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Why did Take-Two buy Social Point?

What's the motivation for the $250 million deal?
Why did Take-Two buy Social Point?

Take-Two Interactive's acquisition of Barcelona mobile developer Social Point has been one of 2017's biggest stories so far.

The deal, worth $250 million, is the first move into mobile free-to-play from the Take-Two group, which is well-established in the console space with its wholly-owned subsidiaries Rockstar Games and 2K Games.

Elabrotating on the motivations behind the deal, Take-Two Interactive CEO Strauss Zelnick has said that it's a route into the lucrative free-to-play space and despite still holding "concerns" about mobile, he thinks Social Point's midcore leaning will serve it well in the future.

But how has the mobile games industry been reacting to the deal? To find out, we put it to our Mobile Mavens:

  • Were you surprised by Take-Two's acquisition of Social Point?
  • What does it tell us about Take-Two's mobile strategy?
Jon Jordan

Jon Jordan

Contributing Editor

Absolutely, yes.

Social Point's two big games - Dragon City (2013) and Monster Legends (2014) aren't an obvious fit with Take-Two's games, even if Take-Two did describe them as "midcore".

It's also not clear how Take-Two will integrate Barcelona-based Social Point into its US management operations.

For that reason, I currently see the deal more as a financial (Social Point's $20 million 2016 EBITDA was impressive) and sector bolt-on than a fundamental shift of strategy towards F2P mobile games.

Further acquisitions would prove me wrong, of course.

Harry Holmwood

Harry Holmwood

CEO at Marvelous Europe

I tend to agree with Jon in that Take-Two is among the best in the world at producing top-end, triple-A console/PC games, and won't be looking to change strategy from that into mobile PvP.

“GTA can make as much money in its opening weekend as the biggest mobile games can make in a year.”
Harry Holmwood

Grand Theft Auto can make as much money in its opening weekend as the biggest mobile games can make in a year.

Although they've had success bringing things like GTA and sports titles over to mobile as premium titles, F2P hasn't really been a big part of their business.

It's likely that, eyeing the fact that the other big players in PC/console have either a home-grown or a bought-in free-to-play mobile business, Take-Two have been under pressure to do the same.

Especially considering that a lot of future growth for our industry is expected to come from Asia (particularly China), having a successful F2P business in the Take-Two family makes a lot of sense strategically.

Nick Malaperiman

Nick Malaperiman

Head of Marketing at TopHouse Media

Regarding Take-Two's strategy, I can see some parallels with Activision's acquisition of King.

Two companies adept in their non-mobile business, that can't quite build their own mobile hit, so buy their way into the business. That said, I think the acquisition is an excellent one.

William D. Volk

William D. Volk

Chief Futurist at Forward Reality

As with Activision’s acquisition of King, this is more than just acquiring a successful mobile game company - it’s about obtaining expertise in free-to-play games.

yt

When triple-A games migrate to online distribution, the financial model will evolve to free-to-play.

Scott Foe

Scott Foe

Chief Product Officer at Ignited Artists

Take-Two's acquisition of Social Point feels like a dramatic overpay.

“The acquisition feels like a dramatic overpay.”
Scott Foe

My back of the envelope calculations, penned in gut feels, with fabricated discount rates and growth periods, tell me that Social Point was worth maybe $100 million. So why the overpay?

Were there other bidders to be blocked from the table? Are there wider gambits in free-to-play within the Take-Two organisation where acqui-hire was essential for forward progress? Does Social Point have the right knowhow?

Time will tell.

Jared Steffes

Jared Steffes

Co-founder at Muxy

Scott, I agree with you.

It feels like Social Point really made out in this deal, but there must be something we are not privy to in this situation.

Take-Two isn't new to mobile gaming, though they have yet to publish games like what Social Point creates. The rush to create a mobile eSport is teetering out for the time being.

My guilty wish is that Social Point helps port a new Civilization game to mobile so I can stop burning through my laptop battery halfway through a flight!

yt