Market Insight

MTG builds its game business with Kongregate acquisition

June 20, 2017

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Modern Times Group (MTG), the Sweden-based broadcaster, has continued its expansion in the games sector with the acquisition of San Francisco-based web gaming platform Kongregate from GameStop Corp for an enterprise value of $55 million. MTG will fully own the games publisher and developer.  

Our analysis

The new acquisition expands MTG's games business in the US and also importantly will bring on board valuable expertise on developing and publishing new games that Kongregate has built since its start in 2006. During its conception and development phases, Kongregate has raised funds from the likes of Amazon and LinkedIn.

Moreover, Kongregate will bring MTG’s games strategy more games-oriented products and skills in pushing out engaging games content. Its content strategy and focus on engagement has resulted in gamers engaged for longer which is an important differentiator from the social platforms where users could spend up to 70% less time than the games platforms. This higher user engagement leads to deep loyalty key desirable attributes and consumer behaviours sought by advertisers in executing online advertising campaigns.

Kongregate was early to recognise the opportunity for games monetisation with advertising and to that end, hiring executives with industry experience that focused on rolling out ad sales and marketing operations. Its premium games content offering is enabled by the Steam games platform - however, given that MTG's focus is on monetising its free platforms, games sales is not expected to be on top of its revenue streams. Further mobile expansion and ad monetisation is what will drive the new acquisition.

Two key points that differentiate Kongregate and make the acquisition for MTG a good fit are:

  • The strong selling point of Kongregate of its young male (13-24 years old) audience, that can provide for high value targeted advertising sales
  • Kongregate has developed a strong model in cross-promotion of games which will be extended by the cross-platform operations of MTG to enhance overall advertising revenues.

Broadcasters have been active in the digital space to future-proof their business and diversify their content and platforms. Games in particular is in the focus of MTG's entertainment strategy as it recognises the potential of the games industry, esports and the mobile platform with its associated scale and games consumption. MTG's commitment in the digital space is clear considering its exit from traditional TV media (see sale of Czech operations) and investment in the Viafree platform, MCN platforms (Splay) and games. MTG's investment in games so far has been relatively inexpensive and this creates a unique opportunity to tap into the games industry by multiple acquisitions. Integration and organisation management will be also a crucial factor in successful performance. 

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