Metaverse company Improbable announced it has sold one of its gaming ventures for PS76.5 Million ($97.1 Million). London-listed video game studio Keywords Studios bought up Improbable’s gaming venture.
On Sunday, Improbable closed its deal to sell The Multiplayer Group (MPG), an MMO services firm, to Keywords. An Improbable spokesperson confirmed this development to CNBC.
Keywords have over 70 studios throughout Los Angeles, France, Brazil, Mexico and Spain, specializing in producing games for third-party developers. The firm was founded in Ireland.
Keywords’ shares have declined roughly 49% year-to-date, and recently, it embarked on an acquisition spree, allocating 91.9 million euros ($100 million) toward new acquisitions.
That has resulted in the shift from a net cash position at year’s end to one with EUR11.4 million of debt on June 30.
Keywords reported earnings per share for its half-year results to June 30 of 18.48 euro cents – down 40% year over year.
Keywords indicated that its acquisition of MPG would be funded primarily with cash and existing credit facilities, resulting in double-digit revenue growth by 2024.
Keywords expects its acquisition will result in earnings per share accretive gains within its first full year post-acquisition.
MPG was established in 2018 and quickly earned recognition for its groundbreaking work on titles like Fallout 76 and Medal of Honor: Above and Beyond.
Improbable’s co-founder and CEO Herman Narula told CNBC the transaction fell within their “venture builder” strategy of investing or acquiring gaming and metaverse-related teams with an option of later expanding or spinning them off into separate entities.
Appropriate moment either expand them further or spin them out,” Narula shared during an exclusive interview with CNBC.
MPG was acquired in 2019; employee numbers have skyrocketed, increasing sixfold within four years to reach 360 employees.
And MPG’s valuation has more than quadrupled from Improbable’s original purchase price of PS30 million to PS76.5 million.
Even though Improbable may have indicated its intention of scaling back its gaming-related investments with MPG’s sale, Narula disagreed that such action constituted any attempt at retreat from that sector.
“MPG provides an extremely specialized service which doesn’t involve selling any technology,” Narula clarified.
Several games utilizing Improbable’s SpatialOS technology have recently been scrapped due to funding issues.
These include Nostos by NetEase, Worlds Adrift by Bossa Studios and Scavengers developed by Midwinter Entertainment on console platforms.
Midwinter was recently sold by Improbable to Behaviour Interactive for $55M.
Morpheus, developed by Improbable as its flagship technology platform for hosting mass-scale online games, has quickly become its flagship offering.
Improbable has introduced innovative experiences using its Morpheus tech, such as virtual Major League Baseball games and its “Otherside” metaverse developed jointly with Yuga Labs blockchain firm.
Improbable is a British firm founded in 2012 that seeks to build an interlinked network of metaverses. Last June, Improbable introduced MSquared, its metaverse creation suite; developers can access this platform.
MSquared offers its network, tech stack and open-source metaverse markup language for use across its services.
Improbable’s deal to sell MPG comes amid multiple difficulties at the firm.
Improbable has experienced substantial cost reductions.
SoftBank and Andreessen Horowitz both contributed significant sums in funding rounds that valued it at $3.4 billion in October 2022, forcing dozens of staffers out the door. The firm completed these transactions while cutting staff.
But valuations of the once popular metaverse and Web3-related startups have taken a significant hit this year and last from investor fatigue with this space.
Improbable has recently made headlines by touting itself as being artificial intelligence-enabled and boasted that this has helped reduce costs; for example, losses were reduced by 85% to PS19 million in 2022.
Improbable was established to develop large-scale computer simulations with applications in gaming and defence.
However, its focus has shifted significantly concerning metaverse bets taking centre stage.
Improbable announced its defence business sale to Noia Capital for $75 Million on September 16 as an exit strategy from its losses-generating venture.
Narula anticipates seeing two separate metaverses emerge next year: Roblox and Fortnite will give way to decentralized Web3 networks dominated by users, he believes.
Web3 refers to an idea for an alternate web, independent from powerful technology companies like Amazon and Meta.
Blockchain technology plays a central role.
“Both Roblox and Fortnite are games created by users and brands alike; however, people cannot create businesses they have control of or that engage in commercial activities that would be suitable,” explained Narula.
Analysts have expressed severe reservations over Improbable’s ability to commercialize its technology due to technical constraints and high costs.
Greg Martin, co-founder and managing director of Rainmaker Securities (a private market trading firm), told CNBC: “The jury is still out as to their viability going forward or whether reality will ever match up to virtual hype,” Greg said.
Narula said he hopes to attract many more partners for MSquared soon.
Improbable has seen great success staging large-scale metaverse events over the last year, hosting 30 such gatherings, up from three last year. Plans call for this number to increase to 300 by 2024.