SoftBank-backed metaverse firm Improbable sells a major gaming venture for $97 million

Metaverse company Improbable has sold one of its major gaming ventures to a London-listed video game developer Keyword Studio For £76.5 million ($97.1 million).

The company closed the deal to sell Multiplayer Group (MPG).,for Keyword, a multiplayer game services firm, on Sunday, an Improbable spokesperson told CNBC.

Based in Ireland, Keywords owns over 70 studios in locations including Los Angeles, France, Brazil, Mexico and Spain. The company primarily develops games for third-party developers.

Shares of Keyword have fallen about 49% year to date. It has recently been on an acquisition spree, with 91.9 million euros ($100 million) earmarked for new acquisitions.

This resulted in a change from a net cash position at the end of last year to a net debt position of €11.4 million at June 30.

Keywords reported earnings per share of 18.48 euro cents in its half-year results for the period to June 30, down 40% year on year.

MPG was founded in 2018 and is known for its behind-the-scenes work on games like Fallout 76 and Medal of Honor: Above and Beyond.

Improbable’s co-founder and CEO, Harman Narula, told CNBC that the transaction was part of its “Venture Builder” strategy, through which it invests in gaming and metaverse-related teams to either expand or spin them off later. Makes acquisitions with options. ,

“The idea was that, if we understand multiplayer well, and we understand the metaverse, then maybe we can find opportunities where we can bring things that we can do well with. And then, At the right time, if it makes sense, Narula told CNBC in an exclusive interview, “either continue to grow them or potentially eliminate them.”

“It became clear that working with MPG and bringing them in-house would help us learn a lot and help them grow.”

Impossible acquired MPG in 2019, and it has grown dramatically since then. The number of employees has increased sixfold to 360 in the last four years.

And MPG’s valuation has more than doubled Improbable’s original purchase price of £30 million to £76.5 million.

While the move suggests a potential reduction of Improbable’s gaming-related investments, Narula refuted the idea that the sale of MPG marks any retrenchment from that sector.

“We are not selling any technology in any way, or stopping working with game companies in any way,” Narula said. “MPG provides a very specific, exclusive service.”

A series of games built on Improbable’s original SpatialOS technology have been canceled in recent years.

These include the open-world game Nostos developed by NetEase, Worlds Adrift produced by Bossa Studios, and the console version of the game Scavengers developed by Midwinter Entertainment.

Midwinter was sold by Improbable to Behavior Interactive earlier this year.

Morpheus, a technology platform developed by Improbable, is now the company’s primary product. Morpheus is designed to host massively multiplayer online games.

Improbable has launched a host of new experiences using its Morpheus technology, including virtual Major League Baseball games and an “Otherside” metaverse developed in partnership with blockchain firm Yuga Labs.

Founded in 2012, Improbable is a British firm that aims to build a network of the metaverse. In June, Improbable launched MSquared, a metaverse creation suite, and provided developers with access to the platform.

MSquared includes its own network, tech stack, and open-source Metaverse Markup Language.

The deal to sell MPG, one of Improbable’s many notable bets on gaming, comes after a number of struggles at the firm.

Improbable has seen substantial cost reductions.

The firm, which hit a valuation of $3.4 billion in October 2022, laid off dozens of employees late last year after raising substantial funds from SoftBank and Andreessen Horowitz.

But the valuations of startups related to Metaverse and Web3, which were once in discussion, have declined this year and last year due to lack of enthusiasm of investors towards this sector.

Improbable recently described itself as artificial intelligence-enabled and said this has helped reduce costs. The company cut its losses by 85% to £19 million in 2022.

Improbable was originally designed to create large-scale computer simulations that have applications in gaming and defense.

But its metaverse bets have now become its main focus.

Improbable sold its defense business to Noia Capital in September, exiting the company from the loss-making venture.

Narula says he hopes to see a “tale of two metaverses” next year. Centralized gaming experiences like Roblox and Fortnite will be abandoned in favor of a decentralized, “Web3” metaverse, Narula said.

Web3 refers to the idea of ​​a more decentralized and open version of the web, out of the control of a handful of powerful tech companies like Amazon and Meta.

Blockchain is a major technology.

“After all, they [Roblox and Fortnite] There are games with different modes created by users and brands. But people can’t create businesses that they have control over, or that can do proper business things,” Narula said.

“The other branch of the metaverse, which is driven in some ways by Web3 and in other ways by companies like ours… is really about building a network of sovereign metaverses.”

Analysts have expressed skepticism about Improbable’s ability to commercialize its technology, due to technical limitations and the high costs involved.

“The jury is still out on whether they have a viable business model going forward, or whether the reality will ever outweigh the ‘virtual’ hype,” said Greg Martin, co-founder and managing director of Rainmaker Securities, a private markets trading firm. Will it match or not? CNBC.

Narula said he hopes to sign many more partners for MSquared in the future.

Improbable, which is focusing on organizing large-scale metaverse events, plans to organize 30 such gatherings in 2023, up from just three last year. The company plans to increase this number to 300 in 2024.