A $10-Million Computer Game
Megatransaction on the Russian software market.
Apr 07, 2005
The biggest deal every in Russian computer games was made on Wednesday when the American Ener1 Group bought 100 percent of the Nival software company from its founder Sergey Orlovsky for $10 million. Insiders say that Westerners have good reason to be interested in the Russian computer games market. Electronic games have emerged as an independent industry in Russia that has a turnover of about $200 million per year.
Nival Interactive Co. has been developing computer games since 1996. Spokesmen say that the company produces about 30 percent of the computer games in Russia and employs 140 designers. Estimates place the company's turnover at about $10 million annually. Among its best known products are Etherlords (Demiurgi in Russian), Blitzkrieg and Silent Storm. Nival has also announced that it has concluded a contract with the American publisher Ubisoft to create the fifth series of one of the world's oldest computer games, Heroes of Might and Magic.
Florida-based Ener1 Group united nine companies in the United States and Japan that make computer programs and software. The company does not release its turnover, but informed Russian sources say that it is in the tens of millions of dollars per year. Ener1 has not developed computer games before. Nival will be its first asset of the type.
Ener1 officially announced yesterday that it had acquired Nival from its founder and leader Sergey Orlovsky. The details of the transaction were not made known, but sources close to the deal say that Ener1 paid about $10 million. Ener1 is not hesitant to share its plans for the company's future, though. Ener1 president Mike Zoi said that Nival will be diversified to develop not only computer games, but games for Microsoft X-Box and Sony Playstation 3, which is to appear later this year. Ener1 and Nival already have a preliminary agreement with the developers of those devices.
The sale of Nival is the first instance of a Russian founder selling his games software business abroad. Specialists say that the American holding is buying the company at a propitious time. The growth in the number of computers in Russia and the suppression of piracy on the Russian software market have made producing and selling games in Russia profitable. In recent years, the development of games has turned from a sideline for enthusiasts in IT businesses to a full-fledged and dynamic industry. The Buka game company estimates that, in 2000, Russian game producers earned no more than $10-15 million. But in 2004, their income was $120 million, $200 million by more optimistic estimates. Growth in the volume of development of computer games in Russia is running at 50-70 percent per year.
"Investors have realized that the Russian market is rapidly reaching world standards in volume and growth. The Nival deal is the first in a series of acquisitions that will take place this year," Buka general director Alexander Mikhailov told Kommersant.
Market participants expect interest in the Russian games industry to grow steadily. This is due to the qualified personnel and the development of original games in Russian companies. At the end of the 1990s, many of them were simply adding their own graphics to imported programs, but now most developers design completely original games that have attracted the interest of players as well as investors. "The relative low expenses on salaries are not the only criterion that draws investors to the Russian market for computer games and media content," said Ruslan Khromov, head of Sibius Co. "Buyers of companies pay, as a rule, not only for labor, but for decision-making and know-how. In recent years, enough of that has been built up in Russia to raise its investment attractiveness."
Nival Interactive Co. has been developing computer games since 1996. Spokesmen say that the company produces about 30 percent of the computer games in Russia and employs 140 designers. Estimates place the company's turnover at about $10 million annually. Among its best known products are Etherlords (Demiurgi in Russian), Blitzkrieg and Silent Storm. Nival has also announced that it has concluded a contract with the American publisher Ubisoft to create the fifth series of one of the world's oldest computer games, Heroes of Might and Magic.
Florida-based Ener1 Group united nine companies in the United States and Japan that make computer programs and software. The company does not release its turnover, but informed Russian sources say that it is in the tens of millions of dollars per year. Ener1 has not developed computer games before. Nival will be its first asset of the type.
Ener1 officially announced yesterday that it had acquired Nival from its founder and leader Sergey Orlovsky. The details of the transaction were not made known, but sources close to the deal say that Ener1 paid about $10 million. Ener1 is not hesitant to share its plans for the company's future, though. Ener1 president Mike Zoi said that Nival will be diversified to develop not only computer games, but games for Microsoft X-Box and Sony Playstation 3, which is to appear later this year. Ener1 and Nival already have a preliminary agreement with the developers of those devices.
The sale of Nival is the first instance of a Russian founder selling his games software business abroad. Specialists say that the American holding is buying the company at a propitious time. The growth in the number of computers in Russia and the suppression of piracy on the Russian software market have made producing and selling games in Russia profitable. In recent years, the development of games has turned from a sideline for enthusiasts in IT businesses to a full-fledged and dynamic industry. The Buka game company estimates that, in 2000, Russian game producers earned no more than $10-15 million. But in 2004, their income was $120 million, $200 million by more optimistic estimates. Growth in the volume of development of computer games in Russia is running at 50-70 percent per year.
"Investors have realized that the Russian market is rapidly reaching world standards in volume and growth. The Nival deal is the first in a series of acquisitions that will take place this year," Buka general director Alexander Mikhailov told Kommersant.
Market participants expect interest in the Russian games industry to grow steadily. This is due to the qualified personnel and the development of original games in Russian companies. At the end of the 1990s, many of them were simply adding their own graphics to imported programs, but now most developers design completely original games that have attracted the interest of players as well as investors. "The relative low expenses on salaries are not the only criterion that draws investors to the Russian market for computer games and media content," said Ruslan Khromov, head of Sibius Co. "Buyers of companies pay, as a rule, not only for labor, but for decision-making and know-how. In recent years, enough of that has been built up in Russia to raise its investment attractiveness."