VK will play differently – Newspaper Kommersant No. 179 (7380) of 09/28/2022

As Kommersant predicted, VK decided to exit one of its key assets – the My.Games gaming division (includes an application store and game development studios). The holding sold it for $642 million to the manager of LETA Capital Alexander Chachava. Sources say that the discount to market value was 60%, and lengthy negotiations could be accelerated by the fact that Apple removed applications and games from VK from the AppStore. Meanwhile, the holding itself promises to continue developing the distribution of games under the VK.Play brand.

VK announced the sale of 100% of the gaming division of My.Games to the manager of the venture capital LETA Capital (InDriver, Novakid, Devar and other startups) Alexander Chachava for $642 million (37 billion rubles at the exchange rate of the Central Bank on September 27). Deal, they say in a VK message, includes all My.Games assets, including company-owned studios and gaming products. LETA Capital confirmed the information, specifying that My.Games co-founder Vladimir Nikolsky will continue to lead the company.

My.Games develops and publishes games for PC, consoles and mobile devices. With a portfolio of more than 150 games (eg War Robots, Hustle Castle, Left to Survive), the company also sells games through its app store. It has 12 regional offices and representative offices in Russia, Europe, USA and Asia. The global partner network includes over 50 development studios in Russia and abroad.

The gaming division brought VK a third of revenue, while in the third quarter of 2021, 77% of My.Games sales were outside Russia and the CIS, primarily in the USA, Germany and France. But VK’s profit from the development, distribution and streaming of games in the second quarter fell by 82%, to 0.6 billion rubles, and the margin of the direction decreased from 28% to 6% with an audience growth of 24.6%, to 26 million people. The indicators were affected, in particular, by the disabling of monetization for mobile games in the AppStore and Google Play marketplaces (see “Kommersant” dated August 11).

The fact that VK is looking for potential buyers for the asset was reported by Kommersant back in the spring (see “Kommersant” dated March 31). Sources in the market claimed that the holding began looking for a potential buyer immediately after the outbreak of hostilities in Ukraine: the fact is that My.Games is the main source of foreign exchange earnings for VK. If the company falls into the sanctions lists, it will not be able, among other things, to place its games in the AppStore and Google Play.

Then VK denied the intention to sell the asset. However, at the same time, the holding launched the VK.Play platform, which actually completely duplicated My.Games both in terms of the number of games hosted and in terms of functionality. VK’s message on the sale of My.Games states that the holding will continue to develop gaming services under the VK.Play brand, and Vasily Maguryan, who has been in charge of VK’s gaming business for more than eight years, will head the structure.

Sources of Kommersant in the market claim that negotiations on the sale of the asset have been going on with great difficulty in recent months, there were six applicants, including large Asian players, as well as Arab companies and specialized funds.

One of the interlocutors emphasizes that the removal of VK applications from the AppStore prompted the parties to close the deal. “Until yesterday, My.Games was on sale at a 40% discount, but after Apple removed VK applications from its store, I’m talking about games, for example, Hustle Castle disappeared from the AppStore, negotiations quickly ended. Moreover, against the backdrop of these events, the buyer brought the discount to 60%, ”says the source. According to him, now the main value of the asset is employees and intellectual property.

Problems in the game development market in Russia may worsen in the near future.

Against the backdrop of the introduction of partial mobilization in the country, game developers began to evacuate employees from the country, including buying out entire charter flights (see “Kommersant” of September 26). The fact is that two-thirds of the employees of game development studios are artists and designers, who often do not have higher education and are not formally IT specialists, which raises doubts in obtaining a deferment from their draft into the army. At the same time, Maksut Shadayev, head of the Ministry of Digital Development, said on September 26 that employees of game studios could apply for a reservation.

Nikita Korolev