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22 October 2014

Exit of the Year 2014: NaturalMotion

Oxford spin-out NaturalMotion picks up Exit of the Year for its $527m cash sale to Zynga.

Author: Gregg Bayes-Brown, editor

In an acquisition that demonstrates that computer games is now serious business, this year’s Exit of the Year – one of the biggest recorded since the start of Global University Venturing – goes to Oxford University spin-out NaturalMotion.

Since its founding in 2003, the technology underpinning NaturalMotion has become cornerstone software for the development of computer games right at the top of the gaming food chain. Its two animation packages, Morpheme and Euphoria, have been used in creating some of the most widely acclaimed titles over the past decade in the ever-expanding sector, including several by games developer giant Rockstar such as Grand Theft Auto IV, Red Dead Redemption, and Max Payne 3.

It was on this solid footing in the industry that NaturalMotion decided to become a games developer in its own right. Moving into the mobile gaming industry, it released CSR Racing in 2012 for iOS. The game would go on to top the gaming chart in the App Store in 70 countries and, at one point, was delivering $12m in revenues per month for the company. Clumsy Ninja, its second offering, was revealed alongside the iPhone 5 in a keynote speech, and would also go on to receive critical acclaim.

The company’s rise to the top as one of the UK’s most successful mobile companies led to it being acquired by gaming company Zynga for $527m. While Zynga’s games operate less like a traditional video game and more a massive social psychology experiment into sunk cost fallacy, the company has enjoyed worldwide success in the past with social network games such as Mafia Wars. In 2010, its flagship game Farmville had one in five users of Facebook hooked, around 84 million players, and created an avalanche of notifications bordering on harassment for the other 80% that the social network had to change its messaging rules.

The change forced Zynga into mobile gaming, and it has since failed to replicate the success of Farmville. However, the acquisition will add CSR Racing and Clumsy Ninja to Zynga’s portfolio, bolstering its outlook in the mobile games sector. More crucially, however, is the intellectual property it has now inherited. The same technology which brought Grand Theft Auto IV to life will now be added to Zynga’s games, bringing with it a new dimension of graphical immersion.

It is this technical know-how that Zynga believes is worth the $527m investment, with the overarching ambition that better graphics will give the company the edge it is looking for in the increasingly crowded mobile gaming sector. It is also signifies a big win for Oxford, with the deal returning £30m ($50m) to the university.

Andrew Hamilton, vice-chancellor of the University of Oxford, said at the time of the acquisition: “Torsten Reil [CEO of NaturalMotion] has built up a remarkable business, based on his research at Oxford into computer simulations of nervous systems. NaturalMotion is now an outstanding example of how our academic excellence translates into high-quality jobs and commercial success.  The scale of the acquisition, and the benefit to the University, is a terrific endorsement of our strategy of commercialising University Intellectual Property and continued investment in our spin-outs.”

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