Summary
M&A in video games is not slowing down anytime soon because investors are finally starting to recognize that games are a gateway to other sectors, the obvious beneficiaries being fintech, infrastructure, big data, and real estate. To see also : The rise of high-tech real estate investment platforms and their impact on housing affordability.
When I heard in April that Sony had its eyes on FromSoftware, the developers of the Souls company and this year’s highly acclaimed Elden Ring, the first thing I did was to board the PlayStation and start my fifth run of Dark Souls. Since then, I have defeated Gwyn, Lord of Cinder, and PlayStation executives have gone on record to deny the speculation.
Not surprisingly, that rejection did nothing to quell the M&A rumors on Reddit wishlists and social media boards. Anointed insiders strongly point to recent announcements from Sony that it had more studio acquisitions planned for 2022. Apparently, Sony plans to buy game studio Bungie for US$3.6 billion, for the first time. announced in January and one of the many marquee sports deals of the year, also gave credence to the news.
Increasing deal volume and quality
The reality, of course, is that the first quarter of 2022 saw nearly US$100 billion in M&A activity in the gaming industry. Much of that deal volume can be attributed to Microsoft’s US $68.7 billion deal with Activision Blizzard and Take-Two Interactive’s US $12.7 billion deal with Zynga. There have also been smaller, but equally noteworthy, transactions in the mobile gaming space. One of the outstanding stories of this year was the acquisition of the New York Times by Wordle, a puzzle game that has no revenue but an opportunity for a large group of word-loving customers, as potential readers of the New York Times can relate. . . Even after accounting for mega deals, M&A in sports is expected to continue to rise. Some analysts predict that the deal volume will exceed US$150 billion this year.
That forecast doesn’t include the massive, trillion-dollar tech deals and telecommunications space. This year, for example, we have seen M&A transactions involving online gambling and casinos, data centers, cryptocurrency-mining technology, optimization of the mining process and process, cloud management, and chatbot development. This may interest you : Nine NFL players entering winning or breaking season 2022: Steelers ‘Devin Bush, Lions’ Jeff Okudah and more. Many of these deals have an impact on the game and the continued growth of the industry. When Nvidia announced its acquisition of Bright Computing and Excelero, both of which specialize in high-performance computing, the gaming community’s expectations were that there would be a positive impact on Nvidia’s gaming presence, including its line of handheld consoles and its cloud gaming service. .
Further consolidation expected
The drivers for the continued intensification of sports are clear. On the same subject : Three shots on Oakland Tech’s high school campus. In an industry where standardization is the norm, it makes business sense for both companies and developers and software developers to avoid in-house, organic growth in favor of acquisitions and acquisitions for rapid capacity and market access.
More importantly, the gaming industry has traditionally been the generator of innovation and idea development, therefore, it represents an entire ecosystem with countless business and market trends. Virtual reality, which is now central and a key link in the metaverse, began life as rough headshots in laboratories and only found commercial acceptance after years of being heated and refined in game studios. The Virtual Earth of the metaverse, whose sales are up to US $ 85 million in January of this year, had its beginnings in the simulation of games and only began to gain traction with the arrival of in-game purchases, cryptocurrency and tokens that are not often understood by non- fungible. or NFT.
Investors are starting to recognize that gaming is a gateway to other sectors, and the obvious beneficiaries are fintech, infrastructure, big data, and real estate. It is for this reason that gaming companies become attractive targets. Investors and buyers are moving around not only because such companies may have made blockbuster games or next-generation devices, but because their use and reputation in the gaming community represents a market share that is not yet available. fully implemented. These are important transactions, not only in terms of deal value but in terms of how transformative they can be as investors search for the next big thing.
Investing in the metaverse
The Metaverse, along with the connected Internet of Things, has been recognized for some time as the next big thing. In some ways, it is the market. When Facebook rebranded as Meta, it was thought that there would be some consensus push to create the infrastructure that would make an alternate world or digital economy a real possibility. When GameStop announced its online marketplace for NFTs, it was a recognition that the digital ecosystem could be a real revenue replacement for legacy brick-and-mortar businesses.
Clearly, there is a ways to go before we get there. Happily, the architecture of the metaverse is also the foundation that makes video game companies attractive M&A targets. Increasingly, we are seeing contracts explained, and investment boards and commissions being asked to sanction, the open secrets of the industry: (1) moving from subscription-based income to variable income linked to one-time purchases, (2 ) Direct service games with DLCs, or new content, added from time to time, (3) longevity of revenue through the issue of sequels and prequels, remakes, and re-releases, ( 4) market diversity such as players who want portability and mobility. consider supplementing with software hardware, supported by the cloud, and (5) increasing the spread of different categories as games enter other markets (eg, the introduction of games on TV streaming platforms such as Netflix).
And, to borrow Tolkien, the one ring that will connect them all is cryptocurrency, long announced as the global solution that will support and strengthen transactions in the metaverse. While by no means universally accepted, cryptocurrency is beginning to benefit from an industry-wide push to address change and security vulnerabilities in a meaningful and interconnected way. It was also of some comfort to investors that regulators, including the Financial Conduct Authority in the United Kingdom, have begun exploring ways to manage and regulate the trading of cryptocurrencies.
What next?
As long as these fundamentals remain in place, M&A in sports will continue. Independent houses and entrepreneurs will continue to look for partners and investors, while joint ventures and cash investors will continue to look for opportunities to strengthen sectors and products. What will be interesting to watch is if this kind of M&A scene moves into the metaverse.
It is already possible to buy a house right next to the famous person you like, so that, for example, you can reasonably live near Paris Hilton or Snoop Dogg, both of them have created modern hybrid residences. which, by all accounts, hosts incredibly well-attended events. In a fully functional metaverse where money is well-respected and various goods and services are portable across domains and globally, one might assume that it would be possible to establish, operate and operate. develop a company or business and then sell that company or business. . That is, in a nutshell, M&A.
