The global gaming industry has never had it better. With a historically unmatched number of gaming platforms, be it mobile, console, PC, online, tablet or virtual reality, the potential for developing a product for the huge global gaming audience is considerable. This buzzing landscape has been backed up by the huge number of acquisitions and deals in the industry, as companies look to acquire the most talented programmers and game designers. The rewards can be sizeable, as London’s King Entertainment demonstrated with its recent IPO on the back of two successful mobile gaming titles. Corporate financiers are increasingly paying attention to gaming, while sell businesses have a larger pool of new start-ups looking for big-time exits.
Over $12.5 billion in game company acquisitions were announced over the past year according to London-based game advisory firm Digi-Capital. The firm’s second quarter review showed that $4.6 billion of the deals involved mobile gaming companies, which demonstrates the rapid surge of the mobile boom. In part, this has been made possible by the numerous and often free mobile development platforms available to programmers. Mobile acquisitions were followed by massively multiplayer online gaming firms with $4 billion; $2.5 billion was paid for game technology companies; and $1 billion for console deals.
There are several major reasons for the consolidation boom that has occurred in the past year. Firstly, mobile developers are buying into a large, high-growth market, with mobile games expected to generate $33 billion in revenue by 2017, growing from $4 billion in 2011 and $16 billion in 2013. Zynga’s purchase of developer NaturalMotion in January to the tune of $527 million is also an example of cannibalisation of other media and platforms, as players look to increase their interconnectivity. This is another driver of acquisitions.
Regional realignment is another major factor behind the gaming consolidation wave. The mobile and online games market will reach $60 billion in value by 2017, just over 63% of which ($38 billion) will be in Asia and nearly 22% ($13 billion) in Europe. US acquirers are preparing for this inevitable transfer of gaming influence by entering these new markets. Acquiring developers, offices, teams and new designers in various locations across the globe is a trusted methodology for expanding into new and important markets.
Old-market buyers are also acquiring new companies to catch up, or in other words pivot to address disruption: Facebook’s $2 billion acquisition of Oculus VR in March is a good example for the gaming industry’s shift. If a digital major is not currently in gaming, then its missing out on potentially lucrative revenues. Some notable majors without links to the industry will likely make major entrances over the next few years.
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