Are We Entering A Period In The Video Game Industry Of Hyper-Consolidation?
from the bigger-and-bigger-and-bigger dept
You will recall that we had several posts covering when Microsoft acquired Zenimax Media for $7 billion, as well as some of the potential fallout from that acquisition. Much of the focus was on what the purchase of Zenimax and its child studios, such as Bethesda, would mean for long-running game franchises from those studios going exclusive to PC and/or Xbox. Microsoft made a bunch of vague, lightly-conflicting statements on the topic before ripping the bandaid off by making the next Elder Scrolls game an Xbox/PC exclusive.
Most folks in the gaming community are either agnostic about exclusives, or decidedly hate them. There are very few cheerleaders for exclusives in other words, which is why most news about larger publishers acquiring small or mid-sized publishers is greeted with very narrow eyes.
That being said, there are acquisitions, and then there are acquisitions.
You might have heard the news: Microsoft has announced plans to acquire gaming behemoth Activision Blizzard King (ABK) and its subsidiary development studios. The deal is valued at $68.7 billion—or roughly 17 acquisitions of the Star Wars franchise—and that kind of money isn’t spent without an expectation of major moves (and revenue) going forward.
From there, the ArsTechnica post digs into some predictions as to what those moves will be: more games going into Xbox’s Game Pass, more mobile games spun out through the King studio, and, of course, the potential for franchises like World of Warcraft going exclusive. A good portion of the reaction to this deal being announced is focused on what titles will go exclusive.
But this deal is much, much bigger than that. It is the largest acquisition in the gaming space by Microsoft and the read on it in the financial space is that this is the real start to a much larger trend of consolidation in the industry.
“It’s going to start a major ripple effect in terms of consolidation for other videogame publishers,” said Wedbush Securities analyst Dan Ives.
Microsoft’s purchase of Activision will accelerate more deals in the industry, analysts said, as big tech companies seek to broaden their consumer offerings by acquiring game publishers and developers that attracted players during the pandemic. Microsoft’s purchase of Activision, which owns the Call of Duty, World of Warcraft and Candy Crush franchises, would also help the company edge into the streaming and metaverse spaces, they added.
Notably, once news of this deal broke, stocks for publishers like EA, Ubisoft, and Nintendo all rose significantly. That’s the market buying this as a trend and trying to get out ahead of the eventual stock climb when future deals are announced.
So, what does this mean for the industry? It doesn’t have to be bad, so long as these large acquisitions are backfilled by new entrants from smaller players. But there are a lot of ways for this consolidation to go wrong. Kotaku’s writeup is a bit over the top for my taste, but there are some valid points to consider in there.
This is the future. There is zero chance that boardrooms everywhere from EA to Ubisoft to Sony aren’t going to be full this week with panicked executives talking about their options for something similar, because their only instinct will be to match this. To keep up, keep those share prices growing, until there are only 2-3 companies left at the top of the food chain, and things are just a little worse still for the rest of us. Because they know nothing else.
We’re unlikely to reach a reality in which there are 3 parent gaming companies out there. If we did, yeah, that would be bad. Instead, I think the real danger in all of this could be the coordinated fragmentation of the gaming industry along platform lines. If the same companies that make the platforms (PCs, Playstations, Xboxs, etc) also makes some sizable plurality or majority of the games, that absolutely will lead to more exclusivity, more walled gardens, more hoarding of the culture that is games.
And that would ultimately be bad for the industry, no matter how many billions of dollars are exchanged in these acquisitions.