Consolidation in Gaming Industry

The surge in gaming studio investments, acquisitions, and mergers in 2021 were unprecedented. The number of investments and acquisitions in the first half of this year alone was double that of the entire year of 2020, and the trend shows no signs of slowing. Many believe that 2022 will see further consolidation in the gaming industry.

The arrival of COVID-19, as well as individuals spending more time at home, has had a big impact on the rise of home gaming, making it even more profitable than before and propelling it to the top of the entertainment industry ahead of the music, cinema, and video. Globally, there were 2.7 billion players in 2020.

In 2021, the figure is considerably greater, and it’s still rising. With 49% ($86 billion), mobile is the most popular platform, followed by consoles with 29% ($51 billion) and PCs with 21% ($37 billion). Online gaming has also become more popular than ever, making gaming more social and accessible. In addition, online gambling is also on the rise, with sites such as https://www.sbo.net/ giving useful information on the best and safe sites to gamble at, as well as providing bonus information, and tools such as odds converter, bet calculator, and many more making it easier for interested punters.

However, despite the growth of the gaming industry, developing games is a costly and risky venture. Customers can be fickle, development expenses have risen enormously, and ideas that were unusual early in development may become commonplace by the time a game is ready to launch three or four years later. Even for the most successful independent game makers, navigating the gaming landscape may be difficult.

Only a few years ago, the big-budget video game business was supplemented by a healthy number of independent development studios capable of creating hits with fewer resources and greater creative risk. Double Fine Inc., a small company with less than 100 employees, was noted for a diverse range of artistic titles. https://www.obsidian.net/ was known for creating complex, sophisticated roleplaying games such as Fallout New Vegas and Star Wars: Knights of the Old Republic II.

However, both companies faced challenges and suffered from financial difficulties. They were frequently hired on a work-for-hire basis by publishers, leaving their destiny in the hands of whatever executives wanted in a given quarter. Losing a contract can be disastrous, resulting in layoffs and budget constraints. Obsidian nearly closed in 2012 after Futureblight, Aliens: Crucible and Stormlands were canceled by publishers. So it’s no surprise that both Obsidian and Double Fine were acquired by Microsoft. Obsidian was bought out in 2018 and Double Fine a year later.

Following an acquisition, an indie studio may be incorporated into a larger firm, forcing them to strike a balance between autonomy and access to the resources of the larger organization. Indie studios that had been successful on their own, like Gearbox (bought by Embracer) and Insomniac Games (purchased by Sony), have shown signs that being acquired could help them continue to expand.

Even major publishing houses aren’t immune to the risks of the gaming industry. Microsoft paid $7.5 billion for ZeniMax Media Inc, the parent firm of Bethesda Softworks, in 2020. ZeniMax had apparently been attempting to sell itself for years after releasing multiple commercial disappointments such as Fallout 76. It was the only big game publisher in the United States that wasn’t publicly traded.

Consolidation appears to be a win-win situation. Buyers gain more material to service a following that is hungry for new games, while sellers have more consistency. However, there are charges involved. A monopolized industry dominated by a few large corporations could eventually lead to creative stagnation, limited alternatives, and increased prices.

One method to safeguard the industry and ensure future innovation is for the purchased studios to be run independently of the new parent. For example, https://embracer.com/ just paid approximately $313 million for eight studios. However, if the purchased companies continue to thrive, the studios will receive an additional $232 million provided they accomplish their objectives and milestones over an eight-year period.

Whether a studio decides to merge or stay independent, both offer advantages and disadvantages. For both big publishers and independent developers, balancing goals and expectations with what is practically financially viable is a recurring challenge. A bad decision from a big publisher can be costly, but a mistake by an indie developer can lead to the studio going out of business. As the gaming industry continues to grow and develop, it will be interesting to see how this changes over time.