Acquisitions happen naturally within any industry, with gaming companies being no exception.
However, if I said over $12.5 billion were dealt through acquisitions solely within the gaming industry last year, many people would be astounded that the gaming industry would be so prominent monetarily. Game Advisory firm Digi-Capital and GamesBeat (2nd Quarter Review) report allocation of the gaming industry’s $12.5 billion as so: $4.6 billion involving Mobile Gaming companies, $4 billion for MMO or Massively Multiplayer Online companies, $2.5 billion in game technology, and $1 billion for console.
Why did the gaming industry generate so much popularity and revenue in the last year?
Well, first of all, the fact that the mobile gaming acquisitions was the biggest piece of the pie and represented over ⅓ of the total $12.5 billion was not that big of a surprise. Mobile games have been dominating since the release of the smartphone, arguably, because of convenience and targeting. Top mobile game companies (based on revenue) such as King (Candy Crush) create games that are addicting, short and on-the-go, and target the casual gamer. By targeting the casual on-the-go gamer, King can provide virtual goods which aid people who have more time and money than others within the game. The CEO of King calls this “bite-size brilliance.” — the perfect way to spend 3 minutes of free time.
More on Mobile
Digi-Capital managing director, Tim Merel, spoke some insight and tried to explain why the gaming industry acquisitions could be at $12.5 billion. Merel states that many companies are acquiring mobile developers to “buy into a large, high-growth market.” They can back that the gaming industry is a large, high-growth market because in 2011, revenues within were at $4 billion and in 2013 it was at $16 billion. With such exponential growth happening, it is no wonder companies such as Amazon are looking into acquiring developers of their own. Merel also states that cannibalization within the industry is a big reason for large acquisitions. Large mobile game developers such as Zynga look to enter other markets by cannibalization of other gaming companies absorbing both the brands name as well as the talent within.
According to Merel, Facebook’s $2 billion acquisition of Oculus Virtual Reality in March is categorized as a reason for the gaming industry’s shift with old-market buyers acquiring new companies to catch up. This makes sense as well as everyone is eagerly waiting to see what Facebook has in store for the Oculus VR.
A Final Word
Every year, people state that the gaming industry has never been as large but trends are indicating that the industry is not looking to slow down at any rate. Projections for 2017 point towards a mobile and online games industry valuation of over $60 billion which is tremendous. It will be interesting to see how the games industry looks to develop as there is still much room to grow.