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That makes for “two of the biggest deals in this industry essentially announced in a week,” according to Scott Kessler, the global sector lead for technology, media, and telecommunications at Third Bridge.
Many industry watchers had expected large-scale consolidation of the gaming space through M&A for years, Kessler said. But large media conglomerates were expected to be the ones to acquire gaming companies so they could monetize their intellectual property through games—think a movie studio developing games around its characters.
“We saw indications of challenges of those companies building those capabilities in-house and monetizing those games accordingly,” Kessler said. ”And there’s a lot of history associated with that. I think it’s fair to say that the nature of the interactions and partnerships of big media and the video game industry has been more around licensing.”
Despite big media companies not being the buyers, consolidation in the gaming industry boomed in 2021. According to Crunchbase data, last year was the busiest year for acquisitions of gaming companies globally in at least a decade, with about 180 companies related to online games and video games acquired.
Microsoft has long had a foot in the gaming world, with Microsoft Flight Simulator released decades ago and the company introducing its console product, Xbox, in 2001. According to Crunchbase data, Microsoft has acquired at least 14 companies related to gaming over the years, with its 2020 purchase of ZeniMax its most recent known acquisition prior to the Activision Blizzard deal.
Some of Microsoft’s biggest disclosed gaming deals include:
- Activision Blizzard ($68.7 billion)
- ZeniMax ($7.5 billion)
- Mojang Studios ($2.5 billion)
- Massive ($200 million)
A play for the major gaming franchises
Microsoft’s planned acquisition of Activision Blizzard positions it to compete in the idea of the “metaverse,” makes its Microsoft GamePass more attractive to consumers, and gives it ownership over popular gaming franchises like Call of Duty and Candy Crush, according to Kessler.
“These are preeminent franchises, and when you think about these franchises, each franchise generally has its own studio,” Kessler said. “So Activision owns a huge number of these game studios and employs a lot of the talent that are so important these days.”
Activision, Take-Two, and Electronic Arts are the prominent video-game developers in the U.S., and with Take-Two scooping up Zynga and now Activision joining Microsoft, all eyes are on the third player.
“People have been waiting for this consolidation and now we’re seeing Activision being acquired or at least the announcement. We saw the news with Zynga, now (people are) looking to Electronic Arts,” Kessler said.
Illustration: Dom Guzman
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