From word puzzles to first-person shooters, the video game industry is going M&A crazy in 2022


The first five weeks of the year have been very interesting for negotiations in the video game industry. In some ways, this might have been the most interesting yet.

The action began on Monday, when Sony revealed plans to buy game studio Bungie for $3.6 billion. Bungie is best known these days for creating the Destiny franchise, and it first rose to fame as the creator of Halo. It’s the latest of three acquisitions that have revolutionized the gaming industry so far in 2022. It’s also the smallest of this bunch, following Microsoft’s $68.7 billion deal for Activision Blizzard and Take-Two Interactive plans to buy Zynga for $12.7 billion.

Sony’s deal for Bungie was largely discussed in the context of Microsoft’s recent mega-deal. Sony and Microsoft, after all, are each other’s biggest rivals in gaming. They have long been the companies behind the most popular console franchises on the market, on PlayStation and Xbox. In recent years, the two have gradually expanded their video game empires, buying up studios and developing other products to meet the needs of gamers.

Sony’s takeover is obviously a different deal from Microsoft’s mega-acquisition. The lowest price makes sense: Bungie is the developer of one successful franchise, while Activision Blizzard is behind several, including Call of Duty, World of Warcraft and Overwatch. But the comparison is always useful. One of Microsoft’s latest forays into the industry is Xbox Game Pass, a Netflix-style subscription service for games with over 25 million subscribers. Sony is believed to be working on its own subscription platform, called Spartacus. And it looks like Bungie could be a key part of that plan.

In an investor call after the deal was announced, Sony said it plans to add 10 so-called live service games — games where new content is continually added post-launch — to its portfolio. by 2026. “The strategic importance of this acquisition lies not only in securing the highly successful Destiny franchise,” said Sony Chief Financial Officer Hiroki Totoki, “but also in bringing into the Sony Group the expertise and technologies that Bungie has developed in the live game space.

Investors generally prefer a steady stream of subscription income to a more volatile income structure based on one-time sales. We have seen that this preference has contributed to the rise of the software-as-a-service model among software vendors. We’ve seen it contribute to the rise of streaming services in movies and music. And now we see it transforming the way people play video games. You’ll still be able to purchase expensive titles like Destiny or Call of Duty all at once. But increasingly, Microsoft and Sony are trying to turn what would once have been described as “customers” into “subscribers.” And the more popular games they can claim, the easier it will be to convince consumers to keep shelling out the cash.

However, consolidation involves certain risks, as Microsoft pointed out this week. US regulators have decided that the FTC will handle an antitrust review of Microsoft’s planned purchase of Activision, rather than the Justice Department, according to a Bloomberg report. The two agencies have similar jurisdictions and similar remit, which often leaves it up to regulators to allocate transactions between them. Most antitrust agencies have taken an aggressive new stance under the Joe Biden administration. But the FTC and Chairwoman Lina Khan may have been particularly active, filing a lawsuit to block Nvidia’s potential Arm acquisition (which appears to be on its last legs) and, more recently, the Arm’s deal. Lockheed Martin to buy Aerojet Rocketdyne.

This week’s development doesn’t necessarily make it more or less likely that the government will try to block Microsoft’s latest move. But it reinforces the fact that the recovery is still very far from over.

I think it’s safe to say that we don’t have to worry about the antitrust intervention on the final gaming space deal this week. The New York Times has announced that it will buy Wordle, the highly viral word game that has garnered a million square-filled tweets in recent weeks, from software engineer Josh Wardle, owner and creator of the game. The NYT will pay” in the seven figures” for Wordle, with plans to (at least initially) keep the game free, as it has been since its launch in October.

On the one hand, a million dollar release for a relatively simple, low-tech project (it doesn’t even have an app) seems like an obvious win. On the other hand, the NYT said that Wordle now has millions of players per day. Any consumer product that can gain millions of users in three months is going to get attention, even if it’s free. I’d be fascinated to hear what kinds of other offers Wardle might have received in recent weeks.

But that doesn’t matter much now. It landed on the NYT, where Wordle will join a thriving games business (including NYT Crosswords and Spelling Bee) that has been a key contributor in Gray Lady’s drive to reach 10 million total subscribers. Luckily, the company hit that number this week, after closing its previously announced $550 million acquisition of The Athletic and its 1.2 million paying customers.

Wordle is a very different type of game from Destiny. Just a few less involved developers. But the fact that both titles are driving M&A activity for some of the world’s biggest media companies is a sign of how far they’ve come since video games were derided in their early days as the nerdiest of things. There’s one simple fact that’s driving much of the major M&A activity that’s been going on in the space over the past few weeks and months: we’re all gamers. now.


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