Gamers play the video game “Star Wars Battlefront II” throughout the “Paris Games Week” on Oct. 31, 2017.
Chesno
Publicly listed gaming corporations are sitting on a $45 billion pile of money and money equivalents — and that may lead to greater consolidation within the $188 billion video games market, in keeping with a latest report from enterprise capital firm Konvoy, which was shared exclusively with CNBC.
The likes of Activision Blizzard, Electronic Arts, Singapore’s Sea, Japan’s Nintendo and Bandai Namco, South Korea’s Nexon, and China’s NetEase, currently hold $45.1 billion in money and money equivalents, according Konvoy, which cited these corporations’ latest public reports.
Public gaming corporations currently hold money and money equivalents of $45.1 billion, in keeping with a report from enterprise capital firm Konvoy.
Konvoy
That might give them good enough financial firepower to take a look at potential acquisition targets that might help them construct out their mental property and products.
Specifically, gaming firms need to keep gamers more engaged for longer with live-service games that add more content over time and paid subscription packages that provide a specific amount of free games and access to cloud gaming, or the flexibility to play games via the cloud fairly than downloading them to their machines.
Publicly listed gaming corporations had a reasonably rosy 12 months in 2023, on the entire.
The VanEck Video Gaming and eSports ETF, which seeks to trace MVIS Global Video Gaming & eSports Index, has climbed 20% within the 12 months up to now, in keeping with Konvoy. The blue-chip S&P 500 index, in contrast, has climbed near 12% 12 months up to now.
The performance of public gaming ETFs because the start of 2023.
Konvoy
The Global X Video Games & Esports ETF, which goals to trace a modified market-cap-weighted global index of corporations in video games and esports, hasn’t performed as well, slipping 0.4% because the start of 2023.
Big Tech eyes video games
Big Tech firms are also primed with loads of money to contemplate more gaming deals, in keeping with Konvoy.
The VC firm said that the world’s biggest tech firms which incorporates Amazon, Microsoft, Google, Apple, Meta, Netflix, China’s Tencent, and Japan’s Sony, have a combined $229.4 billion of money on their balance sheets to deploy on potential deals.
Josh Chapman, a partner at Konvoy, said the corporate expects the Microsoft-Activision deal — which saw the Redmond, Washington-based technology giant pay $69 billion for U.S. game publisher Activision Blizzard — would likely result in further mergers and acquisition activity and create a latest generation of gaming corporations.
“As energetic gaming investors, we imagine that gamers and gaming startups stand to profit from the deal because it improves the value-proposition for gamers and results in a vibrant M&A environment for other deals to get closed,” Chapman told CNBC in emailed comments.
Cloud gaming is a key area for Microsoft because it brings Activision into its growing portfolio of game publishers. The corporate is pushing its cloud gaming service, which does away with the necessity for traditional consoles likes its Xbox Series X or Sony’s PlayStation 5, with its Xbox Game Pass subscription product.
Chapman said this is able to result in “latest opportunities for emerging game developers, infrastructure corporations and gaming platforms.”
Microsoft’s blockbuster acquisition of Activision Blizzard was approved by the U.K.’s Competition and Markets Authority earlier this month.
The deal, valued at $69 billion, will see Microsoft gain ownership of among the most lucrative properties in video games, including the large Call of Duty franchise, Candy Crush, Crash Bandicoot, Warcraft, Diablo, and Overwatch.
VC deal slump
Enterprise capital investment into video game firms slumped 64% 12 months over 12 months within the third quarter of 2023, in keeping with Konvoy’s report.
Total enterprise funding into the video games industry within the third quarter of 2023 fell 9% quarter-over-quarter, to $454 million.
Konvoy
It’s an indication of how, despite the boost to the industry from Microsoft’s landmark deal, the boom times for the industry in 2020 and 2021 have ebbed.
Gaming startups raised a combined $454 million globally for the three months to September, down 9% quarter over quarter and greater than 64% from the identical three-month period a 12 months ago.
Still, Konvoy’s Chapman anticipates the image for gaming VCs and startups will look brighter next 12 months, as grim enterprise investing conditions start to enhance — nonetheless, funding for gaming firms has returned to a ” sustainable latest normal” that can proceed at the present pace for the subsequent few years.
“As the worldwide enterprise market rebounds we expect gaming, which was somewhat insulated from the initial impact of the economic downturn, to follow,” Chapman told CNBC. “We anticipate gaming VC funding to see a slight uptick over the subsequent few quarters, when the industry will grow at an analogous rate to before the pandemic.”
“Immediately, VC deal volume and funding are comparable to pre-pandemic levels, and while we may not see the exponential growth of 2021, we’re excited to see a stable enterprise funding market in gaming for continued value creation within the industry.”
Tougher times
Video game publishers have been grappling with a deterioration of macroeconomic conditions, with high inflation and rising rates of interest denting consumer appetite for discretionary spending.
Whereas in 2020, when consumers were flush with money due to easy monetary conditions, times have gotten tougher in 2022 and 2023 as central bankers have increased rates of interest in a bid to stem rising prices.
Still, the video game player base continues to extend, with a worldwide player base of three.381 million today, in keeping with Konvoy.
The video game market remains to be massive, and is projected to achieve $188 billion in overall sales in 2023, in keeping with Konvoy. That figure is up a modest 3% from the previous 12 months, when gaming sales totaled $183 billion. But growth has accelerated barely from 2022, when gaming sales rose only 2%.
That got here after the standout 12 months of 2021.
Gaming revenue reached $180 billion that 12 months, climbing greater than 8% from $166 billion in 2020 I assume, in keeping with Konvoy’s research.
In 2020, the industry saw even larger growth — greater than 9% 12 months over 12 months. That was when pandemic lockdowns were in full swing, and other people had more time to spend playing video games indoors.
Konvoy is projecting long-term growth for the games industry in the approaching years, though. The firm said that it expects a compound annual growth rate of 9% in the subsequent five years, with the industry reaching a whopping $288 billion in overall sales by 2028.
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