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Gaming - The Next Frontier | Darshan Bhatt



Games typically afford longer engagement periods than series or movies. This is due to the psychological principles of motivation that underpin most gameplay. About 3 billion people worldwide play video games, Six in 10 gamers played online multiplayer games more frequently during the pandemic. Online gaming audiences will surpass 1.3 billion people by 2025. There are over 50,000 games available on Steam.


Today, 83% of video game sales happen in the digital world. Around 63% of developers are creating games for PC. In 2021, gamers in the US spent $60.4 billion on games. The gaming industry is forecast to grow at a CAGR of 12% between 2020 and 2025. Online game revenue is estimated to reach $26.29 billion in 2022. Around 85% of all revenue in the digital game industry comes from free-to-play games.




Transmedia storytelling ability- Video Game based shows Content creation has boomed since the pandemic, and younger audiences are spending more time than ever watching user-generated content online. They have been particularly tuned into games such as Crab Game (a fan-made version of the popular Netflix show Squid Game) – which also has millions of view hours on the streaming service Twitch. People invested in games will often seek out additional narrative (or “lore”) in the form of shows and movies.


Alternatively, audiences invested in shows may also look to video games to provide alternative narratives and opportunities for world-building. So shows lead customers to games, and games keep them engaged between season releases. This technique of telling a story across multiple platforms and formats is known as “transmedia storytelling” and has been used with great success by broadcast, social media, and gaming companies. This is what platforms are banking on to keep audiences locked into their entertainment ecosystems. After the success of shows like The Witcher and Arcane, tons of video games are being adapted into TV shows.


The rise of Minecraft as a popular modding game (in which players can collectively transform the game space through their own modifications) has also helped video streaming and subscription services. Minecraft-related videos have been streamed more than one trillion times on YouTube. Transmedia success provides additional avenues for companies looking to leverage their licensed or original copyrighted content.


Intellectual property and data analytics are the valuation kingmakers We know games promote attention, motivation, emotion, and socializing among players. Companies such as the game-hosting platform Steam have demon user data that can influence the creation of new content by game developers. In fact, this is a market advantage that Netflix and TikTok have over rivals. For example, one could easily imagine that a character who is popular in a game, as revealed through gaming data, would also be more likely to feature in an upcoming show based on that game.


The game giant, Nintendo has purchased Dynamo Pictures, a Tokyo-based visual production company that previously worked with Nintendo on the Wii game Metroid: Other M. It will rename Dynamo “Nintendo Pictures” after the deal closes in October. The unit, the company says, will “focus on development of visual content utilizing Nintendo IP.”


The change of heart began in 2015, when Nintendo buried a line in its earnings that read, “[F]or Nintendo IP, a more active approach will be taken in areas outside the video game business, including visual content production and character merchandising.”


South Korea’s gaming giant Nexon Co. listed in Tokyo has invested $400 million to acquire a 38 percent stake in Hollywood studio AGBO to accelerate the global expansion of its existing and new franchise intellectual property in film and television.


Diversification is no longer a luxury amid tough competition Facing increased competition, falling subscriber numbers, and loss of content, Netflix and TikTok are having to diversify. And for this, they’re turning to games. With more than three billion players worldwide and an estimated market share of US$200 billion, the gaming industry is both popular and lucrative. Netflix introduced mobile gaming last year for all its subscribers.


This included two notable Stranger Things tie-ins. Meanwhile, TikTok has offered games to select users since 2019 and seems very likely to expand these offerings. Both Netflix and TikTok have transformed the entertainment business. They appear diametrically opposed on the surface. The former gets revenue from subscriptions and spends millions of dollars on licensing or creating content. The latter makes money by linking viewers to advertisers, with the help of streaming “influencers” who have mastered the art of short-form video. However, the two platforms share some key characteristics.


They both:

  1. Deliver video content via the internet

  2. Aim to constantly grow their user base

  3. Benefit from unique and original content

  4. Collect user data and use it to improve their services, and

  5. Face considerable and rising competition from other companies and entertainment media.

Many well-loved films and television series are departing Netflix for competitor platforms. At the same time, TikTok is also losing short-form video influencers to other platforms. Both platforms are seeking new strategies for subscriber retention, growth, and original content. This is where gaming comes in. According to one consumer insights report, 79% of the world’s online population engages with games in some form. And millennials rate gaming as either the most popular, or second-most popular entertainment activity – behind watching other people play games on video platforms.


Mergers and Acquisitions in the Gaming Industry: According to the investment banking firm Drake Star, the total deal value for 2021 was $85.4 billion across 1,159 deals. That total was surpassed in the first six months of 2022, when $107 billion changed hands over 651 transactions. While the numbers have slowed in recent months, mergers and acquisitions (M&As) have dominated almost every facet of gaming discourse: the headlines of sites; the content of YouTube videos; conversations between studio owners; fans forum discussions.


Major players like Ubisoft and EA are reportedly looking to sell, while other companies show no sign of slowing down acquisition efforts. Acquisitions are nothing new to the video game industry, but not even halfway through 2022, M&A activity has hit all sorts of unexpected heights, with Microsoft’s bombshell $68.7 billion in-progress acquisition of Activision Blizzard easily being the most notable deal of the year. Since then, several other high-profile acquisitions--such as Sony’s planned purchase of Destiny 2 maker Bungie for $3.6 billion--have arisen.


Activision Blizzard/Microsoft merger was approved by shareholders, but it’s not over yet. Embracer Group scoops up Square Enix’s western studios Square Enix parted with its western studios--Crystal Dynamics, Eidos-Montréal, and Square Enix Montréal--at the beginning of May by selling them to the ever-growing Embracer Group. As part of the deal, Embracer will also acquire several of these studios’ popular IP, including the Tomb Raider, Deus Ex, and Legacy of Kain franchises. Take-Two closes on Zynga acquisition Take-Two completed its acquisition of Zynga on Monday in a $12.7 billion deal. The acquisition, which was first announced in January, was one of the biggest the video game industry had seen at the time. However, less than a month later, Microsoft swooped in with its $68.7 billion offer to Activision.


Zynga is well-known for its library of massively successful mobile titles, such as Farmville and Words with Friends. Meanwhile, you don’t have to look too far to see Take-Two’s imprint in the video game industry. In addition to Zynga, the company also owns 2K (NBA 2K, Mafia, Borderlands), as well as Rockstar Games (Grand Theft Auto, Red Dead Redemption, Max Payne). EA buyout rumors Towards the end of last week, it was reported by news outlet Puck that Electronic Arts had previously been in M&A talks with several potential buyers throughout the past few years, including many high-profile media conglomerates like Amazon, Apple, Disney, and NBCUniversal.


According to the report, NBCUniversal’s acquisition of the game company “fell apart within the last month due to disagreements over price and structure.” The Battlefield and former FIFA maker are reportedly “persistent” about pursuing a sale and is allegedly interested in a merger that would allow CEO Andrew Wilson to maintain his spot as the company’s chief executive. In the wake of Puck’s report, the company has not issued a public comment.


Ubisoft buyout rumors Rumors surrounding a possible Ubisoft buyout surged throughout May following a report from last month that alleged the French game company was drawing buyout interest from several private equity firms, namely KKR & Co. and Blackstone Inc. In an interesting twist, another report surfaced last week that alleged Ubisoft was “listening to pitches” from interested parties. Additionally, it was also suggested that Ubisoft would be unlikely to accept a buyout offer at anything less than €60-70 per share.


Sources: Venture Beat, Ign.com, Pulsenews, Conversation.com, Fastcompany.

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