In every industry, consolidation plays a huge role in steering competitors to battle each other in exclusivity, size, and financial potential. The bigger companies buy the smaller ones, often spending billions of dollars to mark their existence in the industry. However, after January saw the most expensive gaming buy-out in history, the trend is here to stay after Microsoft acquired Activision.

Before January 2022, the Chinese gaming giant, Tencent, held the record for the most expensive buy in the gaming industry when it had acquired Supercell, a gaming publisher. But, everything changed in the first two weeks, which saw Microsoft buy Activision and Sony acquiring Bungie. In general, the gaming industry pockets a lot of money, and an industry-wide consolidation makes sense because today, avenues like the metaverse and NFTs have opened up. Generally, mobile gaming is frowned upon by the community, but it has one of the largest revenue streams. In addition, mobile games are infamously credited for introducing microtransactions in video games (spend real money on in-game currency). Although the pandemic has wreaked havoc worldwide, about 1,500 mergers and acquisitions ($43 billion) deals went through in 2020.

Whether you are into gaming or not, there has been tremendous growth in the user experience realm, which is now connected to the metaverse. In addition, thanks to rapid tech development, streaming and gaming have become mainstream and extremely immersive.

More money, fewer problems

As discussed earlier, the gaming industry has various revenue streams, and it has only grown more over the years. For example, the gaming industry has three main revenue sources, which are hardware (consoles, processors, screen), software (games), and in-game purchases (live services). Therefore, it does not matter against pay-to-win game mechanics because microtransactions are here to stay, and tech companies are ready to pounce on them. 

In 2021, Activision’s 61% revenue was earned through microtransactions (cosmetic items, loot boxes, and DLC) and not by selling games. However, the company’s fourth-quarter reported a whopping $5.1 billion profit from in-game sales (World of Warcraft, Warzone and Overwatch). This amount witnessed a $250 million increase from 2020. In this way, Microsoft will get back the money and earn an additional profit, which can fuel its metaverse aspiration.

If we look at Sony’s latest acquisition, Bungie amassed $300 million from microtransactions, and it will inevitably end up in Sony’s pocket. Sony Interactive Entertainment (SIE) said that this deal was in the works for the past six months, and it plans to deploy Bungie’s live services for the future. In this case, it makes sense why the entertainment giant bought a proven and profitable live service game studio. 

If you take Sony and Microsoft as case studies, we can understand that these are additional forms of revenue for an already profitable company. This is a pattern that other companies will follow, and gaming studios are exclusively targeted. The astronomical amount earned through microtransactions is in some cases more than the revenue reported by a tech company. Apart from the monetary gain, gaming studios will help a tech company with aggressive marketing and a large community ready to be captured.

One for the future

With all the buzz surrounding the metaverse and NFTs, we forget that the gaming industry has been doing this for a long time. In a way, video games have been doing what the metaverse plans to. Big games, which are very popular in the gaming community, will serve as a metaverse platform for the buyer, an extension of the real world. This is another reason why tech companies are behind gaming studios, or else they have to start from scratch. After acquiring a studio, it will provide ample opportunities for social interaction, digital commerce, creation and sharing of content for the tech company.

Companies have increased their spending on metaverse technology, and gaming platforms (each game’s virtual world) are expected to be at the heart of it. This is led by the rapid growth in cloud gaming, the popularity of subscription-based games, and developers have contributed immensely to the global market.

A closer look at the global metaverse will show that it is further divided into mobile, VR headsets, NFTs, PCs, and gaming consoles. The gaming industry will bridge the gap between the metaverse and NFTs. The tech companies will either use in-game currency or deploy NFTs to buy in-game content to carry out secure payments. Ubisoft, known for making the Assassin’s Creed series, tried to introduce NFTs in their game, but fans backlashed at it. The tech companies will look into NFTs as a glue that sticks the gaming industry and the metaverse together.

Another reason why so many tech companies have targeted gaming studios comes after the gaming industry boomed during the early stages of the COVID-19 pandemic. People sitting at home had to shift to a virtual world since their real-world amenities were taken away. Also, increasing people’s disposable income helped increase the gaming population. In addition, banks and financial firms are backing the metaverse platforms’ boom, which has motivated tech firms to dive head-first into the gaming world. As a result, the Asia Pacific will see revenue growth in this market, Emergen Research reported. For example, Seoul had said in November 2021 that it would enter the metaverse and create a digitally duplicate Seoul city that would offer various cultural and entertainment experiences.

Recent examples of tech companies capitalising on the gaming boom include MSI introducing new gaming and content creation laptops that are “metaverse-ready”, built with 12th Gen Intel H-series CPUs, NVIDIA Geforce RTX 3080 Ti GPU. In December 2021, Mystic Moose banked $5 million for its Planet Mojo project (gaming metaverse platform). Meanwhile, Netflix bought Oxenfree developer Night School Studio in 2021.

Although these acquisitions will directly impact the industry, the intensity is still unknown. Several questions are yet to be answered on how tech corporations will affect the studio’s creativity and the developer culture. Are we going to see another case like Cyberpunk 2077? What will happen if the bigshots have a monopoly in the gaming industry? Does that mean the end of the most beloved industry of all time?