Gaming is the world’s favourite form of entertainment, eclipsing revenue in music, film and TV. M&A in the near $200bn global market has already surpassed records this year with two of the biggest deals in history. If popularity dictates acquisitions the next targets are likely to be focused on mobile gaming and the metaverse.
Two developments determine mobile gaming’s future. The first is the popularity of 5G phones, which offer users more speed and allow players to run around virtual worlds without irritating lags. Second is the number of games unchained from specific consoles. Cross-platform gaming means rising revenues from digital sales and in-game adverts and purchases. Microsoft’s purchase of Activision Blizzard is connected to this new model, in which players can use multiple devices to access games via cloud-based subscription services.
These shifts are expected to maintain growth in gaming sales post-pandemic. While console and PC spending is forecast to dip once schools and offices return to normal capacity, mobile gaming is not. Figures from gaming data company Newzoo show mobile gaming accounts for more than 50 per cent of industry revenue. It is growing at 7 per cent per year, faster than both PCs and consoles.
Mobile gaming leaders — Activision Blizzard, Glu Mobile and Zynga — have been targeted. But Take-Two’s $12.7bn purchase of Zynga, known for mobile games such as Words With Friends, and Electronic Arts’ investment in Glu Mobile, could lead to offers for the buyers themselves. Delays in gaming releases have lowered shares in both companies over the past 12 months. Neither offered positive guidance in the last set of earnings. EA trades at a discount to five-year average forward earnings multiples.
Expect opportunistic buyers looking for content to use supposed future revenue in the metaverse — a link between real and virtual worlds — to warrant a mega purchase. Microsoft referred to it in the Activision Blizzard deal. Rival Sony could be the next to make the leap.
