​The great gaming consolidation
Image: David Veksler / Protocol

​The great gaming consolidation

Protocol Gaming

Good morning. This week in Protocol Gaming, your weekly guide to the business of video games: what to make of unprecedented consolidation in the gaming industry, Huuuge's huuuge IPO and Andy Jassy says that Amazon will succeed in gaming. Someday.

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The Big Story

The great gaming consolidation

M&A activity in the gaming sector is off to a blistering start in 2021, building on what was a record-breaking 2020. To list a few of the mega-deals currently in the works:

  • EU antitrust authorities said they would decide whether to approve Microsoft's $7.5 billion acquisition offer for ZeniMax by March 5.
  • Last Wednesday, Embracer Group bought Borderlands developer Gearbox Entertainment for $1.37 billion; mobile developer Easybrain for $765 million; and porting specialist Aspyr for $450 million.
  • Last Thursday, shareholders of Codemasters approved the $1.2 billion acquisition offer from EA, clearing the way for final regulatory approval on Feb. 16.
  • And just Monday, EA announced that it would acquire mobile game developer Glu Mobile for $2.1 billion in enterprise value.

It's not just your imagination: the gaming industry is going through a period of consolidation unlike anything we've seen before. Market research firm DDM collected transaction data over the course of 2020 and found that:

  • Gaming industry investment reached a new high of $13.2 billion in 2020, up 77% from 2019.
  • M&A volume reached a new high of 220 deals in 2020, a 33% year-over-year increase.
  • Things really started heating up in the fourth quarter of 2020, when 75 M&A deals took place, nearly double the number of deals made in Q4 2019.

There are a few underlying factors driving gaming studio consolidation:

  • Central banks are dumping money into the economy, creating an overheated investment environment. Along with driving the SPAC and IPO booms, changes in fiscal policy helped raise M&A volume to record highs in the second half of 2020.
  • Studio acquisitions are a great way to secure content for subscription services. Early on in the streaming wars, Netflix learned that it needed to own content to succeed in the long run. EA and Microsoft have clearly heeded that lesson. Sony Interactive Entertainment CEO Jim Ryan, meanwhile, told Reuters in October that the company would look to grow its studio capabilities organically, with possible support from "selective M&A."
  • Larger gaming companies have been performing extraordinarily well. Microsoft reported in its fiscal Q2 2021 earnings (ended Dec. 31, 2020) that gaming revenue increased 51% year-over-year. As GameSpot pointed out, Microsoft could have used its profit from just the last quarter to buy ZeniMax twice over. Consumer spending on video games has reached new heights during the pandemic, driving up revenues for Sony, Tencent, EA, Nintendo and Activision Blizzard. All this means that the big players have more money and more confidence reinforcing their M&A activity.

But all this money isn't necessarily a good thing, at least from the perspective of gamers.

  • Subscription services are a double-edged sword. On the one hand, they give gamers access to a tremendous number of games for a relatively low price. On the other hand, because larger studios are acquiring content for their subscription libraries, many titles will be exclusive to a particular service. So unless you're willing to shell out over $45 per month for multiple gaming subscriptions (and multiple consoles), you'll likely be locked out from playing many of the most compelling AAA games in coming years.
  • Smaller studios can easily lose their identity after getting acquired by an industry juggernaut. Company culture is delicate, mysterious and so very important when it comes to collective creative endeavors within gaming studios. Acquisitions can easily disrupt company culture or simply preclude studios from working on the projects that would be most compelling for gamers.

— Hirsh Chitkara


  • "Some businesses take off in the first year, and others take many years. Though we haven't consistently succeeded yet in AGS, I believe we will if we hang in there." —In an email to staff on Feb. 1, Andy Jassy reaffirmed his commitment to making video games, following a scathing Bloomberg profile of Amazon Game Studios.
  • "You have created a multinational, multi-billion dollar business, stacked with talent at all levels of the company, carving out a leadership role, earning the admiration of our toughest competitors and devoted fans. And you have done it the right way, always faithful to our core principles of integrity, respect, team, quality. Don't let the day pass without taking a moment to enjoy your remarkable creation." —Bethesda founder and CEO Robert Altman, who died unexpectedly Feb. 3., sent a weekly note to employees during the pandemic to keep in touch with everyone.
  • "I absolutely have not done anything to violate your terms of service, so I can take this no other way than you deciding to burn this bridge. Consider it burned. #Terraria for @GoogleStadia is canceled. My company will no longer support any of your platforms moving forward." —Andrew Spinks, developer of the indie game Terraria, took to Twitter to announce that he's canceling the Stadia port of the game after Google locked him out of his accounts, he says.



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  • Huuuge raised $445 million in its IPO, valuing the developer of mobile casino games at a huuuge (sorry) $1.1 billion and making it the second-biggest studio listed in Warsaw after CD Projekt Red.
  • Oculus says six Oculus Quest titles have each cleared $10 million in revenue and 60, or one-third of all paid apps available on its store, have earned more than $1 million. Facebook also rolled out Messenger for Oculus Quest users, as well as App Lab, which lets devs distribute apps outside the Oculus Store without needing to sideload.
  • Earnings! So many earnings. Sony said it shipped 4.5 million PlayStation 5 units worldwide in 2020, and reported revenue of $8.4 billion in Q3, up 40% year-over-year, and an operating profit of $763.3 million, up 50%. Activision Blizzard reported Q4 net revenue of $2.41 billion, up 21% year-over-year, driven by a record year for Call of Duty, which had full year premium unit sales up 40% year-over-year. Unity reported Q4 revenue of $220.3 million, up 39% YoY, on net loss of $83.5M; stock fell 11% after hours on a slowing revenue forecast. EA reported Q3 revenue of $1.67 billion, up 5% YoY, but its disappointing profit forecast sent shares plunging. And Take-Two shares also fell, after it announced a big drop in sales and shared no plans for new games.
  • Tencent announced it was blacklisting 37 companies from future contracts and has fired more than 100 people on accusations of corruption, saying it would implement a "zero tolerance" policy for people engaging in unethical behavior.
  • Unity hired Amazon's Marc Whitten to run its Create Solutions business. Whitten looked after Fire TV, Kindle and Luna at Amazon, and was previously chief product officer for Sonos and Xbox.
  • Steam launched in public beta in China today. Dota 2 and Counter-Strike: Global Offensive are the first two games on the platform, with 30 more launching in the "near term."

— Karyne Levy

Power Up

CD Projekt can't catch a break

As if the Cyberpunk woes weren't enough, the folks at CD Projekt have a whole new problem: The company was hit by a ransomware attack. The studio published the hackers' ransom note, which says "Your have been EPICALLY pwned!!" CD Projekt said it won't give into the ransom requests, which means Cyberpunk and Witcher source code might be leaked soon. According to the hackers, CD's "public image will go down the shitter even more." Talk about kicking someone when they're down.

— Shakeel Hashim

Thanks for reading. Tell your friends and colleagues to subscribe here, and send tips, feedback and ideas to shakeel@protocol.com. See you next week.

Correction: The story was updated Feb. 9 to convey that GameSpot's calculation used Microsoft's overall profit rather than gaming profit.

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