Why January 2022 was one of the most eventful months in games industry history?

The games industry is consolidating. Highlights from January 2022 alone include: Take-Two Interactive planning to buy Zynga for $12.7 billion, Microsoft planning to buy Activision Blizzard for $68.7 billion, and PlayStation announcing it will buy Bungie for $3.6 billion. Together, these three deals account for at least $85 billion in games M&A activity, which means that the games industry has already surpassed 2021’s annual M&A total in the first month of 2022, Newzoo said in its latest report.

Analyzing the top 10 companies by game revenues in the third quarter of 2021, Newzoo revealed that Sony was the number two company with around $4.3 billion, while Microsoft was fourth with $2.9 billion. However, adding Activision Blizzard’s $1.9 billion to Microsoft’s total, the merged entity would have generated $4.8 billion, which would make Microsoft the second biggest public company by game revenues (still far behind Tencent’s lead).

However, Microsoft’s pending Activision Blizzard deal goes far beyond gaining an extra revenue stream. While it has long found success in the enterprise sector, Microsoft has sometimes faced challenges with its consumer-facing products, losing out to companies like Google (search), Apple and Samsung (mobile hardware), and Amazon (game live streaming). Unlike those other markets, Xbox is a first mover in game subscriptions. The company wants to strengthen its lead as it faces increasing competition from other tech giants. Cloud and streaming also appear to be key opportunities that Microsoft wants to capture to create a full Xbox ecosystem that is not constrained by hardware requirements.

Speaking of mobile, Take-Two’s acquisition of Zynga will significantly boost the company’s revenues. Together, both company’s revenues would be enough to push Take-Two into Q3’s top 10 game companies by revenue. The Zynga acquisition makes sense for Take-Two: in terms of consumer spending, mobile game revenues exceed console and PC combined.

Meanwhile, Sony’s Bungie acquisition will help PlayStation grow via multiplatform & live-service strategies. In an investor-relations document last year, Sony outlined three new growth vectors for PlayStation Studios: developing more service-led experiences within its first-party roster, releasing more games outside of consoles and on other platforms, and expanding growth in markets like China, Russia, and India. Bungie will contribute toward these three goals and more. The company develops “Destiny 2,” a popular cross-platform shooter-RPG hybrid. Therefore, the Bungie acquisition would bolster Sony’s presence on multiple platforms in a genre the company has traditionally not invested first-party resources into. Bungie’s expertise will also help PlayStation expand its reach in growth markets.

“One thing is certain: January 2022 was one of the most eventful months in games industry history. If the planned acquisitions go ahead, their impacts will ripple throughout the industry for years to come. Services, revenue diversification, and consolidation are on the rise for the games market. Inflation, big tech’s metaverse gold rush, and many other factors will only accelerate these trends further,”  Newzoo’s report concluded.