Microsoft’s planned acquisition of publishing giant Activision Blizzard last month kicked off waves of speculation over what Sony’s response would be regarding PlayStation. Sony has since finalized plans to buy “Destiny” studio Bungie, but that deal predates the Activision Blizzard acquisition. As it stands, Sony has yet to make a move that could be seen as a clear response to Microsoft.
Still, this flurry of M&A activity in the video gaming space is rumored to soon get bigger. If Microsoft’s Big Tech compatriots are getting in on the action, some targets are more ideal than others.
Apple’s last quarter totaled $124 billion in sales, a new record for the company. A company this size could easily target the biggest publishers after Activision, but it’s crucial to remember where Apple’s gaming expertise resides.
As the iOS App Store is one of two predominant mobile platforms alongside Android, Apple is unlikely to be interested in a company that doesn’t already have its own mobile presence, especially since free-to-play, mobile-oriented games comprise the bulk of subscription service Apple Arcade.
Mobile remains the biggest source of revenue for games globally, comprising 52% of the entire market in 2021. Acquiring Activision means Microsoft will benefit from the revenue pulled in by King, the publisher of “Candy Crush” and other games that was bought by Activision for $5.9 billion in 2016.
This doesn’t mean Apple wouldn’t consider the multimedia opportunities of publisher IP beyond. Even though the company has stayed mum on subscriber numbers and streaming revenue, CEO Tim Cook still highlighted Apple TV+ in the company’s latest earnings call, reiterating his interest in providing high-quality content to the service.
But if mobile is the principal draw, Apple may want to look at Take-Two Interactive more than Electronic Arts, even if EA is bigger. EA has invested seriously in mobile via its $2.1 billion acquisition of Glu Mobile in 2021, but Take-Two takes the cake with its $12.7 billion purchase of “Farmville” and “Words With Friends” company Zynga, which is expected to close by the end of June.
Furthermore, Take-Two last week announced its follow-up to “Grand Theft Auto V,” a game that has sold more than 160 million copies and is especially popular for its online live-service version. “GTA VI” likely won’t arrive until 2024 or 2025, and chairman and CEO Strauss Zelnick stated the company is still committed to single-player games, so it’s realistic that Take-Two would be open to the financial support of a company like Apple.
Alphabet & Amazon
Because of its investment in cloud gaming via Xbox Cloud Gaming on Game Pass Ultimate, Microsoft’s Activision acquisition is a direct threat to Google Stadia and Amazon Luna, making either company likely to acquire a publisher to further strengthen the streaming content on their game subscription services.
Cloud gaming could surpass $6 billion globally by 2024, but Google and Amazon’s related efforts haven’t been impactful. After launching Stadia in 2019, Google shuttered its first-party development studios, making Stadia fully dependent on third-party partners, while Amazon Luna is still in early access all while its first-party games like “New World” have only just begun to release after years of tumultuous development.
Ubisoft’s own Ubisoft+ subscription is available via add-ons for Stadia and Luna, making Ubisoft a potential target for both. The French publisher is also in a state of disarray, as employees remain upset over the company’s handling of reported harassment and misconduct. Furthermore, Ubisoft is reported to have hit a wall with its release slate, which has slowed considerably.
Inner turmoil was a major instigator for Microsoft’s move on Activision, so it’s not unreasonable to think a similar fate is in store for the company, though a company like Amazon has substantial reason to go for larger game.
Its $8.5 billion acquisition of MGM Studios nearing completion and its “Lord of the Rings” series – the most expensive in history, totaling $465 million in production costs — streaming this fall, Amazon is as invested in Hollywood as it’s ever been, making it more likely to target a publisher with a bigger IP library like EA. Plus, Ubisoft is developing “Assassin’s Creed,” “Far Cry” and “Splinter Cell” series for Netflix as its original “Mythic Quest” show streams on Apple TV+, so there’s less opportunity there.
On top of that, Amazon is already exploring a series adaptation of EA’s popular “Mass Effect” series and is nearing production on its series for “Fallout,” making it clear Amazon sees the value in gaming IP.
By contrast, Google kicked off 2022 by shutting down YouTube’s original content group. Acquiring a smaller company like Ubisoft and licensing its IP out to media buyers as Stadia becomes the cloud gaming home for its properties makes more sense.
Microsoft has already put out an extensive outline of how it plans to maintain fair business practices ahead of its Activision purchase, an obvious gesture of goodwill with respect to the tightening antitrust focus of the Biden administration.
Meta has faced the most federal scrutiny of any Big Tech entity, making the prospect of acquiring a major video game player anything but a sure bet as the company continues to rebrand itself around its metaverse ambitions and adjust to its market cap having fallen from more than a trillion dollars in June 2021 to below $600 million in January after a brutally subpar earnings disclosure.
Epic Games and Roblox are metaverse-friendly companies whose signature titles have for years exhibited lucrative cross-platform possibilities. Still, Epic CEO Tim Sweeney is not without his criticisms (and lawsuits) directed at Big Tech players, and Chinese tech behemoth Tencent already owns just under half of the “Fortnite” company. Tencent itself is dealing with increased government regulation of gaming and app makers in China, making it a priority to maintain its foreign assets.
Likewise, Roblox’s IPO is less than a year old. It’s likely the company would rather grow for a number of years before considering a buyer. Furthermore, “Roblox” and “Fortnite” are predominantly played by children invested in the specific universes crafted by either game, so there’s no guarantee a Meta intervention would resonate well with those audiences, unless Gen Z has an affinity for virtual work meetings that’s gone undiscovered.
Instead, Meta as an acquirer should pursue more tech-focused companies like Unity Technologies. Known for the “digital twins” crafted by its eponymous game engine, which competes with Epic’s Unreal Engine, Unity is focused on virtual worlds beyond just gaming and in 2021 acquired remote access tech provider Parsec to further boost its capabilities.
Bringing such talent into the fold could do a lot to boost confidence in Meta’s metaverse plans among consumers and investors alike, lest Meta witness another company — especially one that isn’t tainted by Facebook’s reputation — beat it to the punch.