According to a new report from an investment bank, the game industry is consolidating at an unprecedented rate. The total value of mergers and acquisitions in the first quarter of 2014 alone reached $5 billion, which equals the value of acquisitions for the full-year in 2013.
This consolidation has resulted in increased value of most Asian and North America gaming firms. Most of these consolidations have come about from companies that focus on mobile gaming. On the top of this list includes American companies such as Zynga and Facebook and Asian companies that include Softbank and Tencent.
The rise in mobile gaming and PC multiplayer gaming has attracted many small tech firms to make games for this fledgling gaming market. Mobile gaming for instance attracted $16 billion dollars from gamers that they spent on purchase of various games for android and iPhone smart phones and tablets. This number is likely to climb throughout this year that companies hope to capture through mergers and acquisitions of small firms that target these gamers.
“The first quarter this year has seen unparallel growth in mergers and acquisitions, says a representative of a gaming company, “It will be interesting to know how the consolidation of these gaming firms will affect the gaming market in the coming quarter.”
Some of the major acquisitions includes purchase of Oculus VR by Facebook for $2 billion and Zygas purchase of NaturalMotion for $527 million. In Asia, the biggest purchase was of Korean game company CJ E&M by Tencent, which also owns Riot Games the developer of League of Legends.
In 2013, the biggest consolidations came from Asian companies while Apple, Nintendo, Microsoft, and Activision also contributed to the mergers and acquisition of small firms. It is expected that this year also these firms will continue the trend and create a lofty record for gaming mergers and acquisitions.
The recent trend signifies that the mobile and PC multiplayer gaming sectors offer a substantial earning potential to game developers. It also shows that big companies lack the capabilities to capitalize on the opportunity due to which they are moving towards mergers and acquisitions. The rest of the year will see the continuation of this trend with record levels of acquisitions of small tech companies by their bigger rivals. These merger and acquisitions, on the other hand, will offer these firms the needed capability to make games for consumers and reap great profits as a result.