Konvoy, a venture capital firm, has determined that Activision Blizzard, Electronic Arts, Japan's Nintendo and other public gaming companies currently have 45.1 billion dollars in cash and cash equivalents. The company also anticipates that Microsoft's 69 billion dollar acquisition of Activision will likely spur more mergers and acquisitions within the industry, resulting in a different array of gaming entities. In the third quarter of 2023, Konvoy's exclusive report to CNBC revealed a 64% decline in venture capital investment into video game enterprises compared to the same period of the previous year.
Publicly-traded gaming enterprises currently have $45 billion in cash and cash equivalents, a figure which could direct more amalgamation in the $188 billion video games business, as per a study from venture capital firm Konvoy, presented first to CNBC.The companies -- like Activision Blizzard, Electronic Arts, Singapore's Sea, Japan's Nintendo and Bandai Namco, South Korea's Nexon, and China's NetEase -- are sitting on $45.1 billion in cash and cash equivalents, as detailed by the report from Konvoy, which used the most recent public records as evidence.
Gaming firms have the financial resources to consider taking over other businesses which will increase their IP and products. Live-service games plus subscription plans emphasizing free games and cloud gaming are being used to keep gamers committed for longer. 2023 had been rather successful for publicly traded gaming companies - the VanEck Video Gaming and eSports ETF, tied to the MVIS Global Video Gaming & eSports Index, has increased 20% since the start of the year, compared to the 12% gain by the S&P 500.
Since the beginning of 2023, the Global X Video Games & Esports ETF has experienced a 0.4% decline, not reaching its intended goal of tracking a modified market-cap-weighted global index of companies in video games and esports.
Konvoy has claimed that the major Tech companies, including Amazon, Microsoft, Google, Apple, Meta, Netflix, Tencent of China, and Sony of Japan, maintain a total of $229.4 billion in cash to use for potential acquisitions.
Josh Chapman, a partner at Konvoy, said that the recent purchase of Activision Blizzard by Microsoft — valued at $69 billion — could pave the way for more mergers and acquisitions, and spark the emergence of new gaming companies. He added, "As active gaming investors, we believe this deal gives gamers a better value-proposition and serves as a catalyst for more M&A activity." Microsoft seems to be banking on its cloud gaming service to succeed, as it brings Activision into its growing list of gaming publishers. Through Xbox Game Pass, the Redmond-based tech company is trying to do away with the need for traditional consoles, and as such, it could create "new opportunities for emerging game developers, infrastructure companies and gaming platforms," according to Chapman. The U.K.'s Competition and Markets Authority allowed the acquisition to go through, which gives Microsoft access to some of the most successful gaming properties, including Call of Duty, Candy Crush, Crash Bandicoot, Warcraft, Diablo, and Overwatch.
According to a report from Konvoy, the third quarter of 2023 saw a 64% decrease in venture capital investment into video game companies compared to the same period the previous year.
It's evident that the gaming industry has not been able to sustain the momentum it achieved from Microsoft's noteworthy agreement, leading to waning activity in 2020 and 2021. During the three months up to September, the overall money invested in gaming startups was $454 million, which is a decrease of 9% in comparison to the previous quarter and 64% from the same quarter in the previous year.
Konvoy's Chapman anticipates that the outlook for gaming VCs and startups will get better next year, as underlying venture conditions start to improve. He believes that financing for gaming firms has stabilized to a "sustained new normal" that will persist over the next few years. When speaking to CNBC, Chapman stated that "as the global venture market rebounds, we anticipate gaming..." which was relatively unaffected by the outset of the economic downturn, "to follow". He added that presently, deal numbers and investment are on a par with pre-pandemic values, and while they won't enjoy the explosive growth of 2021, the industry can still expect a reliable venture market to generate further value creation.
Amid macroeconomic turbulence characterized by high inflation and climbing interest rates, video game publishers are facing an uphill battle with consumer discretionary spending. Nonetheless, the video game player base is still booming, reaching a global total of 3.381 million people in 2021, according to data from Konvoy. This, combined with forecasted total sales of $188 billion in 2023, is an increase of 3% from the previous year, and a slight increase from the 2% growth in 2022.That comes as a surprise after the standout year of 2021, when gaming revenue soared 8% from $166 billion to $180 billion.And that was before the pandemic, when gaming sales soared an even greater 9% year over year.According to Konvoy's projections, the video game industry is primed for continued success in the coming years. It expects the industry to reach $288 billion in revenue with a compound annual growth rate of 9% in the next five years.
Comentarios