InvestGame Q3 2022: Cooling investments and consolidation

by | Nov 17, 2022 | Technology

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InvestGame’s Q1-Q3 2022 Gaming Deals Activity report reveals that gaming investments are cooling off.

While total deal value is $124.5 billion — double 2021’s $62.4 billion for the same period — the pending Activision Blizzard acquisition by Microsoft accounts for 55% of the total. Without the $69 billion merger, the year-on-year trend would have been a loss of 11%.

This general downturn can be seen in other metrics. Closed deal value fell 12% ($51.4 billion in 2022 vs. $58.8 billion in 2021). Similarly, the number of closed deals also fell from 709 to 626, a decline of about 12%.

Compared to 2021, the number deals has fallen while deal value has gone up for 2022 so farInvestGame also points to particularly types of investments that are snuggling in Q3. Private investments and public offerings trending downwards compared to recent years.

InvestGame suggests these market conditions have a number of causes. The report points to “the current lumpish macroeconomic situation, post-pandemic user engagement changes, post-IDFA pressure, increased regulatory scrutiny, release dates shifts, supply chain issues, and other factors” that are driving these cooler conditions.

However, these changes could also be partially explained by a shift in general strategy. Recently, value per deal has been growing (up 16% for Q3 YoY) while the number of deals are shrinking (down 31% for Q3 YoY). This suggests that some investors are being more selective about who they invest in, but investing more capital in the companies they do choose to work with.

Early and late-stage VC funding activity in the report echos this pattern, but paradoxically blockchain investments are heading in opposite direction. Instead, the number of deals is going up (up 2.8x YoY), but the total deal value is falling ($932 million vs $1.09 billion). This suggests growing caution from investors, but the potential for a small bet to grow massively is tempting.

These opposing trends suggest that gaming is seen as a more mature and stable market than blockchain’s potential bonanza or bust environment. Gaming’s market maturity has lead to a massive push for consolidation. For the year so far, a mere five deals have contributed nearly 65% of the $37.6 billion of total deal value:

Acquirer/InvestorAcquisition/InventeeValueTake-Two InteractiveZynga$12.7 billionSonyBungie$3.6 billionEmbracer GroupAsmodee$3.1 billionSaudi Arabia’s Public Investment Fund (PIF)Nintendo*$2.7 billionJoffre CapitalPlaytika*$2.2 billion*Minority StakeThe industry appears to be heading towards becoming even more top heavy. InvestGame tracks and ranks the most active investors in games. With the Embracer Group, Saudi Arabia’s Savvy Gaming Group, Tencent, NetEase, and some Western gaming companies looking to spend, there could be more significant M&A activity on the horizon.

InvestGame partnered with Hiro Capital, Naavik and White Label PR for its Gaming Deals Activity report. You can find the full report here.
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