After blockbuster Microsoft deal, gaming giants are still sitting on $45 billion cash hoard

by | Oct 20, 2023 | Financial

Gamers play the video game “Star Wars Battlefront II” during the “Paris Games Week” on Oct. 31, 2017.ChesnoPublicly listed gaming companies are sitting on a $45 billion pile of cash and cash equivalents — and that could lead to greater consolidation in the $188 billion video games market, according to a new report from venture capital firm Konvoy, which was shared exclusively with CNBC.The likes of Activision Blizzard, Electronic Arts, Singapore’s Sea, Japan’s Nintendo and Bandai Namco, South Korea’s Nexon, and China’s NetEase, currently hold $45.1 billion in cash and cash equivalents, according Konvoy, which cited these companies’ latest public reports.Public gaming companies currently hold cash and cash equivalents of $45.1 billion, according to a report from venture capital firm Konvoy.KonvoyThat would give them more than enough financial firepower to look at potential acquisition targets that could help them build out their intellectual property and products.In particular, gaming firms are looking to keep gamers more engaged for longer with live-service games that add more content over time and paid subscription packages that offer a certain amount of free games and access to cloud gaming, or the ability to play games via the cloud rather than downloading them to their machines.Publicly listed gaming companies had a fairly rosy year in 2023, on the whole.The VanEck Video Gaming and eSports ETF, which seeks to track MVIS Global Video Gaming & eSports Index, has climbed 20% in the year to date, according to Konvoy. The blue-chip S&P 500 index, by contrast, has climbed close to 12% year to date.The performance of public gaming ETFs since the start of 2023.KonvoyThe Global X Video Games & Esports ETF, which aims to track a modified market-cap-weighted global index of companies in video games and esports, hasn’t performed as well, slipping 0.4% since the start of 2023.Big Tech eyes video gamesBig Tech firms are also primed with plenty of cash to consider more gaming deals, according to Konvoy.The VC firm said that the world’s biggest tech firms which includes Amazon, Microsoft, Google, Apple, Meta, Netflix, China’s Tencent, and Japan’s Sony, have a combined $229.4 billion of cash on their balance sheets to deploy on potential deals.Josh Chapman, a partner at Konvoy, said the company expects the Microsoft-Activision deal — which saw the Redmond, Washington-based technology giant pay $69 billion for U.S. game publisher Activision Blizzard — would likely lead to further mergers and acquisition activity and create a new generation of gaming companies.”As active gaming investors, we believe that gamers and gaming startups stand to benefit from the deal as it improves the value-proposition for gamers and leads to a vibrant M&A environment for other deals to get closed,” Chapman told CNBC in emailed comments.Cloud gaming is a key area for Microsoft as it brings Activision into its growing portfolio of game publishers. The company is pushing its cloud gaming service, which does away with the need for traditional consoles likes its Xbox Series X or Sony’s PlayStation 5, with its Xbox Game Pass subscription product.Chapman said this would lead to “new opportunities for emerging game developers, infrastructure companies and gaming platforms.”Microsoft’s blockbuster acquisition of Activision Blizzard was approved by the U.K.’s Competition and Markets Authority earlier this month.The deal, valued at $69 billion, will see Microsoft gain ownership of some of the most lucrative properties in video games, including the massive Call of Duty franchise, Candy Crush, Crash Bandicoot, Warcraft, Diablo, and Overwatch.VC deal slumpVenture capital investment into video game firms slumped 64% year over year in the third quarter of 2023, according to Konvoy’s report.Total venture funding into the video games industry in the third quarter of 2023 fell 9% quarter-over-quarter, to $454 million.KonvoyIt’s a sign of how, despite the boost to the industry from Microsoft’s landmark deal, the boom times for the industry in 2020 and 2021 have ebbed.Gaming startups raised a combined $454 million globa …

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