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Gaming industry insiders bet on takeover frenzy after Activision deal

Mergers take gaming industry to next level: After Call of Duty maker is snapped up in a £50bn deal, insiders bet on a wave of takeovers

The £50.6billion acquisition by Microsoft of Call of Duty maker Activision Blizzard has sent shock waves through the computer games industry.

Shares in Japanese conglomerate Sony plunged by over 12 per cent amid fears the deal could threaten its dominance of the sector.

However, shares in other firms surged on hopes they could ride the wave of consolidation – as buyers or targets.

Explosive: Shares in Grand Theft Auto maker Take-Two have soared 9.2% while AIM-listed group Frontier Developments has gained 6.6%

Shares in Activision rival Electronic Arts are up 5.5 per cent since the deal, while Grand Theft Auto maker Take-Two Interactive rose 9.2 per cent and AIM-listed group Frontier Developments 6.6 per cent.

French developer Ubisoft is up 15 per cent since the takeover was unveiled on Tuesday. The merger, due to complete next year, is the largest ever in the sector and comes amid a scramble for dominance.

It will make Microsoft the world’s third-largest computer games firm after Sony and China’s Tencent, and provide a massive leg-up for Microsoft’s Xbox gaming consoles as well as its Game Pass subscription service, which offers players a library of games in a similar manner to the way people watch films and TV shows through Netflix.

The strengthening of Xbox is a challenge for Sony, which leads the market with its PlayStation console. The swoop on Activision Blizzard comes as takeovers sweep across the global video game market.

Earlier this month, Grand Theft Auto maker Take-Two Interactive snapped up Zynga, the maker of Farmville, following Microsoft’s purchase of video game studio Bethesda, the owner of franchises including Doom and Wolfenstein last year.

In the UK, Southam-based racing game developer Codemasters succumbed to a swoop by Electronic Arts, followed by Sheffield’s Sumo Group being bought out by Tencent.

And London-listed Team 17 has snapped up German simulation game developer Astragon Entertainment for £83million.

The flurry of activity follows a boom in demand for computer games during the pandemic.

The swoop on Activision Blizzard is the largest takeover so far in an ongoing wave of mergers & acquisitions that have swept across the global video game market

The swoop on Activision Blizzard is the largest takeover so far in an ongoing wave of mergers & acquisitions that have swept across the global video game market

New audiences, and the profits that followed, shone a light on an industry that had previously attracted little interest. 

‘There is a lot of investment going in. It’s got a wide spread of demographics. It has all these attractive qualities that were highlighted and increased by the pandemic,’ said Katie Cousins, an analyst at Shore Capital.

‘People began to realise how valuable these titles can be. You have a whole community with friends meeting up in games in the same way you might go down to a football pitch and play. That social and community environment is very valuable.’

Activision Blizzard owns several titles that boast millions of players. Its Call of Duty is one of the world’s best-selling computer games, having sold over 400m copies since 2003.

Online multiplayer fantasy game World of Warcraft has around 6.1m monthly players.

Cousins said these gaming communities can spawn other forms of media including books and online series, but companies can only profit if they control the intellectual property (IP).

‘That’s why there has been a rush to collect these IPs,’ Cousins said, adding that for most firms it is easier to buy games that are already popular than create new ones.

The scramble echoes a flurry of deals in the media sector such as Disney’s £3billion purchase of the Star Wars franchise from creator George Lucas in 2012 and Netflix’s acquisition of the rights to the works of children’s author Roald Dahl for £370million last year.

It comes amid the rise of the ‘metaverse’, a virtual reality environment that tech moguls such as Facebook founder Mark Zuckerberg believe will usher in a new age of online interaction. 

Microsoft boss Satya Nadella said computer games would ‘play a key role’ in the development of metaverse platforms’.

The spree seems set to continue, with more UK firms in the crosshairs. AIM-listed Frontier Developments, whose games include the Jurassic Park franchise, is thought by some to be a target due to its successful gaming IPs and a fall in the share price. The stock is down 34 per cent in six months. Tencent has been mulled as a potential buyer.