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EXCLUSIVE: While Microsoft‘s acquisition of Call of Duty maker Acquisition Blizzard delivered a major boost in 2023, overall M&A and investment in the video game sector this year will return to quieter, pre-Covid levels, a new forecast says.
DDM Games, in a report recapping 2023 and previewing 2024, says the industry will “struggle finding footing” this year amid the reset. After the boom times of the pandemic, “companies are restructuring their operations through closures, layoffs, and divestitures,” the agency wrote in its report.
In large part due to the Microsoft deal and “against all odds,” in the view of DDM, overall investments and M&A in gaming added up to $81.1 billion. That broke the previous record set in 2021. Microsoft closed its $68.7 billion deal — which represented 85% of all economic activity in the space — last October.
“Beneath these shiny totals, the industry struggled to maintain momentum and displayed pullback to pre-pandemic growth,” the report asserted. Without the Microsoft-Activision deal, there would have been $11.4 billion from 643 investments and M&A deals, down 80% in value and 49% in volume from 2022.
Although the pandemic boosted a number of sectors, including streaming, “there’s no question the games industry benefited the most as the world turned to forms of entertainment,” DDM said. “The exponential growth among revenues, profitability, investments, acquisitions, and IPOs was unsustainable for the industry since the world would eventually go back to normalcy.”
As 2024 unfolds, the agency’s report forecasts more downsizing, restructuring and divestitures. Some reasons for optimism about future deal flow include well-capitalized venture capital firms, Saudi Arabian investment funds and the adoption of blockchain games.
China won’t come to the rescue, DDM maintains. The country “will continue to have tight gaming restrictions and lower revenues for their giants,” including Tencent and NetEase, the report predicts.
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