Will the Consolidation of the Gaming Industry Continue?

For decades, Microsoft and Sony have competed in the console war with their respective Xbox and PlayStation series. Last month, the gaming industry saw a major development in this rivalry when Microsoft acquired Activision Blizzard (“ATVI”), a powerhouse video game developer in terms of its ownership of intellectual property as well as its game franchises’ massive fanbase.

Activision Blizzard consolidated much of its investment into intellectual properties that it deems profitable at the expense of others that have some considerable following but generate less revenue. With Microsoft’s acquisition, many in the gaming world hope that an influx of resources may inspire changes to their current strategy and revive some of the popular intellectual properties that have been overlooked when it comes to allocating investments.

Despite the struggles ATVI has faced with its reputation in the last few years, due to harassment claims and insufficient handling of those claims, some speculated that it was still a major threat to Sony. They were quickly proven wrong because two weeks later Sony acquired Bungie, the developer of Destiny 2 which is available on both Xbox and PlayStation, in a $3.6B deal. The acquisition of Bungie is a testament that the console war will continue if each company, including Nintendo, has its own proprietary intellectual property and hardware that can generate hype and demand amongst consumers.

On the other hand, although recurring services are a growing revenue stream for many companies, the future of video game subscription services is still uncertain. While Sony has yet to launch its own version, Microsoft’s acquisition of ATVI allows it to add even more titles to its Game Pass. Nonetheless, how this service will perform against cloud-based gaming services, such as Google Stadia and Amazon Luna, remains to be seen.

Microsoft and Sony are the latest examples of how the consolidation and creation of mega-companies has no boundaries. Like the technology sector, the gaming industry should see increasingly more competition between big companies, making it very difficult for smaller studios to continue to compete.