Like a nearly unkillable boss character, investments in the video games business have stirred back to life after a rugged 2023, rising nearly a third over the first half of 2024 to the highest levels in nearly two years, according to statistics compiled by industry consultant Digital Development Management.
“Q2 2024 investments totaled $3.05 (billion) across 222 investments (+32% in value and +21 in volume compared to Q1’s $2.3 (billion) and 184 investments) achieving the most investment volume in nearly two years as games investments have not surpassed 200 investments since Q3 2022,” according to the report.
Even as investments have risen markedly, DDM warned that “…the news isn’t all positive as M&As still remain low.”
The game business, and related dealmaking, boomed during and just after the pandemic lockdown, undergirding a string of multi-billion-dollars deals led by Microsoft’s $71 billion acquisition of publisher Activision-Blizzard. Even taking that mammoth deal’s distortions out of the comps, mergers & acquisitions remain muted, still only about half of the 2023 totals when the Activision deal is set aside.
The $181 billion game industry has struggled to find a new normal amid high interest rates and a broader cooling of venture-capital investments and exits through initial public offerings and acquisitions. Repeated rounds of layoffs and studio closures have bedeviled the industry, further spurring unionization pushes and more recently, a strike of major publishers by SAG-AFTRA unionized voice and motion-capture actors over concerns about the use of artificial intelligence tools.
Despite all that, the glory days of game dealmaking are creeping back, the DDM statistics show, leading DDM executives to say the future is looking brighter.
“When you look at our dataset, which covers 16 years of games investments, M&As, and IPOs, I can’t help but be excited for the near future,” said Mitchell Reavis, the manager of the DDM Games Investment Review. “The last year has been a really shaky time for the games industry, and with the resurgence in games investments, it appears the shakeout is coming to an end.”
More money came into the industry in both quarters of 2024, which were substantially bigger than any quarter in 2023, DDM said. And Q2 saw $3.0 billion in investments across 222, the most investment volume in nearly two years.
The investments included Disney’s $1.5 billion buy-in with Epic Games, which makes the Unreal Engine virtual-production and visual-effects tools that Disney creators have used in projects such as The Mandalorian. As part of the deal, the two companies are building a Disney-themed world in Epic’s Fortnite.
Most investments were in companies specializing in tools or other support capabilities. A big portion of the investments, again, has been in companies with blockchain capabilities, driven substantially by the U.S. Securities and Exchanges Commission approval of ETFs based on the Bitcoin and Ethereum cryptocurrencies in recent months.
Dealmaking in the video game industry is perking back up after a rugged 2023, DDM reports (source: … [+]
Some 40 exits (IPOs and acquisitions) in Q2, totaling $845 million, were slightly down from the year’s first quarter totals, which DDM attributed mostly to a lack of any bell-cow major deals to lead the herd (and wildly inflate overall totals). But the first half of the year as a whole was up 26 percent compared to 2023.
The quarter’s biggest deal was Infinite Reality’s $250 million acquisition of the Drone Racing League, 30 percent of the quarter’s dealmaking total but far smaller than the $1.6 billion Kahoot! deal the previous year.
The decline in Q2 exits also featured a quarter without any IPOs, breaking a five-year streak of at least one market debut by game companies per quarter since late 2019. In 2021’s hectic first half, for comparison, 17 game company IPOs generated $84.5 billion in investments.
The slow half-year in going public may be a hangover of the far broader chill in 2023 on IPOs by any companies, a chill that has only recently started to thaw.
But more deals are clearly on the way. DDM’s report tabbed a big Q2 jump in cash raised for investment funds, up 48% in value to $21.9 billion across 38 funds.
Three-fourths of that total was raised by four big funds: General Catalyst ($6 billion), ICONIQ Capital ($5.2 billion), Norwest Venture Partners ($3 billion), and Kleiner Perkins ($2 billion), according to DDM.
DDM also noted that dealmaking totals don’t include what they believe are a number of undisclosed deals for smaller values that didn’t require public notice.
“While M&A and IPOs have declined marginally quarter-over-quarter, values are down simply from the lack of disclosed deals,” Reavis said. “The unfavorable conditions have allowed companies to be more strategic by not disclosing the purchase price of a company. As studio financials become more stable, we expect more values to be disclosed, boosting the major exits that are currently in the works like EQT Group’s £2.2B acquisition of Keywords Studios and Animoca Brands’ potential IPO in 2025.”