Analysts from the investment bank Digi-capital told how much game developers have earned this year on the sale and withdrawal of their companies for IPO, and also explained why indies, unlike average teams, will survive.
Let’s go through the money first.
So, in total, $15 billion was spent on deals to acquire gaming companies over the past year. Recall that one of the largest deals of last year was Microsoft’s acquisition of Mojang Studio for $2.5 billion.
The remaining $9 billion went to those firms that entered the stock market and earned on the initial public offering. For example, King raised about $500 million during the initial auction at the end of March. However, the source of most of the amount turned out to be Asian, not Western companies.
Summing up the results of the past year, Digi-capital also shared its forecasts for the future. Firstly, the company stated that at the beginning of 2014, it slightly overestimated the games (software) market. By 2017, he will not be able to earn $ 100 billion, but by the end of 2018, it is quite possible.
The revaluation is due to the fact that only the mobile games market continues to grow at a wild pace. All other segments do not double in 12 months.
But the most interesting thing from the report is, of course, the forecast of which types of companies will survive and which will not. We present this fragment in its entirety:
“In markets with a single digital source of growth, the tide is no longer lifting all boats. The competition boils down to the difference between excellent and just good.
In this phase of the market, corporations with popular IP addresses, an extensive user base and money can invest large sums in marketing and infrastructure to compete in steadily growing markets, despite the reduction in margins for all participants of the ecosystem. Indie doesn’t have hit IP or scalable advantages yet, but they don’t incur any special costs either. Both corporations and indies can create hits. Even though there may be few such projects and they may radically differ from each other, this is not so important. But medium-sized companies do not have hit IP, scalable advantages, but they have infrastructure and marketing crutches. Of course, they can bring a hit IP to the market, but the high base cost of the latter increases their risks.
Another problem of medium-sized companies is the nature of transactions and investments in a steadily growing market. Corporate buyers manage their own businesses and they are not very interested in acquiring established large teams. In other words, the last thing they want to buy is someone else’s expenses. It is also more difficult for middle-class people without support to raise money for development, despite the increase in investment volumes, their number in 2014 decreased by 25% compared to 2011.
Against the background of a fall in gaming stocks, in general, by 14% in 2014, corporations are reducing their costs and looking for small independent teams with unrealized high potential to then integrate them into their infrastructure and marketing, or breakthrough companies with high-quality games, high ratings and a large number of downloads in mobile.
Indies continue to do what they have always done: they are trying to create great games from scratch for the sake of fame and glory (and maybe budget).
In such a situation, medium-sized companies have a choice: to become great and sell out, or to shrink to the level of indie and survive. Just being a good company is no longer an option.
DIGI-CAPITAL Also on the topic:
- Digi-Capital: the mobile market has destroyed the gaming marketDigi-Capital is an investment bank for games, applications, digital media and services and telecommunications companies in America, Asia and Europe.