The great consolidation of video games has only just begun

Expect more deals like Sony’s acquisition of Bungie, as tech and entertainment companies keep an eye on metaverse projects.

A food frenzy for video game makers is now in full swing. The obvious question is: who’s next?

Sony Group Corp. said Monday it has reached an agreement to acquire private game developer Bungie Inc., maker of two of the most successful game franchises, Halo and Destiny, for $3.6 billion. The deal comes just weeks after two other major gaming deals were announced: Microsoft Corp.’s planned purchase of Activision Blizzard. for $69 billion and the Take Two Interactive Corp. deal. for mobile game maker Zynga Inc. for $11 billion in cash and stock. And all of this followed Microsoft’s $7.5 billion acquisition of video game publisher ZeniMax Media last year.

Video game companies have become hot commodities for several reasons. First, the industry remains one of the largest and most attractive growth opportunities at the intersection of consumer products and technology. According to research firm Newzoo, the global gaming market will be about $219 billion by 2024, up from $180 billion last year.

Second, interactive entertainment companies offer an edge over what some say will be the next big thing: the so-called metaverse. The idea of ​​the metaverse is actually that of an always-on multiplayer video game, where participants can combine their real and virtual worlds while going about their daily lives. While the idea is still largely theoretical, developing the concept requires skills and technology similar to those found in video games.

That prospect has caught the attention of top technology and entertainment names. Reed Hastings, co-Chief Executive Officer of Netflix Inc., has said the company is looking for a bigger player in the gaming sector. Major console platform owners such as Sony, Microsoft and Nintendo will want to continue to strengthen their in-house development capabilities and acquire more studios. Finally, if big tech companies get regulatory approval to make big deals, expect Apple Inc., Meta Platforms and Alphabet Inc. will also be willing buyers.

Who will be bought next? Expect potential buyers to discover companies that possess an unusual combination of cutting-edge, in-house game programming technology and the ability to build a super-successful franchise.

A few names fit that bill, including Epic Games Inc., with its Fortnite and Unreal game engine; Electronic Arts Inc., owner of Respawn Entertainment studio’s Apex Legends game; Cyberpunk 2077 creator CD Projekt SA; and Take-Two Interactive Software, owner of the Grand Theft Auto game franchise.

As scale becomes more important, don’t be surprised if these companies see suitors on their doorstep.

Tae Kim is a Bloomberg Opinion columnist on technology. He previously covered technology for Barron’s, after a previous career as an equity analyst.

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