Jan 18, 2023 - Technology

Investment in gaming swelled in 2022

Source: Data: Drake Star Partners; Chart: Axios Visuals
Source: Data: Drake Star Partners; Chart: Axios Visuals

Deal-making in the video game industry reached $127 billion last year, across more than 1,250 investments, acquisitions and mergers, according to a new report by Drake Star Partners.

Why it matters: Both tallies were up from 2021, demonstrating continued, intense financial interest in the sector.

Details: Investment was spread across console, PC and mobile gaming companies, with $4 billion pouring into blockchain gaming efforts alone (up from 2021).

  • Esports related deals, however, were scarce, continuing a downward trend.
  • One head-turning esports exception: the $1.5 billion paid by the Saudi government-funded Savvy Gaming Group for two competitive gaming firms in January 2022 (Savvy plans to invest $38 billion in games in the years ahead).

Between the lines: Microsoft’s $69 billion bid for Activision Blizzard was the year’s biggest deal, though it hasn’t yet closed due to regulatory challenges.

  • The year’s biggest disclosed private placement was the $2 billion injected into Fortnite maker Epic Games, with funding led by Sony and Kirkbi, the company that owns Lego. Epic and Lego are planning a Lego virtual world.
  • Some notable game studios that received big investments in 2022 include Elden Ring makers FromSoftware ($260 million), Journey studio ThatGameCompany ($160 million), and former Grand Theft Auto producer Leslie Benzies’ Build A Rocket Boy ($125 million).

One Web3 catch: While venture capital firms raised an impressive $13 billion for blockchain gaming funds, Drake Star says the category’s second biggest player among them was collapsed crypto outfit FTX.

What’s next: Drake Star predicts 2023 to be another year of consolidation in the industry, with big spending from Saudi-backed Savvy and increased investment in AI.

Yes, but: Signs of a slowdown are evident, with the deal value, if not the number of deals, dropping in Q4 of 2022.

  • And not surprisingly, January 2023 has also been much quieter than the supercharged first month of 2022, which included announcements of the Microsoft-Activision bid, Savvy’s esports deals and since-closed deals for Bungie and Zynga.

The big picture: Gaming's robust activity bucks the overall trend for M&A, particularly.

  • Global deal value and volume were down 38% and 18%, respectively, from 2021. The declines for U.S. deals were 39% and 15%.
  • Q4 was the year's slowest quarter, after having been the busiest in 2021 and 2020.

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