The £50.6billion acquisition by Microsoft of Call of Duty maker Activision Blizzard has sent shock waves through the computer games industry.
Fears that the Sony deal might threaten the dominance of this sector led to shares in Japanese conglomerate Sony plummeting by more than 12 percent.
However, shares in other firms surged on hopes they could ride the wave of consolidation – as buyers or targets.
Explosive: Shares in Grand Theft Auto maker Take-Two have soared 9.2% while AIM-listed group Frontier Developments has gained 6.6%
Shares in Activision rival Electronic Arts are up 5.5 per cent since the deal, while Grand Theft Auto maker Take-Two Interactive rose 9.2 per cent and AIM-listed group Frontier Developments 6.6 per cent.
French developer Ubisoft is up 15 per cent since the takeover was unveiled on Tuesday. This merger is expected to be completed next year and it comes amid fierce competition for the top spot.
It will make Microsoft the world’s third-largest computer games firm after Sony and China’s Tencent, and provide a massive leg-up for Microsoft’s Xbox gaming consoles as well as its Game Pass subscription service, which offers players a library of games in a similar manner to the way people watch films and TV shows through Netflix.
Sony is facing a major challenge in strengthening Xbox, as the company leads this market with its PlayStation Console. Activision Blizzard’s acquisition comes amid a wave of takeovers in the video games market.
Earlier this month, Grand Theft Auto maker Take-Two Interactive snapped up Zynga, the maker of Farmville, following Microsoft’s purchase of video game studio Bethesda, the owner of franchises including Doom and Wolfenstein last year.
In the UK, Southam-based racing game developer Codemasters succumbed to a swoop by Electronic Arts, followed by Sheffield’s Sumo Group being bought out by Tencent.
And London-listed Team 17 has snapped up German simulation game developer Astragon Entertainment for £83million.
Following a spike in demand for computer gaming during the pandemic, there was a flurry.
The swoop on Activision Blizzard is the largest takeover so far in an ongoing wave of mergers & acquisitions that have swept across the global video game market
The new audiences and subsequent profits have shone light on an industry once viewed with little enthusiasm.
‘There is a lot of investment going in. It’s got a wide spread of demographics. It has all these attractive qualities that were highlighted and increased by the pandemic,’ said Katie Cousins, an analyst at Shore Capital.
‘People began to realise how valuable these titles can be. It’s like a community of friends getting together for games the way that you might get down to a pitch to play football. That social and community environment is very valuable.’
Activision Blizzard has several games that have millions of users. Its Call of Duty is one of the world’s best-selling computer games, having sold over 400m copies since 2003.
World of Warcraft is an online multiplayer fantasy game with around 6.1 million monthly users.
Cousins explained that gaming communities have the potential to spawn new media such as online series and books, but only companies who own intellectual property can make a profit.
‘That’s why there has been a rush to collect these IPs,’ Cousins said, adding that for most firms it is easier to buy games that are already popular than create new ones.
The scramble echoes a flurry of deals in the media sector such as Disney’s £3billion purchase of the Star Wars franchise from creator George Lucas in 2012 and Netflix’s acquisition of the rights to the works of children’s author Roald Dahl for £370million last year.
It comes amid the rise of the ‘metaverse’, a virtual reality environment that tech moguls such as Facebook founder Mark Zuckerberg believe will usher in a new age of online interaction.
Microsoft boss Satya Nadella said computer games would ‘play a key role’ in the development of metaverse platforms’.
With more UK-based companies in the spotlight, it seems that this trend will continue. AIM-listed Frontier Developments is believed by many to be under threat due to the success of its gaming IPs and the fall in shares. Stock is now down 34% in the past six months. Tencent was considered as potential buyers.