The Video Game Wars Are Just Beginning
Take-Two’s acquisition of Zynga is a signal of what’s to come
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Take-Two Interactive’s $12.7 billion deal to acquire mobile game company Zynga says one thing: gaming companies are finally ready to up their spending game in search of more eyeballs.
Acquisitions and mergers in this space are nothing new. Electronic Arts (EA) spent over $3 billion to acquire smaller studios in 2021. Take-Two shelled out $378 million to acquire a Nordeus — a mobile game studio focused on sports — and the company has slowly assembled a large group of studios over the past two decades to help it grow to its current size. Even Sony (PlayStation) and Microsoft (Xbox) upped their acquisition game in 2021, buying several studios and bringing them in-house, allowing them to release even more exclusive games in the seemingly never-ending battle for console supremacy.
But this specific deal, and the high premium attached to Zynga’s market value, showcases the quiet war happening between game developers.
Before Take-Two’s deal for Zynga, it was lagging behind the top four gaming studios. As of November 2021, Roblox ($75 billion), Nintendo ($53 billion), Activision Blizzard ($47 billion), and EA ($35 billion) were all worth more than Take-Two ($20 billion). To become a true alpha in the industry, Take-Two had to make a splash. In order to do so, it paid a crazy amount of money for one of the top mobile gaming studios, making it the largest ever deal in the gaming world. Yet, it could pay off pretty quickly.
What Zynga specializes in is free-to-play games. These games are free to download, but once you become addicted, you can make in-game purchases to improve the playing experience, or to access digital goods within the game economy.
These free-to-play mobile games bring in billions of dollars a year for the top studios. Call of Duty: Mobile and Honor of Kings contributed significantly to a $10 billion year for TiMi Studios in 2020, which helped the Tencent-owned studio outpace Activision Blizzard’s revenue for the same year.
Take-Two plans to use Zynga’s expertise to turn popular titles such as Grand Theft Auto, Red Dead Redemption, and others into these free-to-play cash cows.
