Are Acquisitions "Good for the industry"?

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Waking Up to Change

“You can’t wake up one day and say, ‘Let me build a game studio,’”

Satya Nadella says to Cnet after the gaming world would stir to the news of Microsoft’s industry shattering announcement to acquire Zenimax Media for $7.5 billion.  Satya would foreshadow that there would be more to come.  Not too far in the distant future, other large players in the industry announce significant deals.  EA would agree to purchase both Codemasters and Glu Mobile for a combined $3.3 billion.  The Embracer Group agrees to purchase Gearbox Entertainment, mobile developer Easybrain and Aspyr for a combined $2.5 billion.  Sony just announced the acquisition of Housemarque and Nixxes, and are suspected to have purchased at least one more.

At the time of this writing, both Embracer and TenCent are raising money to add additional companies to their portfolio.  If the number of billions being thrown at gaming companies sounds a little out of the ordinary, that’s because it is.  Gaming industry investment reached a new high in 2020 with no signs of slowing down. 

In a recent interview with IGN, Phil Spencer volunteered his perspective on game developer acquisitions as a “natural and healthy part of our industry”. Considering that the IGN crew weren’t challenging Microsoft’s buying spree at the time, it would appear Phil was pushing back to a narrative growing elsewhere.

In a March 5th article from Bloomberg, Jason Schreier represented a different point of view regarding the anxiety others have over these buyouts. “An industry dominated by a handful of big companies could eventually lead to creative stagnation and other symptoms of monopolization, like limited choices and higher prices.  It’s great to see developers finding financial success, but it’s hard not to be worried about the long-term ramifications for video game fans and makers. By the time we see the results, it may be too late.” If you frequent discussions in gaming forums, then you’ve likely heard these concerns echoed by others.

Creative stagnation, limited choices and higher prices sound like a combination of factors that any fan of the gaming industry should reject but is the gaming industry trending in that direction? How do these buyouts relate to the current trajectory? Let’s take a look.

Creative Stagnation?

“The most limiting aspect to creativity and game design isn’t the hardware.  It’s the boardroom.”  

(Anonymous ‘AAA’ developer)

20 years ago, the videogame industry appeared to be in this adolescent stage of self-discovery.  Many western developers like Bethesda and Bioware were making their first appearances on consoles, bringing those gamers a type of experience that had never existed there previously.  Halo and GTA3 changed the gaming landscape.  Half Life 2 and Valve would soon revitalize PC gaming. 

We were witnessing the dawn of online gaming and towards the end of that cycle, there was a healthy mix of both single and multiplayer gaming.  Why then would popular single player IPs born over the next 2 generations not be able to find life in the last seven years by the industry’s biggest publishers?  Why would a studio like Arkane, who made one of the highest rated multiplatform AAA single player games last generation, be rumored to have been on the chopping block prior to Microsoft’s acquisition of Bethesda?

A quick look at the financials show a AAA gaming industry that is thriving all while taking less big chances in the process.  In the previous five years, industry leading publishers Activision-Blizzard, EA and Take-Two averaged less than three single player games per publisher, barely more than 1 single player game every other year.

The other two western powerhouses, Warner Bros and Ubisoft were willing to fund single player games however Warner has recently stated they’ll be pivoting to more live service games.  Ubisoft has largely relied on three IP’s which have had more than five sequels (Assassin’s Creed, Far Cry and Just Dance) with only one new single player IP in that time.  Square recently had their best Western studio, Crystal Dynamics, change direction from the single player games they exceled at to a copy-cat formula Games as a Service title in the Avengers.  The data makes it clear that in the AAA space, what’s been good for business and what’s been good for diversity were at odds with each other. 

There has been a growing counter-balance to the stagnation of the AAA industry however.  When we look at the number of unique developers over the past two generations, the Xbox platform grew from about 600 developers on the Xbox 360 to 2200 on the Xbox One. 

This has been a result of significant growth in the independent sector of gaming.  Independent developers are able to take more creative risks as a result of lower average development costs.  As the industry trends towards cloud development and improved developer tools, the barriers for creative people to bring their visions to life will continue to lower while their output will increase in graphical fidelity.  This may explain why many accomplished AAA creatives have left big companies to start new studios in recent years. 

In addition, we can’t ignore that the core reason for Microsoft’s acquisition spree was to supply the Xbox Game Pass subscription service with bigger games more frequently. As discussed in our Netflix of Games analysis, bigger games from a diversity of genres, regions and rating classifications are necessary to fulfill the vision of reaching a diverse audience.

Based on a December, 2020 report from Simon-Kucher & Partners which included a survey of 13,000 people in 17 countries, they predict subscription services to become a predominant way that consumers access media much like with music, TV and movies.  According to their findings, Simon-Kucher doesn’t expect the gaming subscription market to be a “winner-takes-all” where one company dominates the market.  The relevance of this is expanding the subscription market will continue to enhance the environment for more creative risks.

If creative risks were primarily coming from the growing Independent community and have been emboldened by new gaming models, then it would seem disingenuous to equate buyouts of larger studios as a primary threat to the industry’s creativity. This is especially true when considering the apparent loss of appetite to take risks on expensive projects in the traditional AAA gaming paradigm.

Limited Choices?

In March of 2001, Sega would announce they were bowing out of the console business leaving the AAA gaming space with two platforms until Microsoft replaced Sega later that year.  Fast forward twenty years and we have not three but rather eight platforms which are either established or have money to fight for position between Microsoft, Sony, Nintendo, Valve, Apple, Google, Epic and Amazon. 

These companies will need to provide unique values relative to the current market leaders in order to survive.  The industry has moved from a couple hundred developers to thousands in two decades.  As 5G streaming is expected to create more engagement opportunities, gaming PCs continue to grow at a strong pace and console manufacturers offer more price points, the consumer has options to play more games from more developers on more types of devices than at any other time in the history of the industry.

As the technology matures, the onus on platform holders will only become magnified to meet their customers where they prefer to game. We’ve seen recent evidence as Microsoft now publishes all their 1st party content on PC and Sony is trending towards more PC support as well. As long as the trend of developers continues to out-pace the trend of acquisitions and platform holders to become more accessible, consumer options don’t show signs of reducing unless we focus on a narrow segment of consumers who impose limitations on themselves over platform preference.  

Higher Prices?

Consumer options extend beyond the hardware of storefronts. Pricing models are more diverse than at any point in history. Digital distribution has allowed developers to diversify and innovate in how they sell their content. Today’s biggest games can be accessed for free. While the high end of traditional games has risen to $70 in the US (and more in other regions), there’s also a number of high quality games that covers the spectrum of prices points. An example is a game like Hades, nominated for Game of the Year in 2020, priced at $25. The growing number of developers making high quality games will continue to give gaming consumers options within the traditional model alone.

Subscription models are still in their infancy yet already offer a value proposition to consumers unimaginable only five years ago. Game Pass offers hundreds of games, including many new releases, for $10 a month. Recently Sony has reduced the cost of their subscription service, PS Now, while simultaneously increase the quality of their offerings for PS Plus in light of this competition. If the price of the traditional AAA game is too much, we have a subscription for you.

Hardware is still an expensive consideration that gamers need to consider at least every seven to eight years. In an industry like gaming where content and services is where the profits are generated, the revenue from console sales was never the focus. Hardware cost has always been a barrier. The competition for platform holders is the accessibility of their ecosystem. That’s why even when competition was low, platform holders continued to sell their hardware at or below cost. As internet quality progresses worldwide, we should expect to see more consumers feel no dedicated gaming hardware is a viable gaming option .

Expanding Industries are Healthy Industries

What we’re seeing today is an expanding industry.  Most projections have gaming growing substantially over the next six years because advancements in technology are increasing it’s reach.  This growth has created more opportunity and therefore more players looking to reap the benefits. Rather than buyouts being a leading indicator of negative trends for consumers and developers, it’s a byproduct of increased demand and opportunity. As technology lowers the walls between gamers and creators, the spotlight on games shines brighter. If the impact of hardware gets reduced and it’s easier for consumers to move around, then naturally the value of the creatives who manage and build games swells.

“Starting a new studio is a very risky proposition.” Spencer continues to say to the IGN crew. “And if a team actually takes the risk of starting a new company, starting a studio, building that over years, building value in that, to say that they shouldn’t sell, I think is just short-sighted.” He goes on to explain that being rewarded for “creating value” is what continues the cycle of new companies deciding to take these risks. Today it’s a seller’s market and many business owners are looking to be rewarded for the value they helped create.

While we may continue to wake up to more studio purchases from the industries big fish, there doesn’t appear to be signs that we will wake up to an uncompetitive or uncompelling industry anytime soon – no matter what armchair analysts in internet forums tell you.


Great article, nuanced as such a question requires. For me, if it allows the teams and talent to be as creative as they can while having financial stability it’s great for the industry. If the purpose is just to shut down the competition while not allowing the teams to thrive, in my opinion it’s not so good.


Of course Phil Spencer is going to have a biased view on the topic but what he said about starting new studios is risky and people want to be rewarded financially if it proves successful is lost amongst the discussion I feel. We tend to largely think about people running these studios as your stereotypical creative types, which there is a hint of truth to it, but also these people have families and a good selling price can secure their future, and that is not even to discuss investors who just want to see a return at the end of the day.

In regards to whether it is good for the industry, with everything in life you are going to have success stories and failures, but I feel the industry ‘consolidation’ we are seeing atm is not going to damage the industry because there is arguably more competition than ever that will only drive innovation in games and services.


Excellent article with some great points. It had an especially strong start and I only wish mainstream gaming sites had this kind of coverage. Even Jason Schrier at Bloomberg has had some reductive take lately, so it’s refreshing to see such a well thought and researched article.


Another element left out somewhat here, which is at the heart of the whole subject drawing ire from gamers, is the presumption that acquisitions result in limiting the player base as buyouts have lead historically. Sony fans are upset about Zenimax because they presume they no longer have a way to play these games…which is NOT TRUE!

And I do not mean ‘just buy Xbox’, I am referring to the fact that by the time these games start rolling out Game Pass will be embedded into countless TV’s and available on all mobile phones and PC’s. ALL of those Sony fans upset still have access to those games (and countless more) using their preferred controller either on a local machine (PC) or on various streaming devices.

Similarly, Sony buying Nixxes is a great thing for Xbox gamers who will be able to access those PlayStation exclusives soon on their PC. Sure, it isn’t as wide a net as xCloud can cast, but it still is a purchase that, like the Zenimax deal, leads to MORE ppl accessing/playing these games than would otherwise be possible, not less. So those of us engaging in gaming discourse on this topic need to update our understanding of what the end result on offer actually is. It is not necessarily the result most assume it leads to.


This is a somewhat selfish opinion but as a subscriber I’m just happy I get more value for my money the better and bigger these teams are.

I know the business can be pretty cut throat at times for employees, but you have to admit given the sheer size of the Bethesda acquisition, MS have handled it with pure elegance, with very little in the way of lay offs or interfering with their work culture.

I suppose the dividends will show in the coming years.

I honestly think that if a studio wants to be bought, are in money troubles or any dev troubles and the team have a close or good relationship whether that be exclusive games, share info on things and give advice then the acquisition is ok. Now having a close or good relationship isn’t a requirement like some people say, if both companies thing it’s a good fit that that alone is enough for me.

With regards about platforms missing out on content, I think that is just part of life when it comes to a company buying another. I think it is dumb to expect a company to release content and IP on other platforms. When people bring up the Minecraft situation, that annoys me because that is completely different to any other type of game Microsoft owns. Minecraft is one of the biggest games on the planet and it got to that point because word of mouth and being on almost everything. Minecraft IP had already grown a massive install base on all platforms more than any other game.

Minecraft is the biggest IP Microsoft owns, the game was already established on all platforms and I doubt we’ll get a Minecraft 2 so that probably played a big part on it. Maybe if there is a Minecraft 2 that could be exclusive but I don’t think Minecraft 2 will be a thing.

Back on track about acquisition, none of the buy outs so far have been bad IMO from all parties. I do think that some companies won’t be able to compete on this and others will be able to compete on every single bidding war. I do think there will be more and more sales and there will be studios that build up from scratch then sell off after a great first game.

TDLR: I don’t mind acquisitions, it helps studios grow and do better, exclusive games coming from it is ok even if multiplatform, acquisitions are going to become more and more common, some companies will be able to bid on more than others.

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This is another important element: companies explicitly wanting to be bought. We know Zenimax wanted to be bought by MS specifically.


Yes, I think that this is what gets overlooked a lot in angry internet discussions. We only see one outcome. It might not be the best for everyone, but maybe it’s the one that compromises the developers the least. I don’t have a crystal ball, or much of an understanding of business so I try not to chime into these discussions. There’s just too much I don’t know.

What I want is great, affordable, widely-available experiences made by happy people who are fairly treated and compensated. I’m not sure if all of that’s possible but if most of those boxes get checked by a business move like an acquisition then I don’t really have much reason to complain.

Great article.

The other missing piece that few people consider are the early stage investors in new studios. A healthy acquisition market creates an incentive for more new investment in startups. Many of these investors have no interest in the video game industry per se, they simply want a good investment opportunity. They are investing with short to intermediate time horizons and explicitly want an opportunity to profitably exit the investment somewhere down the road. Acquisitions provide that opportunity.

In short, the healthier the acquisition market the more new studios we get.


Personally, I have no problem with acquisitions regardless of who’s doing the acquiring. I do prefer Microsoft over Sony due to Game Pass but don’t mind if Sony acquires studios or publishers because at the end of the day, if there’s a game I want to play day one, I will do so.

With that said, I am hoping Microsoft goes all out for WB Interactive and the entire DC license. Seriously, just go get them!!! It will all pay for itself within a decade.

For Sony, I do want them to go after Square Enix. First, it’s a perfect fit and second, they don’t seem to care as much about Crystal Dynamics and Eidos Montreal like they do their Japanese studios so in this scenario, I know Sony would get both of them back to greatness. As for Xbox, Square Enix avoids it with their Japanese games majority of the time anyway so in a way, Xbox isn’t losing anything on that side because Square Enix isn’t giving Xbox anything to begin with and if they do, it’s like years later.

For my top AA publisher, im hoping that Embracer Group acquires Airship Syndicate. I will be very happy especially since they own Gunfire Games. The entirety of Vigil Games can be home!!! :joy:

Of course. It means money is being brought into the industry and making it bigger.

Good. Bad. Phils the guy holding the money.

It could certainly be good (or bad) for an individual company to be acquired. Like Housemarque is probably in a much more secure place now than they were before.

“For the industry” ? The only reason the question is even being asked is because people saw an opportunity to vilify Microsoft.


I’ll read later, but my quick answer to the title is “I don’t think so”.

I like when a company keeps independent and strong because this means more creative minds with freedom to work.

I celebrate when Xbox buy a company just because this means Game Pass day one games and more time for their other studios to work on a better product. If they make partnerships to bring GP day one games, I don’t care if they will buy the studio or not.

Of course there are exceptions. I was happy when they bought Obsidian because they are an amazing studio with a history of bad luck. The acquisition means more stability to them. back then, I told a friend that the world is not prepared for a Obsidian with money and stability and they’re showing this quickly.

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