'Cautious growth' returns to video game trading in Q1 from 2023 slump

According to the quarterly DDM Games Investment Review, the games business saw a modest recovery in investments, mergers and acquisitions, and IPOs in the first quarter of 2024 after a slump in 2023, but the overall The boost required a headline-grabbing $1.5 billion investment from Disney. .

“Despite layoffs and disruption in the games industry, investment and M&A are returning to cautious growth,” said a report from Digital Development Management, which provides consulting and operations services to video game companies. . focuses on trading in Western markets and does not include the huge Chinese gaming business.

Last year's total was significantly inflated by several big deals, most notably the Microsoft deal.
MSFT
Game-changing acquisition of publishing giant Activision for $68.7 billion
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-Blizzard in late 2023. But overall, the trading market in 2023 slowed significantly compared to 2021 and 2022, as consumer interest in gaming increased significantly during the pandemic, and then it became more common than it was before the pandemic. This is because the weather has cooled down to a very low level. shutdown.

While no deal of the size of the Activision deal is planned for 2024, Disney's $1.5 billion investment in Epic Games inflated the investment total in the first quarter, which was the largest investment in games in the quarter. This corresponds to two-thirds of the company's total investment.

Disney announced the deal amid a fierce proxy battle with two activist investor groups, the latest in a series of initiatives that CEO Bob Iger has used to fend off challengers. It was part of. Disney, which has been largely content to license its intellectual property franchises to outside game makers in recent years, already has a close working relationship with Epic, and is using Epic's Unreal Engine virtual production tools. He has produced hit shows such as: the mandalorian And live action The Lion King. Both companies are currently working together to build a Disney-themed world within the gaming platform Fortnite.

Overall, approximately 178 first-quarter investments in gaming companies of all types amounted to $2.2 billion, an increase of 123% in value and 20% in value compared to the fourth quarter of 2023. It's the first quarter he's made more than $2 billion since the report looked into it. Third quarter of 2022.

Investors are still pouring money into companies developing blockchain-related games and technology, with about $293 million poured into 66 deals. Although this was down (16% in value and 35% in volume compared to the previous quarter), it was due to a spike in interest in Bitcoin.
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ETFs after regulators allow them to be sold in the United States. As a result, interest in all blockchain-related investments has increased, DDM said.

Mergers and acquisitions during the quarter also exceeded $2 billion with 41 deals. That's a massive 97% decrease in value (again, thanks to Microsoft-Activision) and only a 9% decrease in quantity. DDM wrote that a better comparison would be to remove the “anomaly” of this mega deal from the total, which means the M&A value is two-thirds lower than all other Q4 deals. This indicates that it has recently jumped up.

Three-quarters of our M&A deals in the quarter came from our acquisition of Kahoot!by a consortium including Goldman Sachs
G.S.
, General Atlantic, KIRKBI, Grytrafjord. Of note in the statistics is that the largest segment by sales volume is esports, which saw a significant rise in interest for about three years before the pandemic and in the early days of lockdown, before retreating and restructuring.

The third part of the report tracks “exits,” including initial public offerings, which were reduced to one IPO worth $7.2 million. This is a 94% decrease in value compared to his three gaming-related IPOs in the previous quarter. DDM wrote that the lower number “pre-pandemic volume was consistent, typically with one to two IPOs each quarter.”

Poland, a hotbed for gaming in general and IPOs in particular, continued its role in the first quarter as local company ConsoleWay made its debut on NewConnect Exchange.

The report also tracked venture capital fund announcements where 28 funds raised $13.7 billion in new funds. This is a nearly quarter-fold decrease in value, but a slight increase in volume, suggesting more and smaller funds are entering the sector. Two of Silicon Valley's biggest companies have raised the largest amounts of new funding. Andreessen Horowitz's a16z raised $7 billion, and Y Combinator raised $2 billion. Together, these represent two-thirds of the new funds raised.

Like other blockchain-related gaming funds, blockchain-related gaming funds have received more attention, but the a16z fund accounted for the majority of the category's total of $8.3 billion.

As a side note, next week I'll be moderating a keynote at the LA Gaming Conference's Law and Finance Summit with Peter Levin, Managing Director of Santa Monica-based Griffin Gaming Partners. The conference will be held Monday at the Palisades Ballroom on the UCLA campus. Levin is the former CEO of Nerdist Industries, a leading venture capital firm focused solely on gaming-related investments, where he leads one and manages over $1 billion.