May 22, 2022

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Fine Art Of Business

Wordle, Activision, Zynga ride a ‘tide’ of FOMO driving big video game deals

2 min read

The video game studio buying frenzy that’s erupted in recent weeks may just be an industry-wide case of fear of missing out (FOMO), according to analysts.

January’s string of big and small deals for game developers has seen Take-Two () – the publisher behind heavy-hitting franchises like Red Dead Redemption and Bioshock, make a for mobile game giant Zynga.

Not to be outdone, Microsoft () announced it would buy Activision Blizzard () for a that would unite franchises like Call of Duty, World of Warcraft and Candy Crush together with the makers of the Xbox.

Michael Pachter, managing director of equity research at Wedbush Securities, told Yahoo Finance Live last week that the software giant’s move for Activision is part of a bolder “vision and a strategy.” The deal essentially gives Microsoft more games and properties – not just for its traditional consoles, but to help grow its efforts in mobile gaming and cloud computing.

More recently, the gaming boom culminated with Sony () announcing a $3.6 billion deal for Bungie, the studio behind “Halo” and “Destiny,” while The New York Times () is buying the viral crossword game Wordle for an undisclosed price “in the low seven figures.”

Pachter told Yahoo Finance that Sony’s purchase of Bungie was driven more by FOMO, citing the higher price the Japanese giant paid per developer when compared to Microsoft’s Activision bid.

“Sony, I think, just did a ‘me too’ statement and said we’re not gonna be left behind, so we’ll buy Bungie,” he added.

And other companies – like Google (), which has its own cloud gaming service – might yet join the video gaming land grab, analysts say. Yet some think major players are in a wait-and-see mode, especially with the more recent deals undergoing regulatory review.

“Anything that Google or any of the other platforms might do from an acquisition standpoint will rightfully get a lot of scrutiny,” Daniel Flax, senior research analyst at Neuberger Berman, told Yahoo Finance.

He added that Google will likely focus on maturing the cloud gaming experience rather than acquiring intellectual property.

“It makes sense to license content, perhaps have some of your own,” the analyst suggested. Google’s focus is “to really ensure the user experience is first rate, and that in my view is what’s going to drive growth,” he added.

The flurry of deals could also boost companies more peripherally connected to gaming, according to Patrick Moorhead, founder, CEO and chief analyst of Moor Insights & Strategy.

With Sony and Microsoft making investments in gaming and gaming content, “AMD () will be able to piggyback on top of that increased demand,” he told Yahoo Finance. “They’re gonna rise with the tide as well.”

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https://finance.yahoo.com/news/wordle-activision-zynga-ride-a-tide-of-fomo-driving-big-video-game-deals-155733417.html

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