With emerging technologies and new gaming platforms, the video game industry trends for 2023 hold great promise.
The video gaming industry has been a hotbed of activity in recent years, with significant investments and mergers taking place in rapid succession. However, two recent reports from research firms DDM and InvestGame suggest that the gaming investment landscape is beginning to cool off.
DDM’s report indicates that the total value of gaming deals in 2021 was $62.4 billion. The Q1-Q3 2022 Gaming Deals Activity report from InvestGame reveals that the total deal value has increased to $124.5 billion. However, this is primarily due to the pending $69 billion Activision Blizzard acquisition by Microsoft, which accounts for 55% of the total. Without this merger, the year-on-year trend would have been a loss of 11%.
Currently, the overall video gaming industry is expected to continue growing at a steady rate, with DDM projecting a market value of $296.5 billion by 2026. While the industry may experience some volatility in the short term, the long-term outlook for gaming investments remains positive.
Market Conditions and Causes for the Recent Downturn in Video Gaming Deals
Despite the increase in total deal value, other metrics suggest a general downturn. Closed deal value fell 12% from $58.8 billion in 2021 to $51.4 billion in 2022. Similarly, the number of closed deals also fell from 709 to 626, a decline of about 12%.
InvestGame suggests that these market conditions have a number of causes, including:
- The current macroeconomic situation
- Post-pandemic user engagement changes
- Increased regulatory scrutiny
- Game Release date shifts
- Supply chain issues
Video Gaming Investment Landscape: Cooling Off or Shifting Strategies?
Video gaming industry trends in 2023 seem to be changing. These changes could be partially explained by a shift in general strategy.
Recently, the value per deal has been growing (up 16% for Q3 YoY), while the number of deals is shrinking (down 31% for Q3 YoY). This suggests that some investors are being more selective about who they invest in but investing more capital in the companies they do choose to work with.
InvestGame’s report also highlights specific types of investments that were struggling in Q3 and Q4 of 2022. Private investments and public offerings are trending downwards compared to recent years. Early and late-stage VC funding activity in the report echoes this pattern.
Blockchain and Web3 Investments vs. Video Gaming Market Maturity
Paradoxically blockchain and Web3 investments are heading in the opposite direction. For example, the number of deals is going up (up 2.8x YoY), but the total deal value is falling ($932 million vs. $1.09 billion). This suggests growing caution from investors, but the potential for a small bet to grow massively remains tempting.
These opposing trends suggest that gaming is seen as a more mature and stable market than blockchain’s potential bonanza or bust environment.
Video Game Industry Trends 2023 – Consolidation
The video gaming’s market maturity has led to a massive push for consolidation. For the year so far, a mere five deals have contributed nearly 65% of the $37.6 billion of total deal value:
- Take-Two Interactive acquired Zynga for $12.7 billion
- Sony acquired Bungie for $3.6 billion
- Embracer Group acquired Asmodee for $3.1 billion
- Saudi Arabia’s Public Investment Fund (PIF) acquired a minority stake in Nintendo for $2.7 billion
- Joffre Capital acquired Playtika for $2.2 billion
The industry appears to be heading towards becoming even more top-heavy. InvestGame tracks and ranks the most active investors in games, with Embracer Group, Saudi Arabia’s Savvy Gaming Group, Tencent, NetEase, and some Western gaming companies looking to spend. There could be more significant M&A activity on the horizon.
Non-Traditional Investment Sources: Private Equity Firms Entering the Space
InvestGame’s report also points out that the gaming industry is starting to attract investment from non-traditional sources. In particular, the report highlights the recent investment by a number of large private equity firms in the gaming space. These firms are seeking to capitalize on the growing popularity of gaming and the potential for significant returns.
Video Gaming Industry Long-Term Outlook: Growth Potential and Emerging Technologies
In summary, both the DDM and InvestGame reports show a general cooling off in the gaming investment market in the short term. This is evidenced by a decline in the number of deals and closed deal value.
However, the industry remains a lucrative market with strong growth potential, driven by factors such as the increasing popularity of mobile gaming, the rise of esports, and the growing availability of high-speed internet.
The industry is also expected to benefit from the release of new gaming consoles and the expansion of virtual and augmented reality technologies.
Looking ahead to video game industry trends in 2023, the advent of Web3 gaming is another interesting factor that is on the horizon. Undoubtedly, the technology for Web3 gaming is still in embryonic form. However, if the gaming community adopts these new technologies, video gaming could receive another massive boost.
Related: Web3 & Blockchain Games Articles by Gamelevate