Report: Gaming Deals Slow, but Still Exceed Pre-Pandemic Levels

Gaming M&A and investment activity has significantly slowed as the pandemic gaming bubble deflates, but it’s not all bad news according to InvestGame. Its report, which covers 2020 to 2022, shows continued strength in early-stage investments, as well as PC, console and cross-platform development.

Growth Potential
Despite the steep decline in the overall market, early-stage deal activity was a bright spot, with $800 million invested across 109 deals in 2022, versus $1.1 billion in 156 deals in 2021. Looking ahead, many gaming venture capital funds are still sitting on large war chests. The fall in valuations is a double-edged sword: While gaming companies may not be worth as much, they are also more affordable for investors. 

Talk of the Town
InvestGame also tracked media coverage of closed deals (which eliminates the elephant in the room that is Microsoft’s pending purchase of Activision Blizzard). The deals with the most media coverage were Microsoft’s purchase of Bethesda Games’ parent company Zenimax Media, followed by Sony’s $2 billion investment in Epic Games and $3.7 billion purchase of Bungie. PC also got a little shine, with game engine developer Unity’s acquisition of ironSource being the eighth most visible deal.

The Big Casualties
Blockchain-based Web 3 gaming was, unsurprisingly, one of the hardest hit segments. Q4 2022 saw just under half a billion dollars in Web 3 deals, compared to Q1’s $1.6 billion in activity at the height of the bubble. 2023 figures to be an even tougher year for Web 3 in gaming. The other big casualty was mobile gaming, which lost much of its investing luster after Apple’s changes to user data sharing with advertisers. 

Has the Worst Passed?
That's the big question many gaming companies – particularly hardware manufacturers seeing double-digit revenue declines – will be repeatedly asking themselves in the coming months. This report suggests that, if the worst isn't behind us yet, then at least 2023 will still offer significant growth opportunities for traditional gaming companies.

Image source: AMD