Sony, NetEase, and Tencent, Asia’s largest video game developers, continue their purchase and investment sprees as they push into new forms and, in the case of the Chinese giants, expand internationally to alleviate harsher regulation at home.
Each company’s strategy differs.
NetEase bought French game developer Quantic Dream last week, establishing its first European studio. NetEase has Japanese and U.S. gaming studios.
Tencent, which has invested in smaller gaming studios worldwide, bought a share in FromSoftware. Sony invested alongside Tencent.
Sony bought Helsinki and Berlin’s Savage Game Studios last week.
Recent mergers and acquisitions in gaming starting off 2022. In January, Microsoft offered $68.7 billion for Activision Blizzard. Soon later, Sony announced plans to buy Bungie for $3.6 billion.
Three Asian gaming companies have diverse M&A objectives.
Sony’s PlayStation has reigned for years.
Console gaming’s business model has altered. It’s not enough to sell games and hardware. It’s about milking income from games through continuous updates and subscriptions.
Sony’s acquisition of Bungie demonstrates this approach.
“Their goal is to have enough content to motivate users to buy their proprietary hardware, pay a monthly charge for PS Plus, and buy the occasional digital game through the PlayStation Store,” said Tom Wijman, market head for games at research company Newzoo.
“Buying studios is the best way to assure exclusive content for their ecosystem, especially in response to Microsoft’s acquisition spree.”
Sony is expanding beyond consoles. Last week, the Japanese behemoth stated it is putting up a specialized section to handle mobile game production, a relatively new initiative for the corporation.
The mobile video game developer Savage Game Studios was also acquired.
Wijman: Sony is leaving its comfort zone to stay competitive.
Mobile gaming accounts for more than 50% of the gaming market, while consoles account for 27%. Sony wants more market share.
Sony’s acquisitions will boost its IP and game catalog as it expands into mobile gaming.
Tencent and NetEase face a tougher local market, increasing the importance of their international investments and acquisitions.
Last year, Chinese censors limited the time under-18s could play online video games and froze new releases. In China, regulators must approve games for release and monetization. In April, approvals resumed.
Covid-19’s reappearance in China and subsequent lockdowns have hampered economic progress. Some of China’s internet heavyweights, including Tencent, had their worst quarter of revenue growth.
Tencent and NetEase have sought development abroad through acquisitions and investments.
Tencent and NetEase built their gaming businesses in China. Wijman said these two companies will speed their global expansion as their home market becomes more controlled.
Tencent owns or invests in Riot Games, developer of League of Legends.
NetEase focuses on purchasing high-profile IP. The Hangzhou-based firm can publish a Star Wars game after acquiring Quantic Dream. NetEase has Harry Potter and Lord of the Rings mobile games.
For the two giants, owning studios behind international major hits in gaming is a critical strategy.
NetEase has been less aggressive than Tencent in deals, although it’s stepped up in the last year.
Both firms’ investment strategies include console ambitions. NetEase and Tencent grew by focusing on PC and mobile gaming, not consoles, which were outlawed in China until 2014.
Both companies are focusing on console gaming.
This year, NetEase hired a console veteran to oversee its Japanese gaming studio. TiMi Studio, a Tencent-owned developer, opened offices in Montreal and Seattle.
Both firms can gain console IP by acquiring and investing in other gaming studios.
Tighter regulation in China and the search for expansion could drive NetEase and Tencent’s investment and acquisition strategies.
If Chinese government regulation continues to squeeze NetEase and Tencent in their native markets, they may be interested in M&A, Wijman added. “Their global expansion plans just began.”
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