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In less than half a year, we’ve seen three gigantic acquisitions in the gaming world that altogether have exceeded $5 billion.
On the surface, Facebook’s purchase of Oculus for $2 billion, Amazon’s purchase of Twitch for $1.1 billion and Microsoft’s likely deal to buy Minecraft maker Mojang for $2.5 billion would seem to have little in common. One is a virtual reality technology company, the second is a video-streaming media platform and the third is just a really, really popular game.
But common to Oculus, Twitch and Mojang is an audience — more specifically, a trend-bucking subset of that ethereally defined group, “gamers,” who tend to be young and, more importantly, are harder to reach through traditional media like TV, or even Facebook. These companies’ products are totally different from one another, but they’re attractive to acquirers because their consumers think and act differently from other groups.
In a world overrun by things that play games, Oculus’ advocates are raring to give VR another shake, despite the general failings of the technology in the past. In a world of abundantly free and cheap online video content, Twitch’s users are spending tens of millions of dollars on mostly pointless subscriptions. And in a world of free and cheap videogames, Minecraft’s players are ponying up real money to play — to the tune of $126 million in profits last year.
In Minecraft’s case, that ponying-up often means buying the same game multiple times. I’ve heard anecdotally from multiple parents that their kids have to buy Minecraft for each gaming platform (PCs, consoles, etc.) wherever they find it’s available, and, as an adult player of the game, I’m much the same way. So far, I’ve spent $20 on the Xbox 360 edition of Minecraft, $5 to upgrade to the just-released Xbox One edition, $7 on the Pocket Edition for my iOS devices and $3 on in-game purchases on Xbox 360. Almost immediately, after seeing a blog post saying the Xbox One edition had launched, I abandoned my desk for the Xbox One to spend my $5, like a wallet-opening reflex.
To the uninitiated, this may sound bizarre — and it should.
Minecraft, as we noted yesterday, inspires obsession in some of its players that goes beyond what most games can offer. The unstructured nature of how you play in Minecraft, and the reinforcing impact of countless YouTube and Twitch videos showing how to do things in the game, brings players back again and again. Parent company Mojang AB’s laissez-faire embrace of all videos about its hit game has essentially created a runaway “native advertising” unit.
That’s not the norm. Most games have to strategize, adapt and cross their fingers to reach that level of stickiness.
So, who else might be on the block? The trick here is separating the companies with lots of fans now from the ones that will still have those fans five years from now.
The short answer is, not many gaming companies are left that fit that description. Riot Games has found Minecraft-esque success, albeit in a totally different genre, with its game League of Legends, but it is already owned by Tencent. A handful of mobile startups seeking to ape League of Legends, including Hammer & Chisel and Super Evil Megacorp, might be able to repeat Riot’s trick on mobile, but they have yet to prove themselves.
There are a few private outliers like Machine Zone, which makes the continually top-grossing Game of War: Fire Age; Kabam, in which Alibaba just invested $120 million; and Big Fish, which makes a popular social casino game.
In the NPD Group’s ranking of the top 10 console and PC games at U.S. retail in July, the only game not published by a public company was Minecraft. In App Annie’s July index of the top 10 games by revenue on the iOS and Android app stores, all of the companies were publicly traded, or subsidiaries of publicly traded companies.
The most interesting “sticky” company left that’s independent of the public giants might be Valve, which both makes its own games — including the hit free-to-play PC shooter Team Fortress 2 — and operates a popular PC gaming download store and social platform called Steam. However, it would probably take a substantial truck of money to get Valve to give up its prideful independent identity.
So, that’s game development companies. Let’s broaden the net.
On the media side, Disney has already bought the biggest name on YouTube, the “Let’s Play”-er PewDiePie, for $500 million. But there are plenty more where he came from, including SkyDoesMinecraft, VanossGaming, TheSyndicateProject, CaptainSparklez and Rooster Teeth — and don’tcha know, most of them play a lot of Minecraft.
On the technology side, it’s a lot quieter. Ouya, which makes a gaming-focused set-top box for your TV, is in the process of trying to sell itself, but more for its staff talent than its technology. If any of the companies making Ouya-esque “microconsoles” or Steam Machines are able to mount a threat to Sony and Microsoft, they’ll be very attractive targets, but we’ve yet to see that happen. Similarly, companies like Leap Motion are trying to capitalize on the mixed bag of virtual reality control options, though we haven’t yet heard Oculus’s final word on the matter, and those companies’ success will be dependent on widespread adoption of new VR headsets.
The short of it, though, is that Mojang is an unusual beast in the gaming world. We might be done with the industry’s mega-acquisition fever for now, at least until gamers warm up to the next Mojang.
http://www.youtube.com/watch?v=LnjSWPxJxNs
This article originally appeared on Recode.net.
