eResearch | The video game industry is quickly expanding with multiple acquisitions as publishers and game developers create new innovative products and services. Growing trends in the industry include live-service games, subscription-based gaming platforms, and ESports offerings.
The industry recently experienced a spike in new users due to the COVID-19 pandemic forcing consumers to stay at home. According to Deloitte’s 2020 digital media trends survey, during the pandemic, 33% of U.S. consumers for the time tried a video game service or watched ESports.
Evolve E-Gaming Index ETF (TSX: HERO), the first Canadian ETF focused on gaming and ESports, has increased by over 50% in share price since dropping in March.
CHART 1: NASDAQ 100 (black) vs HERO (red) -1 Year Chart
Microsoft Acquires ZeniMax Media
Last month, Microsoft (NASDAQ: MSFT) announced a $7.5 billion all-cash acquisition of ZeniMax Media, a U.S. video game holding company. The two companies have multiple years of history working together, as ZeniMax games are currently available on Microsoft’s Xbox console.
ZeniMax is the parent company of Bethesda Softworks, one of the largest private game developers in the industry. Bethesda is best known for its game franchises, The Elder Scrolls and Fallout.
Bethesda was ranked as the number one publisher in 2018, and has achieved the “Game of Year” award five years in a row. The acquisition of Bethesda will expand Microsoft’s number of creative studio teams from 15 to 23.
ZeniMax’s portfolio of publishing offices and development studios also include:
- Alpha Dog Games
- Arkane Studios
- Bethesda Game Studios
- id Software
- MachineGames
- Roundhouse Studios
- Tango Gameworks
- ZeniMax Online Studios
Microsoft plans on expanding content for its Xbox Game Pass with games from Bethesda and ZeniMax’s other game development subsidiaries. The Xbox Game Pass is Microsoft’s subscription based gaming platform, which launched in 2017.
Microsoft’s stock is currently trading at $215.81 per share, a 7% increase since announcing the acquisition and a 55% increase in the past year.
TGS Esports Acquires Volcanic Media
This week, TGS Esports (TSXV: TGS) announced signing a letter of intent to acquire Volcanic Media in an all-stock transaction valued at C$0.24 million.
TGS, previously Myesports Ventures, is the owner of Canada’s first dedicated Esports arena. TGS listed publicly in August on the Canadian Stock Exchange, and is currently transitioning to the TSX Venture exchange.
Volcanic is the creator of the National Esports Scholastic League, the first organization in Canada to work with high schools to create inter-district Esports leagues. In addition, Volcanic also provides high schools with Esports scholarships.
The National Esports Scholastic League currently has a network of 1000 high schools in 13 different cities, across 6 school districts.
TGS announced plans to allow high schools to join Volcanic’s league for free, with zero costs to schools and students.
TGS expects to receive over 200,000 new users for its proprietary Esports platform, Pepper Esports, from Volcanic’s scholastic leagues, tournaments, and in-class programs.
TGS plans to distribute payments for the acquisition based on milestones related to the 200,000 new users that it expects to gain from contracts with Volcanic:
- C$0.04M upon closing of the transaction.
- C$0.01M upon reaching 10,000 total new users.
- C$0.03M upon reaching 40,000 total new users.
- C$0.03M upon reaching 70,000 total new users.
- C$0.03M upon reaching 100,000 total new users.
- C$0.05M upon reaching 150,000 total new users.
- C$0.05M upon reaching 200,000 total new users.
TGS’s stock is currently trading at C$0.12 per share, a 5% increase since announcing the acquisition and a 54% decrease since launching publicly in August.
Victory Square Technologies Acquires GameOn App’s IP and Assets
Last month, Victory Square Technologies (CSE: VST; OTC: VSQTF), a portfolio holding company, announced an all-stock acquisition of GameOn App’s assets and IP. The acquisition was made through Victory Square’s portfolio company, V2 Games, a video game venture firm focused on royalty investments.
The acquisition will be paid in V2 Games shares issued at a price of C$0.25 per share, which will be distributed to GameOn shareholders.
GameOn is a technology company that provides a platform where fans can compete around sports, television, and live events with prediction games. GameOn’s proprietary technologies builds engagement through localized gameplay, peer-to-peer functionalities, leaderboards, and cash prizes.
GameOn provides the interactive, social experience to partners that include broadcasters, sportsbooks, venues, and brands.
Comcast (NASDAQ: CMCSA) partnered with GameOn to launch GameOn-branded sports prediction games to homes and hospitalities across the U.S.
NBCUniversal Media, a subsidiary of Comcast, also partnered with GameOn through a white-label agreement to build NBC’s own prediction products for reality TV and sports.
PHOTO 1: GameOn’s Brand & Media Partners
Victory Square’s stock is currently trading at C$0.54 per share, a 22% decrease since announcing the acquisition and a 170% increase in the past year.
Video Game Industry
The games industry is expected to continue growing with high M&A activity as the market grows with new users during the pandemic. During the current economic downturn, the games industry may be a good defensive investment for portfolios.
According to Newzoo, the global games market is forecasted at $159 billion this year, and is expected to potentially reach $201 billion by 2023, growing at a CAGR of 7.7%.
CHART 2: NASDAQ 100 (black) vs VST (red), TGS (blue), and MSFT (yellow) – 1 Year Chart
Other recent eResearch articles related to the gaming industry:
- August 2020: Video Game Quarterly Update – Activision, Electronic Arts, and Take-two Interactive Report Record Revenues
- July 2020: Vindex Announces Acquisition of Belong Gaming and Plans to Spend $300M to Open 1,500 Physical Gaming Arenas
- July 2020: Video Games & eSports Betting Update – Sony Invests US$250M in Fortnite and Embracer buys Sweden-based Saber Interactive for US$525M
