In the wake of Microsoft’s US$69 billion bid for video game giant Activision Blizzard, the question of the future of independent studios suddenly seems very topical. The rumor machine fueled by an apparent acceleration of market consolidation around its main platforms spares no one, not even Ubisoft.
This is the question of the hour in video games: will Sony make an offer to acquire Ubisoft? If not, what future for the other major publishers? “All of a sudden, everyone is wondering what the future of gaming looks like,” said Jayson Hilchie, president of the Entertainment Software Association of Canada (ALD). One thing seems certain: mergers and acquisitions are on the increase and Quebec will not escape it.
“The content needs of major platforms are profoundly transforming the industry,” continues Jayson Hilchie. “We normally see consolidation in mature sectors where growth is stagnating, such as aerospace and automotive. It’s amazing to see this phenomenon accelerating in video games. The sector is experiencing double-digit growth,” a sign that this maturity has not been reached.
A platform war
The video game industry has always orbited around a three-headed monster named Microsoft, Nintendo and Sony. Of the three, Microsoft has arguably the fiercest acquisition strategy. Its targets lately isolate Sony more than Nintendo, which explains the knee-jerk reaction on the stock market: Sony’s stock fell 9% in one week.
At the other end of the spectrum, Ubisoft saw its title jump 13% over the same period, before falling in the wake of the stock market correction in tech stocks. Electronic Arts, another major publisher, took 4% in the stock market in one week. Investors are betting these two are attractive targets for Sony or another big player.
Canada may eventually feel the effects of this newly found appetite for mergers and acquisitions. Its multimedia industry is largely made up of smaller independent companies, tempting prey for deep-pocketed foreign corporations. Most studios in British Columbia were independent and were gradually taken over by foreign rivals, recalls Jayson Hilchie. “But here, we are reaching a whole new level” of the pace of acquisitions.
The arrival of video game platforms from Apple, Google and Netflix is what made Microsoft react. They too are potential buyers. Offering exclusive content becomes key to their success. Many independent publishers will want to cling to a dominant platform. This should stimulate further consolidation in the sector, explains the president of the Entertainment Software Association of Canada.
Closer ties
Publishers that are in a good financial position could do better by forging closer ties with one or more platforms, whether Microsoft, Sony, Apple or Netflix. Private companies owned by a limited number of shareholders can decide their fate more calmly than companies listed on the stock exchange whose title fluctuates according to the mood of speculators…
This is what Rémi Racine, co-founder and CEO of the Montreal company Behavior Interactif, said just last week. “We are not Activision. We still have good years of growth ahead of us. We should never say never, but we are not for sale,” says the man who sees himself more as a buyer than a seller at present.
The same goes for Haven Studio, a company founded in Montreal in the spring of 2021 by a handful of video game professionals who include Ubisoft and Google alumni, and which is led by renowned Montreal designer Jade Raymond.
Haven Studio is a close partner of Sony, which has an investor role in Haven and which moreover ordered their first title exclusively from them. The evolution of the sector leads the people of Haven to believe that companies that stick more closely to a distribution platform will do better.
“Our intention was to have a close collaboration with Sony and to develop it in the longer term,” says Le Devoir Jade Raymond. She says she sees with Microsoft’s announcement that there’s more convergence these days, but that doesn’t change the basic fact in this highly digital industry: original content remains critical to platform success.
And that original content more often than not comes from independent publishers.