Video game publishers are consolidating – what does this mean for the industry?

In January, Microsoft announced the biggest-ever takeover in tech.

Microsoft acquired video game holding company Activision Blizzard – publisher of Call of Duty, World of Warcraft and Candy Crush – for a mind-boggling $68.7bn (£50.6bn), beating Dell’s previous record-high bid for digital storage giant EMC back in 2015.

This is the latest and clearest sign that big companies are consolidating the video game industry. Acquisitions have been picking up pace in recent years, including Take Two’s $12.7bn purchase of Zynga and Epic Games’ acquisition of Tonic.

Microsoft in particular has embarked on something of a shopping spree, initially hoovering up studios such as Double Fine before moving on to bigger publishers, such as ZeniMax Media last year.

Sony was quick to respond, announcing it would be purchasing Bungie, the developer of Halo and Destiny in a deal worth $3.6bn (£2.7bn).

So, the video game industry consolidation phase is evidently underway. But what does this mean for the sector at large? How will it affect all those involved, from causal gamers to major shareholders and everyone in between? We look at the potential pros and cons of consolidation in the gaming industry.

The good news

The gaming industry is growing

First, let’s look on the bright side. Consolidation is a clear sign the gaming industry is growing. This means there are likely to be more opportunities for both established and aspiring people in the industry to make their mark.

Hopefully we’ll see more jobs in gaming with better routes for progression. Salaries might also increase as demand for talent grows.

A new wave of investment

Speaking of salaries, gaming could see a new wave of investment. Just to reiterate: Microsoft’s acquisition of Activision Blizzard is the biggest-ever takeover in the tech world. Investors are going to sit up and take notice, even the ones who may have scoffed at the idea of video game investment ten years ago.

As a result, the gaming industry at large may be about to score some serious loot. New investors might mean greater activity, increased share value, and higher pay.

A boon for smaller studios?

Consolidation could be good for smaller games companies, too. It’s hard being an indie studio. Making games is a risky business. You’re producing a piece of art as well as a product, and it’s difficult to predict what will be successful (particularly if you don’t have the marketing spend or brand presence of the big publishers).

As a result, smaller studios can easily find themselves in a state of financial peril. So more cash in the industry could provide studios with a steadier funding stream. Even takeovers can be a positive thing, if the studios are allowed to continue working with creative independence. With a parent company’s support, they’ll be better able to weather the ups and downs of the industry.

The bad news

Or a bane for smaller studios?

On the flip side, many commentators are decrying the consolidation phase as the end of the indie studio. Innovation often happens within smaller companies, where each studio has its own way of working and they’re free to take creative risks.

As studios are swallowed up and assimilated, we could see a stifling of creativity. Different studios working under the same parent company may begin to look more or less the same as they homogenise under real or imagined pressure from higher up the chain.

Monopoly

We could then see the major players moving to monopolise the market, perhaps leaving us with two or three megapublishers. Not only could this kill the indie scene, but it also means that players might face higher prices. Games could also become increasingly platform exclusive, as Microsoft, Sony and Nintendo hoard their best titles.

And even if consolidation doesn’t stifle creative diversity or innovation, we would still have large multinationals creaming off most of the profits. The talented people who make the games might end up with a smaller share.

Disempowered employees?

Finally, the Microsoft Activision merger raises some very specific concerns, which could have wider implications for the industry.

Activision Blizzard is currently embroiled in a sexual harassment and discrimination scandal. Last year, California filed a lawsuit against the company following a damning two-year investigation, which found that there was a ‘‘frat boy’ culture’ of ‘constant sexual harassment, unequal pay, and retaliation.’ Many senior figures, including Activision Blizzard CEO Bobby Kotick, allegedly knew about, or even participated in, the company’s systemic misogyny.

Workers have staged protests, demanding better working conditions for women and the removal of Kotick as CEO. At the time of the merger announcement, workers were in their fifth week of strike action and had not received a reply from leadership following their request to negotiate.

Many employees fighting for justice and fairer working conditions are concerned about the merger. Some feel that the executives to blame for the misogynistic company culture are essentially being rewarded with a large pay-out, while others fear the news presents an opportunity to sweep concerns under the rug.

So what does this mean in terms of consolidation? Well, for many people the Activision scandal represents a power struggle. Downtrodden employees are taking on the higher-ups who abused their positions of power.

The worry is this: monopolies tend to concentrate power, not distribute it. Will consolidation further disempower employees? Will it become even harder to voice grievances and demand change?

Which way will it go?

So, will we see the best- or worst-case scenario? Most likely it’ll be a mixed bag. But it’s worth mentioning that those right at the top of the would-be megapublishers understand the potential pitfalls of consolidation.

Many games developers who have found themselves part of the Microsoft family in recent years have said that they continue to work with creative freedom despite being taken over. So, it’s not too farfetched to believe that something of the indie spirit will remain. Nor is it wishful thinking to hope that higher investment will lead to better pay, greater innovation, and overall a more active and exciting video game industry.

As for the mistreated employees at Activision Blizzard, there’s hope there too. Microsoft has a good reputation in the tech industry, and people will be watching to see how they handle the situation. Let’s keep our fingers crossed for real, positive change.