The battle for the world's top game IP began

While the global economy continues to suffer the onslaught of covid-19, the impact of the pandemic seems negligible for the gaming industry. According to the "2021 Global Game Market Report" released by NewZoo, which is committed to the global market research and forecast analysis of the game business, the global game market size will be at least $180.3 billion in 2021.

According to the report, consumer spending in the global gaming market was $175.8 billion in 2021, down 1.1% year-on-year.

But with industries that have been hit hard, such numbers are enough to satisfy practitioners.

For a long time, the global console game market has been the domain of Microsoft, Sony, and Nintendo. These three families are each on one side, and "there is no trouble with each other". But just into 2022, the situation of "peace and quiet" has suddenly changed.

Microsoft, which provoked the incident, entered the market with huge funds and began to exert efforts on the game track, trying to impact the hegemony of the console game market and end the situation of "peace and quiet" before in one fell swoop. With strong financial support, Microsoft may have enough money to realize its wishes, but the question is: Can you unify the market with money? Will Sony and Nintendo and other giants willingly hand over their turf?

In January, Microsoft announced a $68.7 billion acquisition of Activision Blizzard at a price of $95 per share, a premium of up to 45 percent, and the deal will close around 2023. If completed, it would be the largest merger in the history of global gaming. (Image courtesy of CNSPHOTO)

Microsoft set off an IP scramble

Microsoft is the initiator of the world's top game IP battle.

In January, Microsoft announced a $68.7 billion acquisition of Activision Blizzard at a price of $95 per share, a premium of up to 45 percent, and the deal will close around 2023. If completed, it would be the largest merger in the history of global gaming.

For Activision Blizzard, this is a sure deal. Since the global game industry entered the mobile era, Activision Blizzard's dominance in the game market has begun to decline significantly.

In terms of explosive product innovation, Activision Blizzard is lackluster, and can only rely on older games such as Call of Duty, World of Warcraft, StarCraft and Diablo to maintain its former glory. But even in the above game products, as activision Blizzard's most profitable game "Call of Duty" series, the global revenue in the mobile game market has not exceeded 1 billion US dollars, failing to rank among the first echelon of global mobile games. In addition, in the past 5 years, Activision Blizzard has not launched any blockbuster new games.

At present, Activision Blizzard is not only facing the embarrassment of weak product innovation, but also bears the risk of massive user loss. Activision Blizzard's first quarter 2021 financial report shows that the number of active users in Blizzard Entertainment segment is about 27 million. Compared with the same period in 2018, Activision Blizzard lost 11 million active users.

In 2021, although Activision Blizzard's revenue reached a record high of $8.8 billion, these revenues are still achieved by products such as Call of Duty and World of Warcraft. Among them, the call of duty game alone has increased the number of monthly active users of Activision Blizzard to 435 million. However, for microsoft, which has a lot of money, the amount of Activision Blizzard's revenue does not seem to be a problem. What Microsoft values is the super game IP that Activision Blizzard holds.

As one of the world's top three console game platform providers, Microsoft has super game publishing capabilities. Once it can bind a series of game super IPs of Activision Blizzard, it can greatly enhance Microsoft's platform monopoly ability. At that time, as long as players want to play Call of Duty, they will have to buy a home video game console X-Box owned by Microsoft. After buying an X-Box game console, Microsoft can push more self-operated game products to X-Box users, forming a platform-based monopoly advantage.

Sony followed Nintendo on the sidelines

After the news of Microsoft's acquisition of Activision Blizzard was released, Sony's stock collapsed in an instant. Since then, Sony said in a statement to the US media: "We expect Microsoft to comply with the contract agreement and continue to ensure that Activision games operate on multiple platforms." ”

Sony's home console maker, PlayStation, has long partnered with Activision Blizzard and has always held marketing rights to Call of Duty. Sony currently pays Activision Blizzard for a variety of limited-time deals, props and other exclusive content, while the PlayStation brand continues to appear in Call of Duty ads.

In response to Microsoft's acquisition, on January 31, Sony quickly announced a $3.6 billion acquisition of Bungie, a U.S. video game software producer, but this is more seen by the market as a defensive acquisition by Sony. Compared with Microsoft's big hand, Sony is really a bit underwhelmed. After all, Microsoft's cash reserves are as high as $136.6 billion, which is enough to buy the whole of Sony. In addition, in 2021 alone, Microsoft's net profit will be as high as $61.2 billion, which is enough money to buy the entire Nintendo. So, for Sony and Nintendo, games are the lifeline. But for Microsoft, gaming is just one piece of its vast commercial landscape.

The logic of Sony's acquisition of Bungie is the same as that of Microsoft. Although it is weak in the competition of financial resources, it cannot retreat, because in this game IP battle, whoever has more IP will have more commercial value, and who will have more right to speak in the future market. Sony's acquisition of Bungie is exactly what Bungie's Destiny series of games.

Although the gold-sucking ability of the Destiny IP is far less than that of Call of Duty, World of Warcraft, etc., for Sony, the acquisition of Bungie is already the best choice. After the merger is completed, Bungie will become a wholly owned subsidiary of Sony, but Sony will not interfere in Bungie's day-to-day operations and corporate operations.

Kenichiro Yoshida, Chairman, President and CHIEF Executive Officer of Sony Group of Companies, said Sony will use the Group's various entertainment and technology assets to support Bungie's further development and enhance its ability to create classic game worlds across multiple platforms and media around the world.

Kenichiro Yoshida also said what they value is Bungie's ability to "connect millions of people around the world by combining its values with people's desire to share the gaming experience." Jim Ryan, president and CEO of Sony Group of Companies, also said that the acquisition of Bungie is an important step in Sony's strategy to expand the reach of PlayStation to a wider audience.

Compared with the big moves of Microsoft and Sony, Nintendo does not seem to be eager to join the ranks of this combination. At a recent investor conference, Nintendo President Shuntaro Furukawa said that the Nintendo brand is built on its own advantages, and its game production team has a large number of high-quality Nintendo games, and does not need to dilute Nintendo's style by acquiring other game studios, but will only do so when "necessary".

And for the upcoming hosting platform competition, Nintendo also has its own preparations. The Nintendo Switch stood out from the tripical rivalry with X-Box and the PS series of image processing software developed and distributed by Adobe Systems to become the world's most popular home console.

The game market is still variable

The game industry is bustling with excitement.

In this regard, the British "Economist" believes that there are still two things that need to be understood about the game industry: First, some things in this industry will never change. No matter what kind of virtual world the game can create, the most popular thing for male gamers is to beat up their opponents on the screen. Second, everything else in this industry is changing. The carriers of games are shifting from consoles, PCs and smartphones to streaming and metaversalities. In the future, it will not only be the virtual avatar in the game that will be defeated, but also the old business model.

The recent deal between Microsoft and Sony is a perfect embodiment of the above two points, although the gap in strength between the two sides is extremely obvious.

But while it's tempting to think that Sony should catch up with Microsoft, it doesn't have as much money to outpace Microsoft in content layout, nor does it have the cloud infrastructure to compete with Microsoft (even though it launched a streaming service called PS Now). The acquisition of Bungie is a huge deal for Sony, which makes the gap between its financial resources and Microsoft clear at a glance.

For Sony's acquisition, Thomas Aouad of market research firm Drewbridge Research made an analogy that Sony did not take a knife to fight shirtless, its strength allowed it to take only a spoon. To be better than Microsoft, Sony must be on the side of the sword, and it is unusually bold.

First, it has to prove that streaming and subscription services are not guaranteed to bring wealth. Unlike Netflix's audience, players interact with streaming, and their fingers often touch the trigger at milliseconds. Low-latency internet connections are a matter of life and death for the player's avatar.

Second, the subscription business model has not yet been effectively validated. Sony and Microsoft have long relied on small profits to boost their share of high-margin games, and they often own franchises in these games, from which their entire game business and indie game developers benefit. In contrast, the subscription model may attract a large number of new users. Microsoft's Game Pass service, which opened up a library of games that can run on consoles for up to $14.99 a month, now has 25 million users; Netflix is also making inroads into gaming. However, such services may face brutal competition and will need to constantly replenish blockbuster gaming products to slow the rate of user churn. In fact, Sony, which has a rich stock of music and movies, is profiting by supplementing its video and music streaming platform with new content.

As another game strategy, Sony announced plans to double down on "Live-service" games like Destiny 2 in early February. These games are upgraded regularly, so they are easy to monetize. But that's not enough, it needs to sketch a strategic blueprint from its own experience and work to break down the barriers between its businesses such as games, music, movies, electronics and image sensors.

As highlighted in an article on investment research site Smartkarma, while other companies such as Meta talk about building metaverses, Sony already has a lot of elements of immersive entertainment (including virtual reality) in its hands. It needs to promote its own conglomerate structure as an advantage.

That means Sony can cross-cultivate its entertainment business, such as releasing games like a movie. More ambitiously, Sony is considering leveraging its cutting-edge technology to better serve the entertainment industry of the future.

The British "Economist" magazine believes that if Microsoft tries to get Activision Blizzard's game out of the PlayStation platform in the short term, then Sony needs to launch strong enough content to fight back. Sony's gaming business, which accounts for more than a quarter of its revenue, is critical to its future in the long run. But for Microsoft, the game business is not so life-and-death, which will prompt Sony to make more long-term plans.

Compile 丨 years double crossing

Editor 丨 Li Mo Nan

Cover image 丨CNSPHOTO