The potential acquirers in the game business.
Mobile gaming is growing so fast that it is expanding the traditional games industry far beyond its old borders.
Tim Merel, managing director of game investment bank, issued a report today that predicts mobile games could drive the whole game software industry’s revenues to $100 billion by 2017. He said the mobile and online game sectors could grow at a compound annual growth rate of 23.6 percent to $60 billion by 2017.
“Competition for growth is intensifying, as the new kids on the block harness the energy in the cycle to take them to the summit. However this is an elite marathon not a sprint, so long term engagement performance is just as important as short-term success,” Merel said in a statement.
Mobile games and Asian activity drove mergers and acquisitions to a record $5.6 billion in 2013 (and that’s excluding $2.3 billion from the management-led portion of the Activision Blizzard/Vivendi spinout), up 29 percent from 2012. The average deal grew 23 percent from 2012 to $63.8 million.
Mobile accounted for 67 percent of the M&A transaction value and 36 percent of the volume.
“While many deals were focused on growth, there was considerable consolidation for pivot and turnaround strategies,” Merel said.
He noted that Asia is becoming the biggest driver of economic value in mobile and online games, with the best companies’ revenue growth and profit margins becoming the envy of foreign competitors. Merel predicted that Asia and Europe combined could take more than 80 percent of the global revenue share for mobile and online games. Nine of the top 10 game M&A deals of 2013 had Asian buyers, compared to 8 out of 10 in 2012. 13 out of 15 game initial public offerings from 2011 to 2013 were by Chinese, Japanese, or South Korean companies.
Merel said that game businesses are now operating in multiple regions around the globe. A lot of this fits in with our theme of Total World Domination at our upcoming GamesBeat 2014 conference in San Francisco on Sept. 15-16.
Games investment from VCs, corporate venture funds, angels and Kickstarter/crowdfunding recovered slightly in 2013, returning to 2010 levels. Investment in game companies grew in value by 16 percent 2012, to $1 billion.
But Merel said that an early stage games investment gap remains. Metrics and analytics have become increasingly significant in fundraising. Average game investment deal size grew 14.8 percent from 2012 to $6 million. Mobile games and tech/gamification deals dominated 2013.
Meanwhile, game usage is growing on mobile. Games accounted for 32 percent of mobile app usage in 2013, and they were 67 percent of tablet usage. They accounted for 72 percent of mobile app revenue and 40 percent of mobile app downloads in 2013.
Asian over-the-top messaging apps (like Kakao in South Korea) are disrupting the landscape, taking significant share of the top 100 app store rankings in various markets.
Meanwhile, the launch of the new game consoles is beginning to address the console decline of recent years, but Merel said questions remain about how many new machines the vendors will sell.
“Where 2013 was a year of transition, we anticipate 2014 to be a year of both growth and disruption for the games market,” Merel concluded.
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