The future of the advertising industry will be shaped by a range of disruptive themes, with gaming being an important theme that will have a meaningful impact throughout the industry. A detailed analysis of the theme, insights into the leading companies, and their thematic and valuation scorecards are included in GlobalData’s thematic research report,Video Games – Thematic Research. Buy the report here.
The video games industry continues to evolve, driven by changing user demands, new monetisation and distribution channels, and technological progress. Today’s industry is in the throes of a transformation driven by themes like 5G, augmented reality (AR), virtual reality (VR), esports, cloud gaming, and the metaverse. As these themes mature, competition will intensify among traditional game publishers, tech giants, and companies in other sectors (e.g., retail and tourism). As a result, several leading game publishers will become M&A targets, with tech giants being the likely acquirers. Advertising is a significant driver for tech giants in determining M&A targets, as the video games industry provides excellent opportunities for monetisation through advertisement.
According to GlobalData estimates, mobile gaming will be the dominant segment in the gaming software market, accounting for more than 50% of global gaming software revenues by 2030.
However, not all companies are equal when it comes to their capabilities and investments in the key themes that matter most to their industry. Understanding how companies are positioned and ranked in the most important themes can be a key leading indicator of their future earnings potential and relative competitive position.
Insights from top ranked companies
Microsoft is a dominant player in the video games market. It owns 23 game studios that offer several popular titles, including Forza, Gears of War, Halo, Minecraft, Microsoft Flight Simulator, and The Elder Scrolls. Its Xbox consoles are very popular, competing directly with Sony’s PlayStation consoles.
Microsoft is also active in cloud gaming through its huge games portfolio and global cloud infrastructure. Its Xbox Cloud Gaming service was launched in September 2020, integrated with Xbox Game Pass Ultimate. In January 2022, Microsoft made a $68.7bn bid to acquire Activision Blizzard. Pending regulatory approval, the acquisition will make Microsoft the third-largest gaming company by revenue after Tencent and Sony.
Tencent is the largest company in the video gaming market by revenue. Its dominant position is attributable to its stakes in leading game publishers like Riot Games, Epic Games, Krafton, Activision Blizzard, and Supercell. It owns TiMi Studio, Lightspeed & Quantum Studios, and Rubik’s Cube Studio, which develop games for Tencent and its partners. Tencent also owns WeChat, the world’s largest standalone mobile app with over a billion monthly users.
Tencent is a strong endorser of esports and has successfully positioned Honor of Kings, Clash of Clans, and PUBG Mobile in the Asia-Pacific region. Tencent also owns stakes in DouYu and HUYA, the leading esports streaming platforms in China. Furthermore, its wholly-owned subsidiary Riot Games dominates the global esports market with League of Legends and Valorant. In March 2020, Tencent announced GameMatrix, a cloud gaming service designed for Android phones, in partnership with Huawei.
Amazon’s Twitch is a leader in esports streaming, with approximately 140 million monthly active users. While Twitch faces competition from Google’s YouTube and Meta’s Facebook Gaming, its 50,000-plus partners (successful streamers with established audience bases) give it a strong foundation. Amazon has also forayed into cloud gaming (with Luna; currently available in the US), game engines (Lumberyard), and mobile app stores (Appstore). Having launched successful in-house games (e.g., New World and Lost Ark), Amazon is also moving into game publishing. In June 2022, it partnered with independent developer Disruptive Games to publish the latter’s upcoming online multiplayer action-adventure game.
To further understand the key themes and technologies disrupting the technology industry, access GlobalData’s latest thematic research report on Video Games.