The video game market is one of the youngest, most promising, and highly profitable right now. In 2020, it reached $175 billion (an increase of 20%). In 2023, the figures increased several times.
In addition to the gaming industry's growth, it's important to note the rising popularity of ancillary gaming services, such as boosting, which exert a significant influence on specific gaming scenes. This is particularly relevant in games like "Destiny 2," where boosting has become an integral part of the gaming experience and players seek a reliable destiny 2 service. These services offer players the opportunity for rapid progression within the game, granting access to unique opportunities and items. This surge in interest in ancillary gaming services demonstrates that the industry continues to evolve in various directions, opening new avenues for gaming interaction and commerce.
In this article, we will explain why the industry continues to grow even in times of crisis.
How the industry works
Gaming companies can be divided into several categories.
● Video game developers who develop only their own projects. An example of this is the Naughty Dog studio, known for such a game as Uncharted, or Arkane, and the creator of the Dishonored and Prey series of games. This includes developers who self-publish their games. An example of such companies is the mobile developer Playrix or Blizzard.
● Publishers. The main focus of such companies is the publishing and distribution of games, a similar company for PC and console projects is Digital Bros, and for mobile projects - Crazy Labs.
● Tech companies. These are technology development and outsourcing companies - for example, game engine developers Epic Games or Unity, as well as one of the largest outsourcing holdings Keywords.
● Various platforms for streaming and communication - Twitch, Mixer, for connecting with other players Discord, Slack, as well as platforms for coaching and selling game items.
Who is looking for investment?
With increased interest from both foundations and major game companies, and the explosive growth of the video game market, it's becoming easier for studios to raise funding for a range of tasks: team/project funding, growth acceleration, and additional synergies. In general, we can divide the types of companies that are looking for investments into several types. There are also several classifications based on funding rounds.
● Emerging or just established companies that are just planning development, or their project is at an early stage. Such companies are suitable for pre-seed and seed-round investments. Often they attract investments from venture capital funds.
● Formed companies with one or more projects at the soft-launch stage or already in a global release. For such companies, funding is needed mainly to cover three needs: finalizing the project, scaling the team, and increasing marketing expenses. Both venture capital investors and strategic investors are suitable for such companies. At the same time, the main feature of strategic investors is that the ultimate goal of such companies is the acquisition of a controlling stake, which may not happen immediately, but is part of their long-term strategy.
● Formed companies that have one or more successful projects and cover their operating and marketing expenses quite safely. For such companies, investors are interested only in a few cases: a merger with a similar company that can provide additional synergy and the sale of the company to a strategic investor.
Such a separation can help the studio understand where it is now, and what can be expected. The earlier the studio attracts investments, the higher the risks for the investor. Therefore, most often in the early stages, when the project is still being developed, the investor may request additional opportunities in order to avoid possible risks or reduce them. At the same time, when the project has already been released and there are metrics, here it is more important for the investor to understand what maximum the current project of the studio and future ones can achieve.
Who invests
The investment market in the gaming industry has changed markedly over the past few years. So, if earlier, only large companies were engaged in investments, now the most active players are MGVC - the Swedish four, as well as, of course, Tencent, and recently reactivated Microsoft and Electronic Arts.
In general, the investor market for understanding studios can be classified into the following classes:
● Strategic investors are large companies whose goal is most often to buy a controlling stake in a company or startup. In addition, strategists are trying to achieve a number of goals through investments - this is increasing their market capitalization through the consolidation of financial indicators, increasing expertise in various gaming areas (Tencent investment), expanding within the framework of strategic goals (acquisition of ZeniMax by Microsoft to expand the gaming portfolio and gaming line for their Xbox game console).
● Publishers, like Kowloon Nights. They provide project funding, but unlike Kowloon, the publisher publishes the project itself, and all cash flows from the project go through the publisher first.
● Crowdfunding platforms like Kickstarter, Fig, and others. Such platforms are most often used by studios that either failed to raise funding from strategic investors or venture capital funds, or companies that did raise funds, but want to attract additional fanbase.
The video game market is actively changing and evolving, this is facilitated by the release of new generation consoles, the arrival of a completely new audience in the industry, and the popularity of the free-to-play segment. There are more and more funds and companies interested in investing in game studios. The type of investments and investors also continues to increase. Now studios, both with an already launched project and new ones, are able to find funding not only in the local market but also internationally. In the future, the market size will certainly continue to grow, and investments in gaming companies/projects will increase.
