Consolidation of the games market is a concern, but it is not a bogeyman
Even amid the wave of mergers and acquisitions, experts see room for new studios
If there’s one sector of the economy that can’t complain about the Covid-19 pandemic, it’s the games industry. With people locked at home and consuming more games, there was considerable growth in revenue.
Still, Rodrigo Terra, president of Abragames (Brazilian Association of Electronic Game Developers), was restless. “We were very concerned about the verticalization of the market”, he says.
The idea that the games industry was going through a process of “verticalization” (or “consolidation”, as it is often called) gained traction in January, after an unprecedented sequence of billion-dollar deals:
These deals raised questions about the concentration of a lot of power (and money) in the hands of a few players in the games industry and doubts about how this would change the market.
Terra’s concern was with a smaller-scale repetition of this phenomenon in Brazil, with medium and large studios buying or merging with smaller studios. “Which would end up decreasing the base of the pyramid and we wouldn’t have a cycle of new companies emerging”, he says.
This movement really happened, but with different results than he expected. “As the games market exploded, there was great interest from students and even professionals from other areas of the economy, who began to see games as a potential market”, he reports.
The effect of this was that many studios were born during the pandemic, in 2020 and 2021. “Young people with a lot of talent”, says Terra.
According to research released by Abragames, in the last four years, Brazil went from 375 game development studios to 1,009, an increase of 169%, with about 40% of these companies having up to five years of existence.
Chris Charla, General Manager of Projects and Content Curation at Xbox, also notes a clear expansion of the Brazilian industry. “The quality of games is growing very fast. Developers releasing one, two, three titles in a row, and it just keeps getting better,” he says.
As responsible for the ID@Xbox program, which helps bring indie titles to Microsoft platforms, and an employee of one of the companies responsible for the current consolidation process, Charla is in a privileged place to observe the consequences of this phenomenon in the market.
He recognizes that there is a consolidation process, but he doesn’t see it as something negative. “For a studio, joining a larger company could be the right thing. For others, starting over with a small project and surprising is the way to go.”
Charla sees that both options can achieve success at the same time. “It shows that we are in a healthy industry,” she says.
“Like in the entertainment industry, you never know where the next big thing is going to come from. I don’t see anything in the sales figures and long-term projections that might worry independent developers”, adds the executive, who cites “Cuphead”, the debut title of Canadian studio MDHR, as an example of an indie game that became a global success. – even winning a series on Netflix.
It is also true that a lot can still change. The main deals involving game companies have not yet been concluded or are pending approval from regulatory bodies – the FTC (US Federal Trade Commission) is still considering the purchase of Activision Blizzard by Microsoft.
In addition, analysts polled by GamesIndustry.biz do not see the wave of acquisitions and mergers ending anytime soon. The only certainty is that the game market will never be the same again.