The InvestGame team is pleased to present our Global Gaming Deals Activity Report for FY'23.
While the gaming investment landscape faced headwinds in 2023, with late-stage investments and M&A activities declining by approximately 2x times compared to the average of the previous three years, there are signs of stabilization and potential growth opportunities, especially in areas like AI and Early-stage gaming. The increasing influence of regulatory bodies and the evolving role of technologies are poised to shape the industry's future.
1. Deal-making activity in 2023 was characterized as relatively slow, with a notable decline in the number of closed deals and overall investment values, decreasing by over 50% compared to the heights of 2020-2022. The industry experienced turbulence with down rounds and shutdowns as studios struggled to perform in line with the high valuations of past funding rounds. Despite this, Seed funding for new studios remained strong, offering investors favorable entry terms.
2. Mergers and Acquisitions (M&As): Although M&A activities decreased in 2023, with the total value of deals settling at approximately $9.5B, excluding the Microsoft-Activision $68.7B deal, positive signs are pointing towards a more vibrant M&A environment for the future, contingent on macroeconomic stabilization.
3. Public Offerings: Public offerings saw a moderate recovery in 2023, indicating a possible resurgence if market conditions improve, with a growth in value of about 16% year-on-year and deal count increased by 87%.
4. Early-Stage Gaming Investment: Over 25 new Early-stage gaming funds have appeared since 2020. Despite challenges such as inflated rounds, the gaming market remains attractive to investors, with competition leading to size increases of average funding rounds from $16m in 2020 to $21m in 2021 before stabilizing around $13m in 2023.
5. Late-Stage Gaming: Late-stage gaming companies faced challenges due to macroeconomic factors, leading to a downturn in activities. The total deal value in late-stage gaming decreased significantly, from $6.7B in the 2020-21 period to just $1.2B in the following years.
6. Corporate Gaming: There's been a shift from solo investments towards co-investments in Early-stage deals, aiming to mitigate risks and potentially open opportunities for M&A activities. Despite a notable decline in deal value in 2023, the deal count remains close to that of 2022.
7. AI in Gaming: AI technology continued to see a rise in deals, with a significant increase in transaction count in 2023 over the two previous years. GenAI is considered both a game-changer and a source of IP infringement concerns in the industry.
8. Platform & Tech: There was a decline in Platform & Tech deal volumes as investors focused on profitability and short-term outcomes, with AI startups showing growth. However, the number of AI-related tech startups increased, with 29 out of 82 Platform & Tech deals related to AI. Blockchain in gaming has become a more niche market after the investment boom, but it remains alive, with deal values in 2023 still 19.5 times higher than in 2020.
We thank MGVC and Taylor Wessing for their support of the Report.
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