Video Game coverage ramps up at Sydney Morning Herald

Bigger than Netflix: Video game content is the new king - February 5, 2022

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Xbox’s latest acquisition will give it control of Activision Blizzard, which itself contains many studios and properties.

By Tim Biggs

If the last few years didn’t make it clear enough that change was on the horizon for video games, the very first month of 2022 certainly has. In January alone there were three enormous acquisitions announced at a combined value of almost $120 billion. A land grab for content is on, with gamers the next big target market.

Apple, Google, Amazon and Facebook’s owner, Meta, got the ball rolling in recent years, dipping their toes in the waters of game streaming and game subscription services, followed by increased investment in the technology that allows the creation of online virtual worlds, like metaverse.

Meanwhile, Microsoft has embarked on transforming its Xbox games business into a subscription service — Game Pass, introducing a streaming product that lets its games be played on practically any screen.

Traditional game developers are preparing themselves for the inevitable future; streaming means video games are about to become just as accessible as music or TV, and may become a cornerstone of our social lives. With game consoles relegated to a niche audience, consumers will choose between rival subscription services that can be used on their phone and other screens, like today’s video apps.

Ross Symons, founder of Melbourne sports game studio Big Ant, thinks we may have seen the final generation of hardware video game systems. Already more than half of all people play video games, and the potential of streaming subscription services to extend that to the remaining half will accelerate the shift, he said. That makes the need to control more content a core priority for technology companies.

“It’s a bit like, compare the number of people who bought a lot of Blu-rays and DVDs, to the number of people who [today subscribe to streaming video services]. Now look at the number of people who already buy games for consoles, compared to who’s going to subscribe when they don’t need hardware. When there’s a frictionless way to play games. It’s going to go crazy,” he said.

“This could be the biggest thing that’s happened to the TV industry since Netflix, and the thing that’s going to happen as we head to the Netflix of games, is going to be this grab of content.”

To that end, the world’s biggest game companies have been steadily acquiring or investing in smaller firms over the last few years, either to build out their technological capabilities and talent or to ensure they have the IP (intellectual property) and game development pipelines to support a Netflix-style model.

The highest profile aquisition before this year was Microsoft’s purchase of Zenimax for $10.5 billion, which netted the company a huge back catalogue of games including Doom, Fallout and Skyrim to add to Game Pass, as well as several mature studios to make exclusive games, such as Starfield coming later this year. But that was eclipsed last month when the company also announced it would acquire Activision Blizzard — which has an even richer history, owns the perennial best-seller Call of Duty and is incubating metaverse tech — for $96 billion.

Elsewhere in the same month, publisher Take-Two said it would acquire social game pioneer Zynga for $18 billion, and Sony said its PlayStation division would snap up Bungie — original creators of Halo and current developers of the massive online shooter Destiny 2 — for $5 billion.

Currently taking the bulk of the revenue in the global industry are platform holders Sony and Nintendo, as well as tech giants Microsoft, Tencent, Apple and NetEase, who would only become more powerful once hardware platforms are gone. The concern is, if the trend continues and most major studios are consolidated under these banners, will smaller independent studios like those that dominate Australia’s industry miss out?

“It offers opportunities, and also threats. You’re going to come up against conglomerates that are hard to compete against, massive marketing dollars and huge budgets,” said Ron Curry, CEO of peak industry body the Interactive Games and Entertainment Association (IGEA).

But the situation wouldn’t necessarily mean independent games businesses can’t thrive, he said. Small teams can produce big hits when all options are presented on the same service.

“We see that already on Netflix. Not everything that’s a hit on Netflix is coming out of a huge studio.”

Not only will there be opportunities for indies to live on the major platforms’ services — like Unpacking from Brisbane’s Witch Beam Games, which was a recent viral hit that was featured on Game Pass — but the rise of streaming will also mean rival indie-focused services, like we’ve seen with Bandcamp for music or MUBI for movies. And, of course, there’s always a chance those indies will be acquired.

“We’ve had a number of conversations with large and mid-size international developers who have asked us ’who do you think’s worth looking at, should we scoop them up? Should we buy them and leave them independent,” Mr Curry said.

But with recently announced government tax offsets making Australia a more friendly place for those big game companies to set up shop, there may be more paths to success than that.

“When these large companies set up in Australia, they create a good ecosystem that will allow independence. Allow a lot more students to come out of university, hone their craft within a big studio, then break off into fantastic, agile, independent game developers,” he said.

Mr Symons, of Big Ant, said fears of consolidation shutting smaller studios out didn’t take history into account. Ever since the 1980s as the market for video games as grown, there have always been periods of big companies taking control followed by greater opportunities for everyone, he said. Huge companies are needed to advance distribution — from arcades to home consoles to digital downloads to streaming — before the creators can benefit.

“We will have large corporations ruling, but it’s not a position we haven’t been in before. This is part of the cycle,” he said.

“I think what this will eventually do is offer almost direct access to market for smaller studios, access to an audience Netflix-like in size. Large corporations will control the platforms, but it’s in their interests to have the indie survive.”

Of course the question of consolidation is far from theoretical for Big Ant; the studio was already acquired last year by expanding French publisher Nacon for €35 million ($56 million).

“I’ve been given a directive already, to make sure that if there are appropriate studios for us to acquire that we have those talks,” he said.

“There’s a run on for content, and Australian content is very well regarded. We service the markets well, we speak everybody’s language, we allow development when the sun is down for them, and COVID has proven that things can be done remotely.”

Mr Symons added that given Big Ant’s focus on cricket, tennis and other sports, the team is excited about the potential of streaming to widen its audience to every sports fan in the country.

“As long as there’s a sports fan there’s a fan of our games. If it goes on to streaming we’re going to get more people, more eyeballs, we’re going to be able to grow and ride that wave,” he said.

“I think all the studios in Australia will ride this fantastic wave and thirst for content. The uptick in the number of people playing games is going to be so big.”

(The Sydney Morning Herald)