Rise of Video Gaming Companies

Surprisingly there seems to have been a sudden interest in acquisition of video gaming companies in the market. First it was the acquisition of gaming company Oculus Rift which makes Virtual Reality headset for Virtual Reality games by Facebook for $2 Billion. Facebook acquired it roughly around the same time when it acquired messaging app WhatsApp for $19 million. Due to the higher price tag of WhatsApp, the acquisition of Oculus Rift didn’t gain that much traction in the media. A month or so in an even shocking move, Amazon went ahead and bought live streaming video media platform company Twitch for roughly $970 million. Before Amazon finalized its deal with Twitch, Google was in talks to acquire Twitch for a price point close to $1 billion. To top it all off, Microsoft just announced (the news first got leaked to the media before the announcement) this morning a deal nearing to buy the Swedish video game developer Mojang AB, the company behind the popular videogame “Minecraft”. Chinese ecommerce giant which is also soon to be listed on New York Stock Exchange (NYSE), Alibaba also announced of its $120 million investment in the Chinese game maker Kabam.

So the question that now seems to be arising in the mind of laymen is why the sudden interest by the giant technology or ecommerce or social media firms in these small technology startups especially video gaming startups. One common theme in these acquisitions is the age group, of the companies like Amazon or Facebook, which seems to be targeting. The most common users of Oculus, Minecraft and Twitch are gamers who tend to be young and have distanced themselves from social media platforms such as Facebook. The supporters of Oculus Rift are trying to revive the Virtual Reality industry which has failed to capture public’s interest in the past. In case of Twitch, users spends tons of hours sitting on their computers and watching as other people play videogames. The revenue model that Twitch plans to eventually employ consists of subscriptions and advertisements. As far as Minecraft is concerned, it can be considered one of the most successful indie video games out there, primarily due to the profit it generated last year which amounted to roughly $126 million.

Another reason pointed out by analysts, in trying to understand Microsoft’s acquisition, is  that Minecraft targets a large range of age groups. Unlike Twitch, it does not just target the young gamers. Aside from the target audience what makes Minecraft more appealing is that it can be played on any platform including PCs, consoles etc. Unlike Microsoft’s Halo which is just tied to Microsoft Xbox platform, Minecraft can be played on Xbox, Sony PS4, and Kinect Wii etc. The availability allows it to increase its fan base significantly when compared to rival games. Most of my cousins and friends who play video games on a regular basis have bought multiple copies of Minecraft, one for each of the gaming platform they own. People in the age group of 20 to 30 also own Minecraft for different versions of the Xbox. Minecraft’s decision to also offer Pocket addition for iOS and Android users was a stroke of genius as it was one of the first companies to actually target users on mobile platform. With the increasing popularity of acquiring young tech startups in order to acquire new and young user base, it does not seem like the trend of these acquisitions will be slowing down anytime soon.