Add to that the shopping lists that major game companies brought with them to the Casual Connect conference and the perception that everyone there was for sale, and it seems like M&A activity is indeed heating up in the space.
What’s interesting about the two deals this week is it shows that all aspects of the industry are in play, from distribution to content production. In short, game companies and major media companies are making moves to ensure that games as a service becomes a big part of the games industry and that gaming protects itself and takes advantage of digital distribution and free to play in a way that the music industry has fundamentally failed to do.
In regards to GameStop’s acquisition of Kongregate, it’s an interesting gamble all about distribution. Both GameStop and Kongregate are distributors of other people’s content. In fact Kongregate’s original mission was the YouTube of games, a place open to all independent game developers with community tools built in. While Kongregate was eclipsed in size and scope by the Facebook game market there were several things they did well that will benefit GameStop.
First they have terrific SEO. At certain points they ranked higher for OMGPOP games than we did for our own games. SEO is critical to web distribution.
Secondly they built a solid international audience which is a large part of their traffic. Kongregate tends to be a male oriented, shooter heavy type of gaming site but it fits well with the types of audience who also buy console games at GameStop. Will the synergy’s move the needle for either company? It’s hard to see that they would on a large scale but for the right price, with an overlapping audience, it seems like it is worth the gamble.
In Disney’s acquisition of Playdom, the question will be less if it was the right move and more if the price was right over time. Playdom operates, primarily through acquisition, multiple studios. In fact, while Playdom revenues are large for the social gaming space, they barely move the needle for a Company as large as Disney. But Disney will never consolidate small studios one by one so this is fast and easy for them.
Also, Playdom has not been shy about building branded games and content and it seems a good match. Games for Marvel, ESPN and Disney’s wealth of IP, all launched off of Playdom’s base will keep both companies busy for years.
One acquisition was distribution and the other was content. Expect more deals as competing media companies like Viacom, Fox, IAC and others as well as large public game developers and Asian gaming giants roll through and answer back and you will see transactions that run the social, and free to play gamut.