from the the-inside-game dept
We’ve been talking a bit about industry consolidation through mergers and acquisitions (M&As) in the video game industry as of late. The impetus for that discussion has been a series of high-profile acquisitions for several notable companies, namely Microsoft and Sony. Microsoft acquired Zenimax for $7 billion and Activision Blizzard King for a bonkers $69 billion recently, while Sony jumped into the game by acquiring Bungie for $3.6 billion. Of interest for these pages is the different approaches these companies have taken with these acquisitions. Microsoft hemmed and hawed about whether it would start building Microsoft exclusivity for products from its acquisitions, eventually landing on very much embracing exclusivity, while Sony took a much more hands-off approach and stated plainly that Bungie games would still be cross-platform. For those of us interested in digital and technology economies and business models, this is interesting stuff.
But there is a name missing here. The traditional “Big 3” in gaming has long been Microsoft, Sony, and Nintendo. Well, if you like real-world experiments when it comes to business strategies, this looks like it’s going to get even more fascinating, as Nintendo is making noises about going an entirely different route.
While Xbox and Sony are entering an acquisition arms race, Nintendo isn’t so eager to snap up a slew of game studios. In a recent investors’ meeting, Nintendo president Shuntaro Furukawa was asked about acquiring game companies—a timely question, that’s for sure.
“Our brand was built upon products crafted with dedication by our employees, and having a large number of people who don’t possess Nintendo DNA in our group would not be a plus,” Furukawa replied, as reported by Bloomberg and Reuters.
Now, this shouldn’t exactly come as a shock to anyone who knows the industry and how Nintendo operates. Whatever I might want to say in my series of posts about how “Nintendo hates you”, the company has also built a successful business in the space that relies on first-party game titles and franchises compared with Sony and Microsoft. Whatever success those others have had, for instance, Microsoft and Sony simply don’t have a version of the Super Mario Bros. franchise. Nintendo has several of these: Super Mario Bros., Zelda/Link, Star Fox, etc. So Nintendo has always been less reliant on 3rd party titles compared with its competitors.
But the open question is whether this more insular focus will work in the post-pandemic period where industry consolidation is not just for the video game industry, but for many others. The Harvard Business Review had a study released in 2021 that predicted what many others have as well: the mid- and post-pandemic economic space will be one that heavily incentivizes mergers and acquisitions. Consolidation is the order of the day/year.
So now we have three distinct strategies from the Big 3 of the video game industry: Microsoft will do M&As and try the exclusivity route, Sony will do M&As and be more open and permissive or cross-platform releases, and Nintendo will simply choose largely to not play this game at all.
At its core, Nintendo is not an enterprise built on corporate consolidation. It’s a company that makes hardware and games for said hardware. That is etched in its DNA.
And now we get to sit back and see how that works in a post-pandemic world.
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