Games M&A hit a record $18.6 billion in the first half of the year, in a clear sign of late stage market consolidation. The biggest deal was the massive mobile consolidation of 84.3% of Supercell by Tencent for $8.6 billion at a $10.2 billion valuation in Q2, after King’s $5.9 billion acquisition by Activision-Blizzard closed in the first quarter. But those whoppers weren’t the only mobile games companies changing hands, with CMGE being acquired in a reverse merger in China after delisting from NASDAQ last year, Vivendi muscling its way back into games with Gameloft, as well as more take privates and share buybacks rounding out the major transactions. After last year’s games ice age saw deals drop by 81%, games M&A in the first half of 2016 is up nearly 1,000% compared to the rate of deal making in 2015.
AR/VR is the new hotness. VCs invested $1.7 billion in the 12 months to March 2016, $1.2 billion of that in the first quarter of this year alone. There are 4 AR/VR unicorns already (Magic Leap, Oculus, Blippar, Mindmaze). Big numbers, very exciting. But as DFJ Partner Bubba Murarka says, “not all VCs have taken the red pill yet.”
Last year was the worst games deals ice age in a decade, but the topline numbers in Digi-Capital’s Games Report for Q1 2016 make it look like there has been a thaw. However, the buoyant waters of the first quarter hide rocks beneath the surface, and games deal makers should look carefully before they dive back in.
Digi-Capital’s latest quarterly Augmented/Virtual Reality Report and Deals Database analyzed $1.7 billion of AR/VR VC investments in the 12 months to Q1 2016.
There is nearly as much confusion as there is excitement about Augmented and Virtual Reality. While VR could be big and AR could be bigger and take longer (VR $30B and AR $90B for combined $120B AR/VR revenue by 2020), there are more questions than answers out there. Business models are one of the big questions, and AR/VR hardware sales, eCommerce sales, adspend and mobile data/voice could drive over 80% of all AR/VR revenues. Things might look a little different to what you expect.