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The Great Consolidation of the Video Game Industry

Amid an ongoing spree of mergers and acquisitions, fewer companies own more of the gaming industry than ever before. But what does consolidation mean for workers, players, and the medium itself?

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Matthew Karch, CEO of Florida video game studio Saber Interactive, is riding high. The 50-year-old—crew cut and leaning forward over Zoom with a square jaw that makes him look like an action figure—has just overseen the release of online multiplayer horror shooter Evil Dead: The Game. While it was met with enthusiastic if not Metacritic-topping reviews, the game was a hit, topping the PlayStation 5 sales chart in the U.S. Importantly for Karch, Evil Dead: The Game is the first major title Saber Interactive has released since he sold the 600-employee studio to Swedish video game conglomerate Embracer Group in February 2020. It was the perfect start for a company that perhaps needed to justify its acquisition price of approximately $525 million.

Since signing the deal, Karch’s life has changed. Previously, the studio was simply trying to make “ends meet,” balancing a push for Triple-A polish while “keeping the lights on.” Now, thanks to the buyout, Karch barely has any worries. As part of the deal, he sits on the Embracer board, and has turned from acquired to acquirer with “a massive Rolodex” of targets, he boasts. Over the past two years, the CEO has bolstered Saber Interactive and, in turn, Embracer with a suite of companies, including 4A Games, the studio behind the critically acclaimed Metro franchise. At dinner one evening with his boss, Embracer CEO Lars Wingefors, Karch asked why they hadn’t bought the Metro developer. “Oh, they don’t want to sell,” he was told. Karch’s bullish response: “It’s on. … I’m gonna do it. I’m gonna get those guys to sell.”

In some ways, acquiring a video game company (like any other) is this easy: Identify a target; put a big enough number in front of the right people; wait for them to say yes, perhaps after offering them a slightly larger number. But over the past few years, this process has been replicated across the video game industry more rapidly and lucratively than at any other stage in its history. According to the investment banking firm Drake Star, the total deal value for 2021 was $85.4 billion across 1,159 deals. That total was surpassed in the first six months of 2022, when $107 billion changed hands over 651 transactions. While the numbers have slowed in recent months (like the industry at large), mergers and acquisitions (M&As) have dominated almost every facet of gaming discourse: the headlines of sites; the content of YouTube videos; conversations between studio owners; fans’ forum posts.

Matthew Karch, CEO of Saber Interactive
Saber Interactive

Karch, Saber Interactive, and Embracer Group sit at the center of this frenzy. In May 2022, Embracer crowned its current M&A spree with the purchase of Crystal Dynamics, Eidos-Montréal, and Square Enix Montreal, along with the Tomb Raider and Deus Ex IPs, plus more than 50 back-catalog titles, all for the seemingly cut-price sum of $300 million. The same month, Take-Two Interactive completed a $12.7 billion acquisition of mobile games giant Zynga. Tencent, a Chinese conglomerate and maker of hits such as Honor of Kings and the mobile version of Call of Duty, has embarked on its own studio splurge in recent years. Ditto Sony, which purchased Destiny developer Bungie for the sum of $3.7 billion. Even Nintendo, which has traditionally been much quieter than its rivals, has bolstered its ranks with a few studios. But the deal that got everyone’s tongues wagging, including those of the Federal Trade Commission, was Microsoft’s acquisition of embattled Call of Duty maker Activision Blizzard for an eye-watering $69 billion.

The dial appears to have definitively shifted, then, represented by a blink-and-you’ll-miss-it rewording in Take-Two’s annual report. In 2021, the publisher of the Grand Theft Auto and Red Dead Redemption franchises referred to the importance of the “retention and acquisition” of talent. This year, it was swapped to highlight “acquisition and retention.”

Taken as a whole, these transactions represent a consolidation of the biggest developers and publishers in the world, and point toward an industry not just in financial flux but also undergoing deeper shifts in power, consumption, labor practices, and even the form of the video game itself. However, game consultant and Hit Points newsletter author Nathan Brown (whom I wrote for while he was editor of U.K. video game magazine Edge) cautions against treating these deals as one homogenous block. “Microsoft is being expansionist … [and] trying to build out an irresistible subscription service,” he explains over Zoom, referring to Game Pass. Sony, by contrast, is playing things slightly differently. Until the Bungie deal, its acquisition strategy had been “protectionist.” Its purchases of other studios such as Finnish developer Housemarque and remake specialist Bluepoint were driven by an effort to maintain its market-leading position.

The near-insatiable gobbling of Sweden’s Embracer and China’s Tencent encompasses everything from video game studios and publishers to comic book, anime, and tabletop board game companies. Tencent, the largest game company in the world by revenue (with a 2021 total of $27 billion), has aggressively expanded its operations in the West, partly in response to stalling growth opportunities in China related to the country’s tight entertainment regulations. According to Daniel Ahmad, a senior analyst at Asian games market intelligence company Niko Partners, Tencent has effectively tripled its rate of investments year over year for the past three years. In 2019, it invested in 10 game companies; in 2020, 32; and then, in 2021, the number exploded to 101. “Tencent is looking, first of all, to become a global game developer and publisher,” Ahmad says. “Now more than 25 percent [of its revenue] is from overseas.”

Embracer, previously known as THQ Nordic and before that Nordic Games Licensing, went public on the Nasdaq First North stock exchange in 2016. Since then, it has rapidly increased its hoovering up of companies in a bid to mitigate the risks of game development while delivering returns for its shareholders. “If you can make one game, you have a big business risk,” Wingefors told the Financial Times. “But if you make 200 games, like we do, the business risk is less.” This week, the company (which continues to raise money through the selling of shares) announced that its subsidiaries have more than 220 games in development. Despite posting a net loss for the first quarter of $17 million, it spent several hundred million dollars to acquire several more companies, which turned being acquired by Embracer Group into a meme and briefly led to its Wikipedia page being vandalized to say that Embracer had “bought every company in existence.”

With each company vying for position, it comes as little surprise that Jack Tretton, former CEO of Sony Computer Entertainment America and now head of Power Up, a special purpose acquisition company, refers to M&A activity as “constant.” He says it has undoubtedly “heated up” in the past few years, partly a result of the gaming industry having what can be described as a favorable pandemic. Even as it experienced challenges in game production and hardware manufacturing as a result of remote working and supply-chain issues, the industry’s revenues soared and games made the mainstream like never before.

When I speak to Tretton over Zoom, he’s in hype mode. He excitedly points to the investments flooding in from the usual suspects: Sony, Microsoft, Tencent, and Embracer, as well as what he believes is the relatively untapped potential of peripheral figures such as Amazon, Apple, and even Samsung. (Netflix has dipped its toes tentatively into gaming waters as well, with the purchase of Oxenfree developer Night School Studio and more.)

“If you’re a fan of gaming, things are great, because there’s tons of money being pumped into [creating] new forms of entertainment,” Tretton says. “If you’re actively working in the space, there’s really good signs that more money is going to continue to pour in in the form of investment from the major corporations who may want to make a bigger commitment to the gaming space.” Ultimately, says Tretton, the current M&A mania is “good for everybody,” apart, perhaps, from gamers who enjoy playing Activision Blizzard’s Call of Duty franchise on their Sony consoles. The fate of these gigantic, multiplatform titles now hangs in the balance.

Mike Rose, founder of Manchester-based indie publisher No More Robots, agrees with Tretton’s characterization of the M&A hysteria, though not necessarily his conclusion. In recent years, Rose has been contacted more than a dozen times about selling. The figures dangled in front of Rose, whose company is successful (its hits include Descenders and Hypnospace Outlaw), albeit nowhere near a household name, have been “ridiculous,” he tells me over Zoom. And yet by not selling, Rose is seemingly at odds with many of his peers. “I don’t know if I could allow someone else to own this thing that I’ve built,” he admits. “You weigh up the pros and cons, right? Pros: Everyone gets rich. Cons: Some company owns this thing I made. I just don’t know how I’d feel about that. I think the answer is that I’d feel bad.”

For all the headlines these deals generate, as well as the speculation among fans about which targets Sony, Microsoft, Nintendo, or even Tencent should snap up next, most of the gaming public has little idea what actually goes into them. In an effort to bridge this gap and determine whether acquiring a video game company is as straightforward as one CEO opening the company checkbook in front of another, I set up a Zoom call with Keith Warner, CEO of New World Interactive (best known for the hardcore tactical first-person shooter Insurgency: Sandstorm), to find out exactly how his company’s deal with Embracer happened.

New World Interactive CEO Keith Warner
New World Interactive

In February 2020, Warner was looking for funding for New World Interactive’s as-yet-unreleased fourth game. Before this, the studio had achieved a kind of stealth success, enjoying high player counts and millions of sales without really catching the attention of the mainstream games press. With such achievements, New World’s appetite had grown. “We had bigger aspirations. We wanted to build a game that leveraged our experience,” says Warner. His team put together a pitch—not just for the game but for the studio itself—and a list of potential targets whom they would speak to over Zoom, due to the pandemic. Then they practiced their asses off.

In late April, Warner and his team presented to Karch’s at Saber. It wasn’t until late July (the “11th hour,” he says dramatically) that he heard back. The news was positive, so the two teams traded valuations until, a few weeks later, a letter of intent was signed. That, says Warner, is when the real work began: due diligence.

The CEO describes due diligence as when the “acquirer crawls under the covers and looks at absolutely everything … an arguably brutal and emotional process that makes you feel like you didn’t do it right.” Depending on the complexity of the deal, and other factors such as the age of the company, this can take months. Warner, however, wanted to get it done quickly, so the companies embarked on a “super fast-track” process of two weeks. For up to 18 hours a day on Zoom, Warner, his corporate attorney, and his CPA adviser faced off against Karch and more than 40 of the “crème de la crème” from the legal and business world. “I wanted to rip the Band-Aid off, go through it hard and fast,” says Warner. “I knew, fine, I won’t sleep for two weeks, it’ll be stressful as hell, but we won’t have a lot of time to deliberate and we can get back to building games.”

By mid-August, the deal (for an undisclosed sum) with Embracer was complete, which meant Warner was finally able to step off the money-raising “hamster wheel.” He describes it as a “phenomenal relief.” The stress involved in keeping the company solvent, of ensuring that a minimum of six months’ worth of cash was in the bank at all times, vanished overnight.

Other studio executives, however, including those within Embracer, characterize the acquisition process differently. In September 2020, an email from Andrey Iones, cofounder of Saber Interactive, arrived in the inbox of Zen Studios COO Mel Kirk. Kirk and the executive team had been approached at least a dozen times in the recent past by investment companies, studios, and publishers, but the approach from Saber felt “different,” he says. The two parties had Zoom meetings, discussing their “passions and what the future might look like.” Then, after only the second call, an offer was emailed over. The talks didn’t end there, though. Wingefors, Embracer’s CEO, chartered a private jet to pick up the COO and his colleagues in Budapest and fly them to the company headquarters in Karlstad, Sweden. “We thought that was really cool,” he says with a kind of jock-ish enthusiasm. “[We felt] like the hot girl in the room.”

It’s easy to see why Embracer acquired New World Interactive, Zen Studios, and Saber Interactive. With games such as Insurgency: Sandstorm, New World Interactive has proved itself to be an adept maker of online shooters, on minuscule budgets compared to behemoths such as Call of Duty. Saber Interactive has found success not just with similar online multiplayer titles including Evil Dead: The Game and World War Z, but through its contract work on popular franchises such as Halo and Crysis. Zen Studios’ calling card is a series of well-received pinball games built on legacy IPs such as Indiana Jones. This pairing of established IP with lucrative genres (i.e. online titles that inspire repeat hours of play) appears central to Embracer’s strategy. With the recent news that Embracer has bought Middle-earth Enterprises, the company that owns the IP rights to most of J.R.R. Tolkien’s most important works (including The Lord of the Rings and The Hobbit), this looks set to continue in a more high-profile manner than ever before.

The conglomerate’s voracious appetite for IP is best demonstrated by its creation of a vast video game archive in Karlstad. The initiative is framed by Embracer as a public, educational good that preserves and pays tribute to games culture while liaising with museums, researchers, and journalists seeking access to its already 50,000-strong collection of games, consoles, and accessories. However, professor Darren Wershler, who specializes in media history and media archaeology, doesn’t view it in such altruistic terms. “Embracer is in the intellectual property business,” he told Vice. “They buy other companies as a way of securing valuable titles. Not just new ones, but ‘evergreen’ and forgotten titles. Building an archive will allow Embracer to effectively research all the historical game IP out there in order to acquire and control potentially valuable but forgotten titles.”

Put all of this together, and Embracer resembles a kind of modular video game corporation seemingly well placed to navigate the content churn that may be looming for video games. Amid an overall industry decline in revenue, revenue from gaming subscription services such as Microsoft’s Game Pass and Sony’s PlayStation Plus is up; increasingly, these services are how players access their games. Their libraries require huge swaths of content, and Embracer, with its central database of fondly remembered IP, can provide it.

Indeed, just as video game subscription services appear to echo the streaming platforms of TV and movies, so too does the business rationale driving M&As. If the WarnerMedia-Discovery deal was about ensuring the survival of two of the biggest companies in the so-called “Streaming Wars,” game companies can ensure their own survival (at least in the near term) by partnering up with those bigger and stronger than them. The logic appears to be strength in numbers, although the downside may be a loss in autonomy for these formerly independent companies.

While Embracer publicly stresses the independence of its studios (Karch calls Embracer the “anti-consolidating consolidator”), so too does it emphasize the “synergies” between them. Projects and data are shared; productivity is maximized. Karch puts it a little more informally: He’s all about “connecting the dots.”

At Tencent, the dots have so far remained unconnected, but there are signs that this is changing. Not only is Tencent developing its own game engine for cloud-native games, but the company also recently announced its new publishing division, Level Infinite, and since then has set up an office in Liverpool to oversee its international studios. You only have to look briefly at a few of the titles Level Infinite is publishing to see where Tencent believes the industry is headed. Nightingale is a fantastical online survival crafting game; Warhammer 40,000: Darktide is a gory online co-op shooter; Vampire: The Masquerade–Bloodhunt is a bloody free-to-play battle royale; Chimeraland is a bizarre open-world survival and crafting MMORPG.

The strategy appears to be pairing Triple-A console quality with online “games as a service” structures, all while integrating free-to-play monetization strategies. Tencent knows the latter better than most. Free-to-play is how the company rakes in the bulk of its vast gaming revenue in China, and is partly responsible for Fortnite’s stratospheric financial success (which occurred after Tencent spent  $330 million to purchase approximately 40 percent of its maker, Epic Games, in 2013). In spite of this financial success (and more than a few others, including the recently released Diablo Immortal), Pete Smith, vice president of partnerships for Tencent Games Global, believes European and North American studios, often led by Triple-A console veterans, lag behind their Chinese colleagues in terms of games-as-a-service and free-to-play design. “That’s not a criticism,” he says. “We’ve got some fantastic developers who know how to make amazing game experiences, which make great premium games. That’s why, when we bring the two together, we can maximize the potential of what is going to be part of the future.”

Sony, a company that has previously staked its future on prestige single-player games such as The Last of Us and Horizon Forbidden West, explicitly wants in on this games-as-a-service pie. That’s why the company bought Bungie, developer of one of the most successful games-as-a-service franchises of recent years, the sci-fi space opera Destiny. From a technical and logistical standpoint, these are some of the hardest games to make, demanding the delivery of glittering, high-fidelity visuals and fast-paced gameplay to millions of concurrent players, alongside a story that unfolds across not the usual 20 or 30 hours, but many months of incremental content. With this acquisition, Sony bought the talent and technology of arguably the best games-as-a-service studio in the world, while denying its biggest rivals access to the same resources.

Whereas “traditional” (i.e. single-player) games currently receive 88 percent of Sony’s investment, versus 12 percent for games as a service, Sony intends to shift that figure to a 55 percent versus 45 percent split by the middle of 2025. (Sony’s March acquisition of Montreal-based studio Haven, which is currently developing a “Triple-A multiplayer experience,” will contribute to this shift.) The death of the blockbuster single-player video game has long been foretold, and arguably overstated, but the news that Sony, the torchbearer for this type of game, is pivoting so sharply to shared online experiences (including an expansion into esports) is undeniably significant.

The worry is that just as businesses are being consolidated, so too is the actual form of video games. The 2010s was arguably a high mark of formal innovation, as indie titles such as Firewatch and Papers, Please performed well commercially while pushing the boundaries of interactivity and storytelling. The design sensibilities of indie games arguably fed into blockbuster releases such as 2019’s Death Stranding, a big-budget expansion of the slow, exploratory fundamentals underpinning a genre of games known as walking simulators. The concern isn’t that experimental games won’t get made, at least in the near future, but that they could be suffocated by games-as-a-service titles, which increasingly resemble a homogenous block of online looter-shooters with bolted-on survival and base-building elements, and which take up ever-larger chunks of players’ attention.

For such games, retention is key, the rationale being that endless and engaging online play, coupled with microtransactions, brings in more cash than a stand-alone game. Retention is also vital to subscription platforms whose rosters (especially Microsoft’s) are filled with the fruits of acquisition. While it’s difficult to predict whether console subscription platforms will impact the form of video games, what’s already happened on Apple Arcade, Apple’s mobile games subscription service, could offer a clue. In 2020, Bloomberg reported that Apple was pivoting toward “sticky” titles, i.e. titles with high replay value that “better retain subscribers.” Grindstone, a puzzle-action game with more than 200 hours of content, was allegedly cited as the type of game Apple hoped to green-light, one that kept players plugged in and renewing their subscription fee. It has become the gold standard for video games whose success is determined according to the newly prized metrics of retention and engagement.

Piers Harding-Rolls, research director at market data firm Ampere Analysis, believes excessive consolidation could impact the ability of smaller independent publishers and developers to compete in the long term. “We’re just at the starting point, and if there’s more big publisher consolidation to come aligned to distribution and platforms, then the focus is going to be on first-party content,” he says over Zoom. “If you’re thinking about games that are going to engage people over a long period of time … then there’s going to be a shift towards those kinds of service-based games within subscription services. I think that leans more towards bigger companies than smaller entities who might be developing smaller, shorter experiences.”

Still, even though the context surrounding the current wave of consolidation is genuinely new and the intensity of acquisitions is unparalleled, the absorption of businesses by larger ones has long been a fixture of the video game industry. Famed Japanese publishers Square Enix and Bandai Namco were born from precisely these circumstances. In the mid-2000s, as Microsoft was looking to solidify Xbox’s position within the console market, it bought studios such as Lionhead, which it felt could deliver first-party titles to rival those of Sony. Electronic Arts, too, went through its own spending spree at the same time, incorporating companies such as Criterion Games, maker of the hugely popular Burnout and Need for Speed series during the 2000s.

Those who are involved in this process of consolidation, including Tencent Games Global chief strategy officer Eddie Chan, say that consolidation is “natural,” simply part of the industry’s “ebb and flow.” Selling a studio can often make employees a healthy wad of cash. Depending on their position, length of employment, and ability to negotiate, employees will often earn stock options. When one company is sold to another, staff will have the option to sell. If they decide to do so, potentially making a lot of money in the process, they have multiple options in front of them. Some will choose to call it quits, sailing off into the sunset of early retirement, while others will plow the capital into a new studio—one that’s smaller, nimbler, and theoretically more innovative than where they were previously employed.

“[Consolidation] doesn’t mean the end of independent developers,” says Chan. “On the contrary, I think this is actually creating a whole cycle of the next generation of game studios. People naturally look up and say, ‘It’s a good time to start my own thing.’ It’s such an entrepreneurial environment out there, and it’s never been easier.”

Tencent Games Global chief strategy officer Eddie Chan
Tencent Holdings Ltd.

For all Chan’s unsurprising optimism, the history of video game consolidation is also littered with the corpses of fallen studios, some of which even produced ostensible hits for their respective parent companies. Lionhead, maker of the RPG franchise Fable, was shut down unceremoniously by Microsoft in 2016; Pandemic, which seemingly made bank for EA with its Star Wars: Battlefront games, was liquidated in 2009 following the underwhelming reception to stealth adventure The Saboteur. For the people and families who are directly affected by these layoffs, some of whom will have moved hundreds, if not thousands, of miles for a job, it’s hard to imagine seeing anything “natural” about such potentially avoidable studio closures.

That said, Brown believes the attitudes of the acquiring companies are different this time around, and that the companies being bought are valued “for what they are good at rather than what they could be made to do, and therefore might fail at.” He refers to what happened at Rare as a particularly egregious example. The prominent developer of critically acclaimed games including GoldenEye 007, Banjo-Kazooie, and Perfect Dark was bought by Microsoft in 2002 for $375 million, only to be put to work making avatars for its new owner’s Xbox Live service. “I don’t foresee that same level of creative control being taken away [from studios], mandates coming down from on high, it not working out, and then the studio paying the price,” says Brown. “I’d like to think that those days are behind us.”

Ahmad explains that a “hands-off” approach is essential to Tencent’s current strategy. “They don’t rebrand companies that they invest in when it’s a majority stake,” he says. “They invest in a company knowing that it will operate independently and be able to continue the excellence that made them attractive to Tencent in the first place.”

Chan is pragmatic about the possibility of a Tencent game failing to live up to expectations: “For sure, it will inevitably happen, right? What I would say is that we try to be very long-term focused. We’re not managing the next quarter or the next year. We’re on a five-year-plus time horizon. From that perspective, I think we have the ability to be more patient.” Chan says Tencent will continue to support a studio through its “ups and downs,” citing, a little confusingly, the fortunes of Epic Games, a company that wasn’t exactly failing to make money following Tencent’s investment in 2012. “We were very supportive of them for a long time before Fortnite came along, and the bet paid off,” Chan says. “We’ll continue to help support and encourage a studio that we believe in, as long as our initial thesis for why we got involved with them still holds true.”

Even so, should a studio fail to meet Tencent’s expectations, the burden of responsibility ultimately falls on the studio itself. “It’s our responsibility as leaders to make the right decisions to support our studios, which then supports the livelihood of their folks,” says Chan. “But at the same time, we give a lot of autonomy to the studios. We’re not the ones making operational decisions. … Decisions are, by and large, determined by the studios themselves.”

Since I spoke to Chan, Bloomberg has reported that Tencent has lost $560 billion of its market value, with the misery set to continue as a result of its first quarterly revenue decline since the 2008 financial crisis. There’s no evidence yet as to how the company’s current financial woes will impact its international game studios, but the news may at least give those who have recently signed on with Tencent pause. The Chinese giant is perhaps not quite as bulletproof as it once appeared.

Only time will tell how such consolidation ultimately affects employment and labor. Clearly, though, the arguments surrounding it will be fraught. On one side are trade unionists and worker collectives, such as ABK Workers Alliance, for whom conglomeration poses a tangible threat. “My skills and experience are quite specialized,” Brice Arnold, a design researcher at Activision Blizzard, told a hearing held by the Federal Trade Commission and the Department of Justice to investigate Microsoft’s buyout of Activision Blizzard. “Given the ongoing consolidation in the video game industry, there are fewer potential employers for my specialized skills.”

Arnold’s concerns are shared by Sara Steffens, secretary-treasurer at the Communications Workers of America, the largest communications and media labor union in the United States. “Mergers can make the problem of corporate dominance over workers much worse,” she says. “They can lead to lower wages because fewer companies are competing for workers. There are restrictive contracts like non-competes, non-disclosure agreements, and mandatory arbitration agreements. Potentially, it worsens the problem of workers not having a fair shake.”

This is broadly the same argument used by the Justice Department in its suit against Penguin Random House, which is attempting to consolidate the book industry with a $2.18 billion acquisition of competitor Simon & Schuster. With one less publisher competing to acquire their books, authors could theoretically receive lower pay. This represents a shift in thinking away from how M&As might impact consumers, as it has been in the past, to the leverage these companies hold over workers, in this case authors.

On the opposing side are the employers, CEOs, and consolidators themselves. When I put the concerns of Steffens and Arnold to Karch, he launches into a lengthy speech, reminiscent of Chan’s, about how the influx of investment only increases opportunities within the industry, and thus the prospects of its workers. He agrees that “consolidation brings about challenges” but appears satisfied with the mechanisms in place (such as the FTC) to limit its distorting effects on the market. He is open, as is his legal obligation, to entering into negotiations with a union should his employees decide to unionize, although he’d be “surprised” if they did so because “we treat our people very, very well.” According to Karch, Embracer is a “big company but we act like a small company. … [We’re] a collective of independent developers united around a common cause of growth.”

The question is whether Embracer, which has just inked a $1 billion investment deal with a government-funded Saudi Arabian gaming group, will live up to its name. Karch certainly projects an image of a friendly embrace of both the companies and their workers. Yet in the long run—through the sharing of IP and the synergistic strategy, the “connecting the dots” approach mentioned by Karch—it may turn out to be closer to a Borg-like assimilation, each studio (and each worker) valued only in regard to how it augments the Embracer collective as a whole.

For workers looking for more protection than Embracer’s commitment to growth, the signs emerging from Microsoft in the wake of the Activision Blizzard deal are encouraging. During a May meeting with Xbox Game Studios employees, head of Xbox Phil Spencer said that he would recognize Raven Software’s union. This came not long after the QA testers at Raven voted to form the first labor union at a major studio. Spencer said that he didn’t have much prior experience with unions, but that he and Linda Norman, deputy general counsel for the Xbox group, had spent “a lot of time” educating themselves. “We absolutely support employees’ rights to organize and form unions,” said Spencer. In all likelihood, Spencer and Microsoft will be forced to enter into negotiations with further unions; in July, a team of 20 staffers at Blizzard Albany filed for union election with the National Labor Relations Board. “We strive to foster work environments where we are respected and compensated for our essential role in the development process,” read the team’s statement.

Last month, headlines hit mainstream and gaming outlets that the industry was set to contract for the first time since 2015: It would enter into a recession. That forecast, conducted by Ampere, suggested that the shrinking would amount to 1.6 percent—arguably a negligible setback in light of the 26 percent growth from 2019 to 2021, but a contraction nonetheless. “The idea that the games market is ‘recession proof’ is a fallacy,” the Ampere report stated, alluding to a widely-held perception of the industry since it bucked the recession following the 2008 financial crisis. In line with this downturn, M&As have slowed. It could be that now is a good time to take stock, an opportunity for the consolidators to consolidate their newly swollen portfolios and bide their time before making more splashy purchases.

Or perhaps not. According to Ampere’s Harding-Rolls, the recent wave of M&As has been driven, in part, by access to cheap money. “Raising cash has been incredibly cheap,” he explains over Zoom, referring to the all-time-low interest rates of recent years. “So that’s given [the acquiring companies] a war chest to do this sort of acquisition activity.” While Harding-Rolls believes we may yet see another gigantic merger in 2022 (the ailing Ubisoft has long been rumored as a potential acquiree), the current economic situation has complexified the picture. “With interest rates going up in most advanced economies, I think ongoing access to cheap capital may be impacted,” he says. It could also be the case that companies are simply a little more “risk averse” now that the industry itself is in the midst of what has elsewhere been described as a “post-pandemic slump.”

If the latest wave of consolidation has indeed come to an end, how has it altered the global map of video games? According to Daniel James Joseph, a senior lecturer at Manchester Metropolitan University on the political economy of digital culture, the answer is not much. He describes the mergers and acquisitions as a “reshuffling of the existing industries and their structure” rather than a wholesale upending or expanding. The one big exception, says Joseph, is the introduction of Chinese companies such as Tencent and NetEase into the global market. But even their international investment has been limited mostly to Global North companies that are, he says, “still making content targeted for the Global North.”

What’s beyond doubt, Brown notes, is that there has never been more scrutiny of video game M&As, be it from journalists, players, or regulators. “Bluntly, a lot more attention is being paid,” he says. “We’re all just extremely online, extremely aware.” In a sense, the current wave of deals is a clarifying moment for the video game industry, revealing its corporate machinations in starker relief than ever. With these deals, the foundations have been laid for at least the next decade, a time when video games will occupy a more prominent space in our cultural lives than ever.

The stakes, then, have arguably never been higher, and for Brown this poses a serious question: “With the way our world is structured at the moment, how do we feel about concentrating power overwhelmingly in the hands of another small number of corporations?”

Lewis Gordon is a writer and journalist living in Glasgow who contributes to outlets including The Verge, Wired, and Vulture.

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