Microsoft’s landmark acquisition of Activision Blizzard King for $69 billion marks a new high point in the attempt by technology companies to leverage gaming as a key consumer passion point as part of a wider ‘bundling’ strategy – bringing together complementary services that enable greater economies of scale. Amazon, Google, and Apple have all seen varying degrees of success with integrating gaming-specific content, experiences, and infrastructure into their existing consumer technology ecosystems. Elon Musk’s ‘X’ (aka Twitter) seeks to bundle payment services and online banking with social content.
For Microsoft, Activision Blizzard King offers a compelling mix of AAA live service game content, one of the world’s biggest gamer behavioural data sets and a pre-existing mobile gaming ad infrastructure. But regulators’ pre-occupation with competitor access to the Call of Duty franchise and the embryonic cloud gaming industry ignores a much more interesting opportunity this deal presents – the creation of a holistic brand marketing infrastructure for gaming.
With Outlook, LinkedIn, and Bing, Microsoft had a moderately sized audience that stretched little beyond core work products. But with the acquisition of one of the world’s biggest game publishers now sitting alongside Xbox (plus ad tech firm Xandr in late 2022), Microsoft claims to now boast something in the region of a billion users.
On the face of it, this should be good for both brands and consumers. Microsoft should now be able to offer brands a far greater depth of integrated advertising opportunities, consumer insights, and rich content for work, entertainment, and play. For consumers, a cheaper, more convenient point of entry to the world’s richest portfolio of AAA and mobile gaming content is a good thing. Microsoft’s additional concessions to regulators to enable third-party licensing of that game content creates an additional layer of choice for consumers.
But the deal is also the high-water mark of an ongoing consolidation of the wider entertainment industry that has increasingly squeezed out the innovative ‘middle’ in favour of fewer, bigger, and (whisper it) blander content titles. This homogenisation of culture is most evident in the movie industry where Disney, Warner Bros, and Universal Studios own nearly all the Top 30 highest-grossing movies. Disney alone owns 13 of the top 20 – Marvel represents 54% of that share.
The gravitational shift of film towards ‘superheroes & superaction’ is both a cause and effect of corporate centralisation. The ‘infinity machines’ of the internet, 3D graphics engines, SFX and now AI-powered text and image generation mean that anything and everything can be conceived, concepted, and created in comparatively short order. Creative imagination thus becomes simultaneously boundless and bounded by the reality of limitless possibility. In reality, creativity requires parameters against which to push.
Television is arguably headed in the same direction – streaming studios, able to analyse, identify and optimise content selection based on detailed consumption algorithms are well placed to continue giving people exactly what they want, over and over and over again.
Gaming differs in both its nature as a fundamentally participatory art form – where players have an element of ownership over their experience – but also as a sub-culture that has traditionally sought to rail against the conformity of mainstream culture. Pioneering studios like ID Software, Valve, and Rockstar Games produced revolutionary games like Doom, Half Life and GTA which did more to define the modern gaming industry than many others. Yet now, ID Software is owned by Microsoft, Valve is the world’s biggest gaming store and Rockstar is a subsidiary of Take Two Interactive.
And as the gaming industry becomes more consolidated around fewer, bigger companies (65% of revenue sits with eight companies) the bets those companies are willing to make on producing games content are likely to become fewer and less risky. Typically, this leads to a focus on big franchises and ‘forever games’ with what Mitch Lasky & Blake Robbins call ‘Persistent Play Patterns’ - Call of Duty, FIFA, Final Fantasy, GTA, World of Warcraft, Pokémon, Zelda, Mario. Games with name recognition, established lore and just enough innovation on the core gameplay experience year-on-year to remain novel. In fact, so powerful are ‘Persistent Play Patterns’ that Chinese gaming companies like NetEase and Tencent have built extraordinarily popular games like Honor of Kings and Genshin Impact which are, in fact, no more than culturally localised clones of League of Legends and Zelda.
As a result of our ever-progressing ‘infinity machines’ and the cultural emphasis in the game's world of creating ever larger, ever more immersive, ever more fantastical experiences, games now take much longer to develop, optimise and launch. With that, the cost, and risk increase too. So as game companies grow, as they build larger user bases and aggregate more content with persistent play patterns, the incentive to innovate, diverge from existing properties, and produce truly novel game content starts to weaken.
This contrasts with the shifting dynamics in wider culture. The proliferation of content creation tools & platforms is helping to fragment old monocultures. According to YouTube’s 2023 Trends Report 82% of 18-44s have posted video content online in the last 12 months and 68% now consume multi-format content on their favourite topics (long form, short form, podcasts, live streams). Fandom is thus becoming more stratified – 54% of the same audience would prefer to watch their favourite content creators breaking down major events (sports, entertainment, news etc) rather than watching the event itself. And within this more stratified culture, games are increasingly playing a social and discovery role – nearly 50% of 18-44s use games to connect socially, boost their self-image and discover new forms of entertainment like music.
For brands, this is good news. Not only do the converging structures of the gaming industry create better pathways to advertise to gamers but the shifting cultural expectations of those gamers creates room for brands to play a genuinely valuable role in delivering new content and experiences they want to see. Indeed, as gamers spend more time socialising and discovering new strands of culture within games, so their appetite for real-world products tied to those experiences, increases. VML’s recent Future Shopper report highlights that nearly 50% of gamers are interested in buying real-world items via games and purchasing their in-game avatars virtual items in real-life.
For gamers themselves, the future is less clear. Undoubtedly, the gradual investment of more and more tech dollars into the gaming industry is leading to the creation of larger content portfolios, higher quality AAA games experiences and more choice in where and how gamers chose to play. But as Sony, Microsoft, Tencent, Valve, Take-Two and the other big gaming conglomerates continue to accrue more content and build bigger platforms it will be interesting to see whether they mirror the cultural homogenisation of Hollywood or continue to expound the fiercely independent creative energy that historically has made gaming unique.
