The games industry, with the potential to become the world’s largest media and entertainment sector by revenue, is undergoing profound transformation.
The consolidation of major developers is a response to a revenue model pivoting toward subscription, with direct consequences for those already in the subscription space: film, TV and music.
A technology-led creative medium, with an audience approaching three billion gamers, is seeing its franchises become more valuable and useful than ever.
Microsoft and Google are both incorporating AI-powered chatbots into their core search offering. This will create a better user experience for some search categories earlier in the customer journey.
Search is a huge prize, bigger than TV advertising, and AI represents the biggest potential shakeup to that market since the rise of mobile. With ~95% market share outside China, Google's risk is to the downside.
Search is an early, but not the most natural, home for conversational AI: Microsoft and Google have also announced integrations into productivity software. Expect a wide range of services to be transformed by AI integrations as startups and tech giants alike seek share in newly contestable markets.
Consumer tech revenue growth ground to a halt by the end of 2022.
Changes in technology and user behaviour are creating risks for incumbents.
Shareholder pressure is driving efficiencies, but high costs are an inevitable response to growing challenges.
Microsoft’s planned acquisition of Activision Blizzard is in trouble. US, UK, and European regulators may make the deal impossible for Microsoft—and a disaster for Activision and the wider industry.
Sony’s late improvement in PlayStation 5 sales is only just enough to reach its target numbers for the year. It needs a more dynamic approach to a rapidly changing industry, and a less dogmatic message to consumers and regulators.
Netflix Games is more than a trial—it’s on track to become a major games platform.
A combination of factors drove the worst quarter ever for big tech growth, though the secular shift online of the economy and society will continue.
Advertising demand is down, reflected in lower prices. Ads did better the closer they are to transactions, with variability by category.
Efficiencies and AI are the investor-soothing buzzwords going into 2023.
Netflix’s decision to launch games as part of the subscription bundle is smart business: rewarding current subscribers, leveraging its IP, and signalling that subscription is the best long-term revenue model in the games space.
Expect technological innovation to be central to Netflix’s ambitions with games. Netflix will make it easier for different game experiences to occur, and ways to attract external developers will inevitably follow.
For Disney, Netflix just made the battle for customers more difficult and more expensive. Disney will need to make hard decisions about how to approach the games business—something it has shown before it finds difficult to do.
The press industry lost £1 billion off the topline from the calamitous decline in print revenues due to pandemic-related mobility restrictions, partly offset by gains on digital subscriptions, much harder to precisely size in revenue terms.
Trapped at home for the most part, online traffic to BBC News and news publisher services boomed. Popular news sites marginally grew digital advertising while the quality nationals attracted 800,000 new paying subscribers to reach nearly three million in 2020.
The outlook for 2021, in the transition to the ‘new normal’, is mixed. Consumer work patterns and news, information and entertainment habits are unlikely to ‘bounce back’ to pre-pandemic levels, placing free commuter titles at particular risk. Signs of confidence through online innovation are welcome.
The games industry enjoyed a robust 2020, with the pandemic creating high demand across titles and platforms. Now a core part of the mainstream media and entertainment ecosystem, games share of entertainment spend and audience viewing time will maintain momentum and increase in 2021.
The demand for, and value of, premium content has migrated to game IP, with top franchises driving increased M&A activity and tighter integration with film and TV output, and providing an important advertising channel.
The pandemic has provided breathing space for the industry on regulatory scrutiny of revenue models, and overall consumer safety. Regulators need to increase their speed in 2021, and act decisively on predatory ‘free-to-play’ game mechanisms.
National World Plc, David Montgomery’s investment vehicle founded in 2019, will buy JPI Media for £10.2 million, a tiny 1.7x EBITDA.
Disposals by JPI Media shifted its operating model towards digital, National World will shift this further.
This acquisition kicks off what is likely to be a busy period for M&A, though local consolidation remains hindered by the local media mergers regime.
The Competition and Markets Authority (CMA) halted the merger of the publishing assets of Trinity Mirror and Northern & Shell, and is inquiring into the merger’s likely impact on competition in the national newspaper market
The CMA will take into account efficiencies of £20 million in newsrooms, printing and advertising sales, which if realised could help sustain national news provision in a failing print market transitioning to digital services
Secretary of State (SoS) Matt Hancock has issued a Public Interest Intervention Notice (PIIN) citing newspaper public interest (PI) grounds, on concerns the TM/N&S merger may be contrary to the public interest