Gaming: Sector Update
Key Theme:
Games Development
- “I think we’ve been seeing seminal moments over the last couple of weeks and months kind of continuously … every day there’s new releases that are paradigm shifting and kind of reveal new applications and perhaps concepts structurally that we didn’t really have a good grasp of before some demonstration came across. Chat GPT was kind of the seed of that and all of this evolution since has really changed the landscape for really how we think about our interaction with the digital world and where the digital world can go and how it can interact with the physical world. It’s just really profound. I think I saw with some of the applications with Auto GPT were these almost like autonomous characters in a game simulation that could interact with each other or these autonomous characters that would speak back and forth to one another where each instance has its own kind of predefined role and then it explores some set of discovery or application or prompt back and forth with the other agent and that … reveals an entirely new paradigm for you know how things can be done simulation wise”
– David Friedberg (CEO & Partner at The Production Board), All-In Podcast, Ep. 124, 4/14/2023 - Generative AI has rapidly progressed from writing essays, creating pictures, and music to assisting game development studios in tasks that range from producing scripts and scenes to key elements in game design such as characters, vehicles and weapons. “There is probably no game that we’re not thinking about some use cases for generative AI,” said Marija Radulovic-Nastic, chief technology officer of creative and development at Electronic Arts. Previously time-consuming tasks, such as writing the first draft for background character chatter, is being streamlined by tools such as Ubisoft’s Ghostwriter.
Key Theme:
AI Micro Studios
- “I don’t understand why you would have a forty or fifty-person company to try to get to an MVP. I think you can do that with three or four people, and that has huge implications then to the second actor in this play, which are the investors… So for me personally, I am looking at capital formation being done in a totally different way. And our capital allocation model is totally wrong sized. Look fund four or me was one billion dollars. Does that make sense? For the next three or four years, no the right number may actually be fifty million dollars invested.”
– Chamath Palihapitiya (Founder & CEO at Social Capital), All-In Podcast, Ep. 124, 4/14/2023 - Independent studios leveraging generative AI are predicted to be able to accomplish far more with a tight budget. Investors such as a16z also predict that commercial games that will generate significant success are now possible with only one or two employees, which will in turn drive an increase in the number of new games per year.
M&A Spotlight
- On April 5, 2023, Savvy Games Group, a games and eSports company announced an agreement to acquire the mobile game studio Scopely for $4.9 billion. Savvy Games Group CEO Brian Ward noted that “Scopely is one of the fastest-growing games companies today, and we have long admired their ability to build loyal, engaged player communities.” Scopely has developed and published multiple hit game titles such as “Star Trek™ Fleet Command,” Stumble Guys,” “Scrabble® Go,” and other titles with a core competency around mobile platforms.
- Microsoft’s $69 billion acquisition of Activision, announced in January 2022, is now expected to be approved by EU antitrust regulators in May 2023 after Microsoft agreed to licensing deals with cloud streaming rivals such as Nvidia. This development comes after the UK competition authority blocked the deal in April 2023, over concerns it would hinder competition in cloud gaming. Microsoft’s President Brad Smith is hitting back, saying that the decision is “bad for Britain.”
