Gaming Outlook 2022: Consumer Trends to Dictate Revenues

Gaming outlook 2022: Events to watch as the new year gets going

The new year has barely started, but the gaming world has already been rocked with a blockbuster acquisition. Take-Two Interactive Software (NASDAQ:TTWO) is buying Zynga (NASDAQ:ZNGA) for a reported US$12.7 billion.

The consolidating move, which brings the traditional console and computer game company together with a leading mobile game maker, is set to be the biggest gaming acquisition deal in history.

“This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity,” Strauss Zelnick, chairman and CEO of Take-Two, said in a press release.

Meanwhile, Zynga CEO Frank Gibeau said that after a strong end to 2021, management at the gaming-focused company was excited to find a partner to align with.

VentureBeat reported the deal represents a 64 percent premium for Zynga shares as of close on January 7.

Shares of Take-Two took a double-digit dip following the news. However, Bloomberg reported that analysts still view the deal favorably thanks to the long-term outlook on mobile gaming.

Also worth watching is a change in the established revenue model for the console gaming landscape. Microsoft’s (NASDAQ:MSFT) Xbox Game Pass, a subscription-based service that requires a monthly fee akin to Netflix (NASDAQ:NFLX), has inspired another key player to make a move in that direction.

Sony (NYSE:SONY) is reportedly planning to launch a new service to rival the Xbox Game Pass, according to a report from Bloomberg. The service has not been confirmed, but Bloomberg said it will have three tiers, offering a combination of the existing PlayStation Now and PS Plus services, which are already similar to the Xbox Game Pass.

In January 2021, Microsoft said the Xbox Game Pass had reached a subscriber count of 18 million users.

Another event to monitor for the big picture in gaming is the growth of Tencent (OTC Pink:TCEHY,HKEX:0700). Video game research firm Niko issued a report indicating that Tencent is on a path to global gaming domination.

Tencent's strategy has already made it one of the biggest gaming companies in the world. In its report, Niko states, "One thing that did not change is that Tencent invests in a 'silent' manner, meaning that they do not rebrand their portfolio companies and generally leave those companies to continue the excellence that made them attractive to Tencent in the first place. We call that Tencent’s silent pursuit of global gaming domination."

Gaming outlook 2022: Workers' demands may lead to unionization reckoning

Working conditions for video game makers have become a more relevant part of the conversation around the market's value proposition, and this is expected to continue in 2022.

In 2021, workers' rights in gaming gained attention thanks to allegations raised against one of the biggest companies in the space: Activision Blizzard (NASDAQ:ATVI). It owns the popular shooter franchise Call of Duty and the massively multiplayer online computer game World of Warcraft.

A wide variety of complaints were raised against company management, leading to worker walkouts and demands for the resignation of CEO Bobby Kotick; Activision Blizzard was left at the center of a new examination of the male-dominated culture of video game makers and the impact it has had on workers across the board.

In July, the State of California sued Activision Blizzard for gender discrimination and sexual harassment thanks to a toxic workplace environment, a report from Polygon indicates.

Kotick earned the ire of his employees and observers of the video game industry after a Wall Street Journal report showed he was aware of several allegations and had aided in keeping an abusive culture at Activision Blizzard.

However, the executive has been backed by the board at the company, which wrote in a statement: “The Board remains confident that Bobby Kotick appropriately addressed workplace issues brought to his attention.”

In an opinion piece, GamesIndustry.Biz contributing editor Rob Fahey wrote that unionization will stand as one of the biggest stories of the industry in 2022 as the continuing effect of the Activision Blizzard situation.

Commenting on the company's issues, Fahey wrote, “it's very clear that Activision Blizzard's employees would have benefited from access to some kind of alternative recourse outside of the company's own formal structures.”

The first video game-maker union in the US was formed in 2021, but what happens in 2022 is tough to predict.

“Where will this story go in 2022? At a guess, we'll see a few more small studios (and maybe some medium sized ones — there are more than a few bosses at decent-sized studios who have spoken positively about the idea of labor organization in the industry in the past) voluntarily recognising their employees' unions, generating a few more positive headlines around the idea,” Fahey continued.

Gaming outlook 2022: Investor takeaway

In 2021, gaming didn't see the same kind of growth that it did in 2020, but that doesn’t mean the market is on a downturn. Instead, gaming continues to show potential as it courts more consumers keen to spend.

When it comes to 2022, investors will need to keep monitoring the trend of mobile adoption thanks to a wider 5G rollout in key North American markets. Additionally, the potential for increased availability to meet demand for consoles and computer equipment may finally soothe consumers.