Global Video Games Investment: China, Online, Mobile Ascendent

[Digi-Capital, an investment bank focused on high growth digital companies, has just published its 2011 Global Video Games Investment Review (available at www.digi-capital.com). Its managing director, Tim Merel, has provided us with an overview of this new research in the form of a Q&A, giving a picture of the current and future state of the global games market.]

From a video games investment perspective, what trends do you see?

As we anticipated in our 2010 Review, video games activity accelerated and changed fundamentally during 2010.

Venture capital games investment approached 2007 levels in 2010 in terms of funds raised, although the number of investments declined.

The top 10 investments accounted for approximately 60 percent of total games investment in 2010, with a fundamental shift to online/mobile games company investments.

However general VC market weakness and limited knowledge and relationships across complex, fast moving online/mobile games sectors still make generalist VC games investment challenging.

Global Video Games Private Placements

Global Video Games Mergers and Acquisitions

Major console publishers continue to struggle to adapt to online/mobile, with a focus on existing large console games franchises rather than new intellectual property -- as the console games market is flat to down, with declining profitability. The reason for this challenge is that major publishers' core competencies focus on management of $20m+ serial, high risk, complex developments, launches and commercialization.

Online/mobile games require rapid, multiple, small scale parallel development platform investments, completely different to major publishers' business cultures, so they are not driving online/mobile games investment. Similarly, major publishers are wary of large scale online/mobile video games M&A in early stage, fragmented markets where market dominance is not yet clear.