This could be the start of a period of financial gain for the video game industry, which, despite being the largest entertainment industry worldwide, has been facing constricting demand, as prices are higher and companies are compelled to explore alternative options to leverage successful IP.
The video game industry is experiencing a turning point, with companies on the lookout for capitalisation of intellectual property through new ventures and partnerships. To that end, Electronic Arts (EA) recently announced that it secured a record $55 billion leveraged buyout by Saudi Arabia’s sovereign wealth fund and two other firms.
This could be the start of a period of financial gain for the video game industry, which, despite being the largest entertainment industry worldwide, has been facing constricting demand, as prices are higher and companies are compelled to explore alternative options to leverage successful IP. One such way in which the industry is looking for other options is by turning to films and television.
The acquisition of EA means that the new owners also become de facto owners of popular games like Battlefield, Apex Legends and The Sims. The company’s new owners include Silver Lake, Saudi Arabia’s Public Investment Fund (PIF) and Jared Kushner’s Affinity Partners.
While the video game and the film industry partnering up is no new idea, it must be kept in mind that such collaborations in the past have had disastrous box office fates. Video games translated into film or television media Doom (2005) or Street Fighter: The Legend of Chun-Li (2009), have received poor reviews from audiences and critics alike, and were panned as commercially unsuccessful.
However, the winds changed in 2023 when The Last of Us was adapted as a television series, and studios across Hollywood and gaming publishers were more than enthusiastic about acquiring the intellectual property rights of popular video games to be made for films and TV.
This includes the Amazon Prime series, Fallout, Warner Bro’s A Minecraft Movie and several sequels to the Nintendo movies, Super Mario and Mortal Kombat. In September, it was also announced that Paramount Skydance is set to produce a live-action film based on Activision Blizzard’s hit video game franchise, Call of Duty.
Both the production company and the video game owners hoped that this new film would capitalise on the recent success of the Minecraft movie, as they hoped to build a cinematic experience for the dedicated fanbase. In August, Warner Bros Discovery reported that its second-quarter profits grew upon the release of the Minecraft movie and because HBO Max becoming available internationally resulted in a surge in subscriber numbers.
Saudi Arabia’s PIF’s gaming subsidiary, Savvy Games Group, has also invested in other video game companies such as Take-Two Interactive and Nintendo. The Group has also signed other deals, such as buying a stake in Toei Co., a Japanese animation company. This reflects the growing potential in the video game sector, which could expand threefold with the right partnerships and investments.
Market analysts are closely watching the PIF’s investment streams, observing that the Fund has taken a keen interest in entertainment assets with much pop culture influence. Given its recent trajectory, analysts expect the fund to focus more on digital media rather than traditional forms of media like print, movies and television.
Even while investing huge quantities of money to acquire a lot of intellectual property may pay off in the long term, experts warn that high production and development costs could be a financial danger if they are not handled effectively.
For instance, over the past three to four years, the Swedish gaming company Embracer has been expanding its portfolio of games and acquiring dozens of smaller studios. However, the company had split three ways last year as a result of negative reviews for high-profile films and shelved projects.
While there are short-term advantages to consolidating intellectual property during a down market, more often than not, it leads to inefficiencies and a devaluation. Therefore, it is important for companies to lay a concrete plan, taking into account the ups and downs of the entertainment industry.