Nintendo and SEGA were once locked in a highly competitive hardware battle
Image: SEGA / Nintendo

Back in September 2020 when Microsoft announced its acquisition of Bethesda for around $7.5 billion, it was a big move — one that some fans would have been excited by, and others less so. It was a huge deal at the time, with that purchase giving Microsoft Gaming / Xbox a number of new studios and creative teams, not to mention an influx of seminal gaming properties such as DOOM, The Elder Scrolls, and Fallout. The recent Activision Blizzard agreement — which is a long way from being finalised due to regulatory processes — felt like something different, however. The sheer sum of money involved ($68.7 billion), and the size of the company being acquired arguably represents a shift in policy. Microsoft isn't aiming to just boost its Xbox offering, it seems intent to dominate with it while also notionally growing into 'metaverse', which is a conversation for another day.

Now we've had Sony acquire Bungie, the creator of the Halo series (though it departed the franchise years ago) and well known for its Destiny games and expansions. It's another big sum, at $3.6 billion a little under half of what Microsoft paid for Bethesda. PlayStation CEO Jim Ryan has also made clear that the acquisitions aren't finished yet.

Over the past year or more, and amplified since the Xbox / Activision Blizzard deal in January, there's been a slightly strange discourse online among some gaming fans. Plenty have been looking up market values of the world's biggest publishers then talking about "I wish Sony / Microsoft / Nintendo would buy them!", as if they're hotels on a Monopoly board. While it's fun to play 'What if...?' sometimes, the general attitude of hoping Company X is acquired by Corporation Y is not a particularly healthy one, and increasing corporate consolidation is unlikely to be good for the video game industry.

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Image: Microsoft / Xbox

It can go both ways. The 'video game crash' of the early '80s happened in part because there were too many competing products without sufficient quality. Since the late '80s we've had a largely established pattern, with two or three major competitors in the hardware market — SEGA vs Nintendo, then PlayStation joined in, then as SEGA departed we moved into this current era of Nintendo / Sony / Microsoft. That's just the 'big players' with dedicated gaming hardware, of course, and in the past decade or more we've seen transformations in the industry with the rise of mobile gaming, steady growth of VR and also streaming.

Some consumers seem to think it's all a bit of a laugh, as if Sony and Microsoft in particular should build mega alliances of gaming IPs through acquisitions and then fight to the death

This is arguably a particularly disruptive period, with technology shifting and enormous companies like Alphabet (Google) and Apple continually linked with entries into the dedicated hardware market, while Valve (Steam) is testing the handheld waters with the Deck portable. All companies are doing what they're designed to do — assess the market, make the right moves and maximise profits and opportunities. Yet some consumers seem to think it's all a bit of a laugh, as if Sony and Microsoft in particular should build mega alliances of gaming IPs through acquisitions and then fight to the death.

The problem with that is the potential dangers of giving one or two companies too much power and clout in the industry. It's always a balance, but while the current PR talk after acquisitions is around maintaining relations and support across platforms for the 'good of gaming', it's all just soundbites. No company will spend billions of dollars on an acquisition only to gather its rivals around for a sing-song and a sharing of the spoils. To think that would be naïve.

Imagine a world where on one side you have Microsoft with Bethesda, Activision Blizzard and, say, Ubisoft; on the other side Sony has EA, Take Two and Capcom. Cross-platform porting becomes the exception rather than the norm, so many gamers 'pick a side', enjoying one set of mega franchises while missing out on others. Or perhaps they buy one platform and use streaming apps for the other side — which is arguably the play Microsoft is eyeing with Game Pass — adding more subscriptions that may benefit the platform holders and participators, but strip all sense of value from gaming for other, smaller publishers and developers on the outside that still need to sell their game and hope to break even.

The talk around corporate takeovers may be getting to Mario
Image: Nintendo Life / Damien McFerran

We're many years and numerous scenarios away from that happening, but in that world gaming isn't a uniting force, it's yet another source of division. Where, also, would that leave Nintendo? It may come as a surprise to some considering it too is a successful platform holder, but Nintendo is way off the scale of business of Microsoft and Sony, corporations that have numerous hugely profitable interests beyond gaming. Nintendo isn't even the biggest pure entertainment company in gaming. Nintendo runs a very streamlined, efficient business with around 6500 global employees; Activision Blizzard, as a comparison, consistently has over 9500 employees.

Nintendo isn't of the size and scope where it owns and acquires large companies, but it operates very effectively through partnerships (and in some cases minority shareholdings). For example, Nintendo works closely with companies like HAL Laboratory, the makers of the Kirby series. It owns around a third of The Pokémon Company. We had the recent acquisition of Next Level Games — which is frankly small fry compared to the other deals we've been discussing — but for the most part Nintendo and a number of its exclusive games exist through partnerships and collaborations with the likes of Bandai Namco, Koei Tecmo, PlatinumGames and more. As a business, it doesn't need the risk and headaches associated with owning and managing those companies in order to have profitable partnerships that produce excellent results for players and shareholders alike.

This strange frenzy among some onlookers for an acquisition 'arms race' runs counter to how Nintendo operates, and indeed how it can operate. If in a decade we have one or two even bigger gaming superpowers like Microsoft or Sony, following spending sprees, that could put Nintendo in a potentially dangerous position.

If dominant 'Indie' publishers like Devolver Digital eventually get acquired by platform holders, even the Indie scene would be directly impacted by the acquisition arms race
Image: Devolver Digital

Even beyond that, though, a strength of the video game industry right now is that it gives opportunities for small titles to flourish, or we see mid-large publishers putting their games on most or all platforms, reaching more gamers. It's tough out there for small developers, of course, but there are opportunities for breakout hits like Among Us, Valheim and the like. That happens through independence, from bigger corporations like EA down to the smallest Indies. The potential issues of corporate consolidation isn't just about big franchises, either. Look at Indie powerhouse publishers like Devolver Digital, or even the likes of Thunderful, and imagine a scenario where they're also scooped up in acquisitions. What we end up with are gaming communities that are even more gated than they already are. Surely nobody wants that.

We shouldn't be encouraging massive platform holders to buy-out major publishers and developers, we should be concerned by the potential endgame.