A Glimpse into the Global Digital Gaming Industry

Following the global shock of the COVID-19 pandemic, the flood of monetary stimulus in financial markets and a massive surge in digital game sales significantly increased investor interest in the global gaming industry. Although the investment momentum continued into the first half of 2022, the second half of the year witnessed a notable contraction in funding worldwide. Concerns over inflation in U.S. markets and the Federal Reserve’s interest rate hikes to combat inflation caused a decline in global risk appetite.

Adding to the pressure, tech giants such as Meta, Google, Amazon, and Microsoft announced workforce reductions to maintain profitability.

Growth in the Turkish Gaming Ecosystem

Despite global turbulence, the Turkish digital gaming industry continued to grow. In 2020 and 2021, approximately 250 gaming companies were founded in Turkey. Nearly 70 of these companies received a combined $280 million in funding from angel investors and venture capital firms. In 2022, total investments rose to $360 million. Dream Games, which gained recognition through its mobile app Royal Match, received the lion’s share of this with a $250 million investment, making it Turkey’s second unicorn in gaming after Peak Games.

In 2022, the sector faced a shortage of qualified professionals such as developers, designers, concept artists, and product specialists. As a result, companies turned to hiring top talent at high salaries, driving up labor costs. However, many firms failed to meet their revenue targets, leading to cash flow issues. This in turn placed downward pressure on company valuations, giving investors more bargaining power and opportunities to invest at lower multiples.

Global Market Snapshot

In 2022, the global gaming market reached a size of $185 billion. This massive market comprised:

• 50% mobile games
• 28% console games
• 20% PC games
• The remainder from cloud/browser-based games

However, the mobile game market contracted by 6% compared to the previous year, driven by two key factors:

1. Privacy Changes in iOS: Restrictions in user data sharing made it harder for publishers and advertisers to target the right consumer segments.
2. Post-pandemic Mobility: As lockdowns lifted in 2022, users spent less time and money on mobile gaming.

M&A Frenzy and Strategic Acquisitions

2022 was an exciting year for mergers and acquisitions. Angel investors, VC firms, and large-scale game publishers strategically partnered with or acquired startups that showed strong potential or offered technological value—even before reaching full maturity.

Among the most talked-about deals were:

• Take-Two’s acquisition of Zynga for $12.7 billion, a landmark transaction considering Take-Two's market cap of $18 billion at the time.
• Microsoft’s $68.7 billion bid for Activision Blizzard, which includes blockbuster IPs like Call of Duty and World of Warcraft. The deal, still pending regulatory approval, could significantly bolster Xbox’s gaming ecosystem but raises competition concerns with PlayStation and Nintendo players potentially forced to migrate to Xbox.

Microsoft’s antitrust history adds complexity to the approval process, but both acquisitions underscore the sector’s strategic importance and future growth potential.

Virtual Reality (VR) and the Road to the Metaverse

In 2022, VR revenues surpassed $1.8 billion. While initially driven by gaming, VR has rapidly expanded into healthcare, education, engineering, and entertainment.

Meta released the Meta Quest Pro in October 2022, targeting enterprise and mixed-reality use cases beyond immersive gaming, and plans to launch the Quest 3 in 2023. The idea of VR being the primary gateway to the metaverse is no longer far-fetched. In fact, Rec Room—a leading VR social platform—hit 3 million monthly active users (MAU) in April 2022.

Outside of VR, social gaming platforms like Roblox, Minecraft, and Fortnite have become household names. These franchises now serve as experiential hubs where players engage in games and non-gaming activities, fueling the metaverse gold rush.

Blockchain Gaming and the Rise of “Play-to-Earn”

While blockchain-based games and gaming NFTs had an outstanding year in 2021, 2022 saw a sharp correction due to the crypto bear market and global recession fears. This led to a decline in investor interest, token valuations, and player engagement.

Still, the rise of the "play-to-earn" model highlighted an important lesson: building games that are fun and compelling in their own right is crucial, especially when other players depend on continued user participation to maintain game economies.

Conclusion

From record-breaking acquisitions to the evolution of immersive and decentralized gaming, the global digital gaming sector is undergoing a transformative era. With traditional and emerging technologies converging, the path ahead promises continued innovation, deeper integration into daily life, and robust investment opportunities for forward-looking investors.

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