Sony Interactive Entertainment’s US$3.6bn takeovers of games developer Bungie may appear smaller than the recent ones involving Microsoft and Take-Two. But it follows a similar pattern that sees companies buying up not just titles but multi-platform capabilities that span consoles, PCs, and smartphones, too (more in my recent blog Activision deal pushes Microsoft into top three gaming companies).
Bungie is the developer behind leading games, including first-person shooters Halo, now in its fifth version after the 2001 release. The company also has a library of single-player games, including God of War, Ghost of Tsushima, The Last of Us, and Ratchet & Clank: Rift Apart, following a string of acquisitions last year, including Nixxes Software, Housemarque, Firesprite Studios, Bluepoint Games and Valkrie Entertainment. Destiny 2 is preparing three other expansion packs for release over the next few years.
Mobile game streaming absent from Sony repertoire
It’s no surprise that most of those titles were built for Sony’s PlayStation consoles and PCs rather than the smartphone. However, Sony has started converting them for mobile play after PlayStation Studios was reported to be recruiting for mobile development last year.[i]
The company’s cloud gaming platform – PlayStation Now – also has room for expansion and improvement. For the moment, it offers hundreds of PS4, PS3, and PS2 titles but only for gamers that want to play on Sony consoles and Windows PCs. An additional service – PlayStation Plus – is just for PS4 and PS5 players that wish to participate in online multiplayer gaming and costs between US$5-10 a month. Like PlayStation Now, it doesn’t (yet) offer an option for streaming Sony games to smartphones.
That situation could change shortly, however. Sony unveiled plans for a new subscription service more akin to Microsoft’s Xbox Game Pass expected to launch in the Spring of this year. Codenamed Spartacus, it will merge PlayStation Plus and PlayStation Now under a single subscription plan, according to reports. However, Sony has not yet indicated whether it will allow gamers to access the new service and titles via their smartphone.[ii]
Can Sony afford to miss the mobile party?
Sony Interactive Entertainment (SIE) has promised that Bungie will remain an independent subsidiary run by its current executive team, free to “self-publish” games that reach players wherever they choose to play. That carefully constructed statement appears to have been designed to reassure prominent gamers that future versions of Halo and Destiny will not be made exclusive to the PlayStation. Still, it could also be interpreted as a hint that Bungie will create games for other platforms, such as the smartphone. Unconfirmed rumors that a mobile version of Destiny is in the offing have been in circulation for months, for example.[iii]
Bungie is undoubtedly focused on keeping hold of its existing developers. Around US$1.2bn of its purchase price is earmarked as deferred payments to employee shareholders, a clear strategy to retain Bungie’s top talent.[iv] The question is perhaps not whether Sony is preparing a push into the mobile games market but rather whether it can afford not to leverage the opportunity.
Market research firm Newzoo estimates that the mobile games segment generated almost US$91bn of turnover in 2021, the lion share on smartphones (US$79bn, up 4.7% year on year) rather than tablets (US$11.6bn). By contrast, revenue from PC games is calculated to have fallen 1.7% to US$35.9bn. In comparison, console revenue shrank almost 9% to US$49.2bn, partly due to difficulties sourcing supplies of next-generation models, including Sony’s PlayStation 5 and Microsoft’s Xbox Series X.
Of the top ten smartphone games ranked by consumer spend in 2021, App Annie puts titles published by Tencent, Activision Blizzard (now Microsoft), and Zynga (Take Two) in the top five. No Sony game makes the top ten, suggesting the Japanese company is missing out on an increasingly lucrative market. Honor of Kings/Arena of Valor is estimated to have generated over US$13bn of revenue for Tencent since its launch in 2015, while Roblox Mobile has earned around US$3.5bn since its debut in 2021. As relative upstarts, Garena Free Fire (2017) and Epic Games’ Fortnite (2018) have earned US$4.2bn and US$1.2bn, respectively.
Sony reported a 27% increase in games segment revenue (US$5.7bn) in the financial quarter ending September 30th, 2021, but the majority came from PS5 sales (US$1.4bn, up 287% year on year). Sales of games software in the same period grew just 3.5% to US$3bn. While there’s plenty of life in the console games market yet, Sony must have one eye on a mobile games segment which Newzoo is forecasting will continue to expand at a faster rate over the next couple of years. Embedding a native payment layer as it pivots to mobile will be another key to success in the mobile gaming world.
[i] Sony Is Adapting PlayStation Games for Release on Mobile Platforms, PCMag, 12th April 2021
[ii] PlayStation Plans New Service to Take On Xbox Game Pass, Bloomberg, 3rd December 2021
[iii] Bungie Might Be Working On A Destiny Mobile Game, Job Listing Suggests, TGP, 17th September 2021
[iv] Sony Is Spending Over $1 Billion to Ensure Bungie Employees Don’t Leave, Push, 3rd February 2022