Everything Everywhere Once A Week (4/21/2023)

Hello and welcome to Everything Everywhere Once A Week, a weekly newsletter about the goings on in the video game industry over the last week. We took a small break last week led partially by Patreon just kind of…not working, but we’re back at it again. This week, we’re going to talk a little bit about something dominating the news in fits and starts: studio acquisitions and why they suddenly feel more prevalent than ever.

Games Are Complicated

So let’s say you’re a game developer looking to make something hovering around AAA — not quite a God of War 2018, something more like a Darksiders III. To do this, you need to immediately assume you’re going to spend the next 3-5 years on this project, rack up something in the area of $40 million for that time frame, and then need an infusion of double that production cost to actually market and sell the damn thing. That’s a lot of time and money spent on creating something that might sell for a few months if you’re really, really lucky.

Now assume that you’re in charge of ensuring 4-5 of these come out every year.

This week, PlayStation added Firewalk Studios to its Worldwide Studios portfolio, adding to an acquisition list that includes Jade Raymond-led Haven Studios, Returnal developer Housemarque, remake specialist Bluepoint, PC porthouse Nixxes, and others. The industry scuttlebutt has been, and has pretty much born out to, Sony is assuming a “contract-to-acquire” model with many of their recent publishing arrangements. If they signed a publishing deal with you and they’re impressed by what you have going and prove you can handle this kind of thing under their watchful eye, PlayStation is probably pretty eager to talk acquisition.

By doing it before the project finishes, they also get to avoid payouts for a successful project completion in addition to the sale price.

It’s a strategy that is markedly different from Microsoft’s, which is largely about looking for studios with proven independent track records who can manage themselves with just funding and occasional pats on the back. This difference is kind of cultural, though not in a broader Eastern vs. Western sense (both gaming divisions are as western as they come these days). PlayStation WWS just has certain ways they like to operate their first party output, while Xbox prefers to be hands off. They do not, in theory, need to watch everything DoubleFine is doing at weekly meetings with Xbox producers.

But despite these differences, the idea behind these acquisitions is the same: fill the calendar with games. Despite how easy that sounds, it’s a problem that is becoming more and more difficult. A platform holder like Sony or Microsoft can’t keep just acquiring studios forever as the management of all these studios will eventually become a problem. Microsoft is betting big on the Activision-Blizzard deal and is extremely likely to lose their taste for anything near as big after this. Their eventual theoretical wall on this will come and they can’t necessarily count on third-party developers to fill in the gaps because they’re running into the exact same problems.

To be clear, that doesn’t mean they’re acting against their self-interests here. Until they do hit that wall, they should probably be going at full speed, because anything else is likely going to result in unacceptable gaps in release schedules. For PlayStation, which seems a big weakness in terms of live-service, multiplayer games in their portfolio, acquisitions like Bungie and Firewalk make sense to expand out in different directions. Microsoft meanwhile is trying to compensate less in diversity (which they do pretty well already) and more in frequency.

Nintendo, meanwhile, just seems wholly uninterested in gaming studio acquisitions. I suspect that they’re scared off by what happened with Retro Studios, where they bought a company and then had to deal with talent leaving. Satoru Iwata said as much, without specifics, in 2008:

“However, in most cases, the value of software developing companies is attached to its people, not the company, which is merely a vessel for its people. So, when we purchase a company, we can purchase the vessel, but we cannot necessarily purchase the contents. Even if we should compete with others to purchase a software company, although we might be able to increase the sheer number of our developers and to gain a short-term result, we do not think it will do good for us in the long run.”

He explained that Monolithsoft worked because they knew the owners and the talent and were reasonably confident they wouldn’t leave, but it’s probably why they’re unlikely to just go out one day and pick up Supergiant or something.

They do, however, just buy all sorts of other things that are not just gaming studios. They acquired Dynamo Pictures last year despite establishing a clear working relationship with Illumination for movies, indicating they’ll probably still do some of that stuff in-house. They purchased the distribution company Jesnet to smooth out the network of how they move their products around in Japan. They established a joint company with DeNA late last year despite more or less abandoning mobile, the platform the two companies originally came together to collaborate on.

This is all a way of saying two things: 1) That the acquisition train is unlikely to stop and 2) there’s a reason it’s unlikely to stop. The inefficiencies of creating art are not going anywhere — they can’t, really, otherwise we risk what actually makes them art — but the money required to actually bring them to fruition at a steady pace needs to keep flowing. So many studios see these acquisitions as incredibly useful for their long term existence and platform holders see them as necessary gears to keep the machinery fully functioning. And that’s kind of just, like, a best-case scenario right now.

But, if we’re talking how healthy this is for the industry and whether this acquisition spree ends up being ethical overall, well, that’s a different essay.