#1105 – Entertainment Investment Frenzy

The culmination of development and investment towards creating a changed landscape for the consumption of entertainment, has been personified by the start of 2022. The conditions seem to be right for leading entertainment brands towards consolidation, mergers, and growth. The market, through increased investment, sees major corporations looking towards creating franchised ecosystems across the leading platforms, and a physical presence is now becoming as important as a digital, online and connected presence.

Amusement Investment

Developments in the Out-of-Home Entertainment venue scene have continued to pick up speed. Much of this is fuelled by a growth in investment in this area, with the Family Entertainment Center (FEC) business projected to grow to $40.8b by 2025, according to industry analysis evaluation. This growth has continued since the valuation of $18.9b in 2017 (revealed in corporate reporting by Launch Trampoline Parks). This has been matched by increased investment in recent months, into existing developments, seeing the funding of restructuring and growth along with a hunt for new amusement hardware.

One such example of this investment was seen from Round 1 USA, who revealed in a Tweet at the end of December, that a considerable import of Japanese amusement cabinets will be taking place across the US venues. The bowling and amusement operation has used the influence of its Japanese parent to guarantee access to the most niche of the Japanese amusement releases. The operation had commenced a new investment towards opening additional sites and also updating those already opened venues to stay ahead of the curve, offering unique entertainment. 

These new machines are scheduled for installation early in 2022. For the US amusement trade, they have zero opportunity to get access to these Japanese releases, as no Japanese amusement factories would consider distributing these games – such as the popular TAITO ‘Tetote x Connect’ or KONAMI ‘Sound Voltex’ release in the BEMANI series. A game needs English translation and de-coupling from the ‘Paseli’ and ‘e-Amusement’ networks to be operational outside of Japan. To achieve this for only some 60-units would be impossible, unless working directly with Japan, and hardly any Japanese amusement are currently supported by Western distributors – no matter if there was market interest or not.

For current operators without Japanese connections, the options for games beyond the Western norm are far and few. Only BANDAI NAMCO Amusement America (BNAA) represents access to Japanese driver series ‘Maximum Tune’ – offering the latest 5DX+ update. The game is offered with an additional monthly network fee, claimed to be used to recoup the expense in converting this Western version. Meanwhile, Japanese amusement shooters and brawlers are now being offered to Western operations wanting to capitalize on their continued popularity, through the new operation exA-Arcadia. The operation is working with Japanese amusement developers to release their games on the platform, through their North American sales team. This proves a continued interest in this flavour of video amusement content – even if the very distributors created to initially support these games have moved on.   

Revealing other Japanese imports and BANDAI NAMCO Amusement Europe (BNAE), the satellite operation of the Japanese amusement and game giant, revealed their 2022 lineup, and a surprise addition from the VR scene was included. Having been missed previously, BNAE confirmed that for the last six months they have had ‘Galaga Fever’ – the two-player VR amusement piece, originally created for the ‘VR ZONE’ venue concept by the Japanese BANDAI NAMCO ‘Project-i-Can’ development team. Now available in limited numbers, the system is being sold to US and UK operators, separate of the original ‘VR ZONE Portal’ involvement (The Stinger Report exclusively covered the game during our Japanese VR ZONE site visit, in 2019).

This represents the last manifestations of the ambitious ‘VR ZONE – Project-i-Can’ activities created by the research team at BANDAI NAMCO. The hope of a Western rollout of the various VR attractions, as part of the ‘VR ZONE Portal’ initiative, saw extensive negotiations with numerous operators, but would result in only a handful of Western deployments – mainly through BNAE partners Hollywood Bowl, and an EU and US installation. In Japan, the VR ZONE concept has been retired and the sale of ‘Galaga Fever’ marks the last placement of this VR experiment into the amusement scene, through BNAE’s remaining VR project manager. 

Speaking of the UK amusement scene, and developments were seen at the beginning of the year. The impact of the postponement of the EAG 2022 show to March caused issues for the UK amusement trade. The timing of the UK amusement trade gathering has been to capture the important pre-Easter buying period for operators, and the need to offer the market sales opportunities saw the holding, in London, of a one-off distributor event – with an unusual ‘Park Avenue 2022 Preview’. Both veteran distributors Electrocoin and United Distributing Company (UDC) held a three-day open showroom gathering, capturing some of the spirit (if not the same size, with no third parties) of the usual June ‘Park Avenue Openday’, but in January!

The preview offered a chance for the latest hardware to be presented to sales opportunities that could not wait for the postponed trade event. Electrocoin showed their extensive range of gaming, amusement, and prize systems, including the ‘Skill Shooting’ game, along with the latest STERN pintable ‘RUSH’. Meanwhile UDC presented a strong lineup of prize, redemption and amusement, with appearances by the new Touch Magix ‘Mega Blaster’ Videmption. Along with the new two-player video shooter from ACE Amusement called ‘Galaxy Rangers’. The distributor also represented the ‘StepmaniaX’ dancing stage music game, a popular offering in the community. Some buyers changed travel plans to attend the distributor event, which saw it extended for an extra week. This event acted as a good stopgap before we can cover all the new releases at EAG in March.

Merging and Acquisition Define Streaming

The New Year was greeted with immense speculation shaping the landscape of the streaming, gaming, and movie empires. The churn from the Global Health Crisis had not really been fully felt within the media entertainment industries, although recent acquisitions and mergers had been the harbingers of more tectonic impacts to come. The use of mergers was seen as means for existing executive teams and investors to protect their previous investment and dilute or even offset debts incurred during their watch – in consolidation to survive. 

The streaming content landscape has seen the most incredible restructuring due to the impact of consumer consumption caused by the various lockdowns, and also by a move towards consolidation by the movie and entertainment industries towards creating a new ecosystem of streaming (digital) content. Major power-plays have defined the end of 2021 and the start of 2022 in this market. One such example comes with the constant rumors surrounding the streaming platform Roku looking to acquire studio and entertainment giant Lionsgate. This is seen as a future development following the Amazon acquisition of MGM for over $8b last year.

Likewise, these developments have downsides as well as ups. The streaming wars have seen major corporations invest millions into market shares, only to be decimated by poor implementation or market fluctuations. The Walt Disney Corporation has invested considerably into establishing its Disney+ streaming platform but has yet to reach the astronomical adoption numbers set. Seeing a downturn in subscriptions to the Disney service comes just as the corporation is undergoing corporate restructuring to prepare itself for what it sees as the coming storm.

One of the major developments was last year’s announcement of the ViacomCBS and Comcast agreement. The move to offer the respective corporation’s content to an enlarged audience base, supporting their own streaming platforms and illustrating the momentous developments in this field. The Paramount+ and Pluto TV platforms are competing in a complicated and volatile environment. Only recently, the market share leader Netflix saw a loss of some $50b in its value as it failed to hit major targets in achieving its goal of 222m subscribers by the end of 2021. The need to shore up the structure and establish market security is a factor in the vast marketing budgets in play, and the need to establish audience recognition. 

Consolidation of the alphabet soup of streaming services has been seen as essential in these febrile waters. Major names see solidification achieved through a scalable ecosystem, comprising not just streaming entertainment but also extensive libraries of content and even, in some cases, a physical identity. Sources see the vast technology giant Apple about to look towards solidifying its position. Already leading with its Apple+ platform, the ability to increase a library of content and properties has seen speculation rife of a major acquisition in the future, with names such as Sony Pictures suggested as a target by some observers. 

All these developments can trace their implications not just to the impact of the pandemic, but also the streaming service global restructuring; with industry analysts suggesting that the streaming marketplace saw spending that exceeded $220b. It is interesting to place this into comparison with estimations of the gaming industry, recently valued at some $175b.

Merging and Acquisition Also Defines Gaming

These mammoth developments in streaming would soon be matched by similar gargantuan deals in the videogame arena. January 2022 had only just begun when the news broke that two gaming giants of the scene were involved in merger talks. It was announced that Microsoft, the software and technology corporation, which also owns the Xbox games console and game platform, was intending to acquire one of the largest videogame publishers, Activision Blizzard, in a deal reported as worth $68.7b. This will be the largest deal of this kind seen to date in the videogame sector and still needs to be confirmed by both boards, with possible Federal scrutiny, but is expected to be ratified in 2023.

Activision Blizzard has been embroiled in a very public battle with investors and authorities over its handling of allegations regarding criminal misconduct by key executives, and the handling of internal investigations. This had impacted the brand and share price, all while the corporation had continued to publish some of the most populous properties in the videogame scene (such as ‘Call of Duty’, ‘World of Warcraft’ and ‘StarCraft’, to name just three). Meanwhile, Microsoft has been looking to establish its Xbox brand, having launched the latest generation of the gaming platform, while expanding its online game store (the Xbox/PC ‘Game Pass’ service, surpassing some 25m subscribers). Recently we reported on Microsoft and SEGA signing a joint undertaking, and this latest merger will continue the restructuring plans with the Microsoft Gaming operation, to dominate the entertainment landscape – against competition from the likes of Tencent, Nintendo, and Sony.

There are several other overlooked elements regarding the Microsoft acquisition of the Activision Blizzard empire. Many observers missed that, as part of the acquisition, Microsoft would be gaining King – the mobile game app powerhouse, with such populous properties as ‘Candy Crush Saga’ – a series that has been downloaded some 2.7b times. The operation now gives Microsoft a powerful presence in the free-to-play online and mobile gaming sector. Also overlooked was Activision’s ownership of Major League Gaming (MLG) – a professional eSports organization, linked to many of the major competitions surrounding Activision Blizzard games such as ‘Diablo’ and ‘StarCraft’. This acquisition, now under the Microsoft banner, will see shakeups in the eSports sector and could also encourage the development of competitive leagues. 

Concerning the OOH scene, both corporations have dabbled in amusement business. Most recently, Microsoft licensed its phenomenally popular property to Raw Thrills to create ‘Minecraft Dungeons Arcade’, having also worked with the amusement developer on licenses such as ‘Halo: Fireteam Raven’. Likewise, Raw Thrills worked with Activision on a short-lived amusement release of ‘Guitar Hero Arcade’, while King would partner with Adrenaline Amusement on ‘Candy Crush Ticket’. Both Microsoft and Activision have been involved in attractions based on their properties, best illustrated by the 250,000-sq.ft. ‘Halo: Outpost Discovery’ in 2019– an interactive experience developed in partnership with Herschend Live, along with Studio41b and VRstudios.

News of this acquisition marks a period of feverish activity within the international videogame and investment sectors. Mergers and acquisitions were being considered by numerous big corporations, as they rushed to position themselves in this changing global landscape. Investors reacted to the news of the Microsoft acquisition positively towards the Redmond corporation. Meanwhile, their leading game console competitor, Sony, would see $20b wiped off the corporation’s value, as shares fell by 13-percent. The winners proved to be smaller videogame developers, who saw increased investment as investors looked to benefit from the changing landscape. It is expected that further announcements of major deals from other corporations and studios will be forthcoming in the coming weeks.  

Many observers have attempted to chart these merges and acquisitions in the streaming and gaming landscape as reactions towards establishing a dominant position in the “Metaverse”. The ability to offer consolidated brand and content strength enables corporations to position for success. The definition of “what is the metaverse”, and how it will define future business has been confusing, with some attributing it to the emergence of Web.3.0 (a hyper-immersive virtual commerce space, successor to the current web). Meanwhile, others look at the concept as a recreation of a virtual-world environment consumed only in VR, a successor to ‘Second Life’.

Whatever the truth of what is being proposed, these major acquisitions and mergers are creating giant consortiums that will look to define their entertainment holdings, creating a franchised ecosystem. We will report in following coverage the ‘real’ examples of the brands and IP migrating into physical entities, being seen first in the Out-of-Home (OOH) Entertainment industry.