August was a relatively quiet month for the video game industry, save for one acquisition, but big things are on the horizon, according to analysts at Wedbush.
On August 8, gambling and gaming company Light & Wonder inked a deal to acquire the remaining interest in SciPlay that it didn’t already own for $22.95 per share, higher than L&W’s initial $20 bid.
Now, SciPlay will be taken private as a wholly owned subsidiary of Light & Wonder.
There were also a handful of earnings results last month. EA reported lower-than-expected bookings but beat on EPS, while Nintendo set first-quarter records for revenue and profit.
“Electronic Arts Inc. (NASDAQ:EA) has as yet to provide release slate visibility beyond FY:24, which has weighed on its shares,” analysts wrote. “The company’s slow-and-steady approach makes it more difficult for investors to value its shares as a growth stock. We are confident that there are several large titles coming, and the company has confirmed new Battlefield, Dragon Age and Star Wars games in development, among others. With a dearth of high-quality AAA content in the market, we think EA’s announced titles in development demonstrate the company’s path to growth.’
They continued, “Nintendo reported solid results, but maintained its guidance, as is customary exiting the first quarter. The company has moved past the huge contribution from its Legend of Zelda game launch and from its Super Mario film, but we think investors remain positive on speculation about a successor to the Switch.”
Reports suggest that developer kits for the successor to the Switch console have already been provided to studio partners.
“If true, we think that indicates that the new console will arrive in H2:24,” analysts wrote. “The potential for a launch in late 2024 or early 2025 seems likely.”
Then there's the ongoing controversy over Microsoft Corporation (NASDAQ:MSFT)'s proposed nearly $70 billion acquisition of Activision Blizzard Inc (NASDAQ:ATVI).
Last month, Microsoft announced that it would restructure the transaction to address the concerns from the Competition and Markets Authority in the UK. Under the revised deal, Microsoft would acquire Activision Blizzard save for its non-European Economic Area cloud streaming rights.
“The CMA had been concerned that Microsoft and Activision would require players to purchase a game in order to stream it, eliminating the potential for competition in the subscription market,” the analysts noted.
“The CMA’s other concerns were that Microsoft could select which games could be included and excluded from the streaming services of third parties, providing a competitive advantage to Microsoft’s Windows OS product to the detriment of other cloud gaming services. The original proposal was for only 10 years, so the revised deal extends that term by 5 years.”
The CMA deadline is October 18, which is the same as the extended deal deadline between Microsoft and Activision.
Lastly, Wedbush is wary of investor sentiment that Grand Theft Auto VI is coming next year after Take-Two promised significant growth in both next year and fiscal 2026.
“We remain skeptical, and note that every game made by Rockstar (the GTA developer) has been announced at least one year prior to the game’s release,” analysts wrote. “Thus, if we see a trailer for GTA VI by the end of November, we will be more confident about including it in our model for next year.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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