The mobile games sector is moving fast. In what was once a fragmented industry, large companies are acquiring smaller studios to expand their portfolios. We believe this wave of consolidation is likely to have consequences for stakeholders, gamers and investors alike: more standardized game experiences, stifled innovation, higher prices…
Brief historical background
Let's start from the beginning. The consolidation of the mobile games sector is actually the result of a long evolutionary process that began in the late 1990s.
Early days (Late 1990s - Early 2000s) - Mobile gaming started with simple games like Snake on Nokia phones in 1997. These games were limited by small screens and minimal processing power.
Java games era (Mid-2000s) - The introduction of Java-based mobile games allowed for more complex titles, including strategy games and role-playing games (RPGs).
Smartphone revolution (2007-2008) - The launch of the iPhone in 2007 and the App Store in 2008 transformed mobile gaming. This allowed developers to create and distribute games to millions of users worldwide.
Free-to-Play model (2010s) - The rise of free-to-play games with in-app purchases, exemplified by titles like Angry Birds and Candy Crush Saga, revolutionized monetization strategies.
Recent years - Improved mobile device capabilities (graphics, connectivity, etc.), cross-platform integration, increasing device affordability, (...) have turned mobile gaming into a leading subset of the gaming industry. Nowadays, mobile gaming makes around 50% of gaming revenue.
Why a consolidation is happening
First, market fragmentation. The mobile gaming industry has countless small and mid-sized developers, each with their own successful games and established player bases. Larger companies are acquiring these smaller studios to gain access to popular titles and their loyal users, bypassing the challenges of developing a hit game from scratch.
Second, the rising cost of user acquisition (UAC). With the changes brought about by Apple’s App Tracking Transparency (ATT), advertising costs for acquiring new users have risen sharply - the average cost per install on iOS was up 88% between Q1 2021 (the last quarter before ATT rollout) and Q4 2022. For many companies, it’s now more cost-effective to acquire a company with an existing user base than to spend heavily on advertising to attract new gamers.
Third, acquisitions offer companies the chance to diversify their portfolios and reduce risks. By acquiring studios with different types of games, companies can appeal to a broader audience and ensure more stability, even as revenue from individual titles may fluctuate. This diversification can be especially valuable in a market where success is not guaranteed, and the popularity of individual games can change quickly.
The rise of subscription-based gaming models is another important factor. Mobile games using subscription models nearly tripled in a year, jumping from 11% to 29%. Companies are increasingly looking to secure exclusive content for their platforms, which often means acquiring smaller studios that specialize in successful live-service games or premium content. By securing such content, companies can boost their subscription offerings and improve their long-term revenue streams.
In addition to these factors, consolidation helps companies benefit from economies of scale. Larger firms can share resources like development teams, marketing tools, and analytics across multiple games, reducing costs and improving profitability. They can also promote games within their own ecosystem, cutting down reliance on external advertising platforms. Furthermore, owning a larger portfolio provides access to valuable data about players, improving marketing and game design strategies.
Finally, acquisitions provide larger companies with a strategic gateway into fast-growing markets, such as the Asia Pacific region, which generated $84.1 billion in mobile game revenue last year[2]. By acquiring local studios, these companies can adapt games to suit regional preferences, fostering stronger connections with local audiences while expanding their global footprint.
Major deals reshaping the market
Microsoft and Activision Blizzard: Microsoft’s $68.7 billion purchase of Activision Blizzard includes King, the creator of Candy Crush. This highlights how central mobile gaming has become to Microsoft’s strategy.
Take-Two and Zynga: Take-Two acquired Zynga for $12.7 billion, showing the importance of mobile-first developers to traditional gaming companies.
Tencent: Tencent continues to expand globally, increasing its stake in mobile studios like Supercell (Clash of Clans) and acquiring smaller developers worldwide.
Netflix’s push into gaming: Netflix has started buying mobile gaming studios to broaden its entertainment offerings and tap into the gaming market.
What this means for stakeholders
Gamers: Players will likely see better-quality games as studios get access to bigger budgets. However, there are concerns about over-monetization and less innovation.
Developers: Smaller studios can benefit from resources and global distribution. However, acquisitions may lead to creative limitations or layoffs during restructuring.
Investors: Mobile gaming remains a high-growth sector. With 71% of executives expecting more M&A activity in 2025, the market is ripe for strategic investments.
Trends to watch
AI-driven gaming: Studios specializing in AI are becoming attractive targets, as personalized and immersive gaming experiences grow in demand.
Emerging markets: Southeast Asia, India, and Africa are hotspots for mobile gaming adoption. Companies are focusing on these regions for growth.
Cross-platform experiences: The boundaries between mobile, PC, and console gaming are blurring. Acquisitions now often focus on studios that deliver seamless multi-platform experiences.
Final thoughts
We've followed this trend, and what we've seen and are seeing is a market where only the most strategic players survive. The era of successful independent studios is fading, replaced by corporate gaming machines capable of deploying massive resources and complex data strategies.
We believe that this consolidation is not just about acquiring games, but about taking over entire ecosystems of gamers. Companies like Tencent and Microsoft are building entertainment empires capable of leveraging global platforms, cross-market strategies and predictive user engagement models. We expect this trend to continue until 2025, with further mergers and acquisitions.
Small developers must either radically innovate, or become acquisition targets. The mission is no longer to create a great game, but to understand complex player behaviors, monetization tactics, and technological infrastructure, and to be able to leverage them strategically.
At Acquinox Capital, we specialize in understanding the nuanced dynamics of emerging technology sectors such as mobile gaming. Our approach combines in-depth research, strategic analysis and a deep understanding of tech trends. Our clients benefit from insights that go beyond surface-level observations, focusing on long-term, sustainable value creation.
Published by Samuel Hieber
