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Mobile gaming revenues account for more than half of the mobile gaming market. Sony wants to diversify beyond consoles with its new, dedicated PlayStation division for mobile gaming.

Mateusz Slodkowski | SOPA images | LightRocket via Getty Images

Sony

Sony’s PlayStation has long dominated the game console market.

But the console gaming business model has changed. It’s not just about selling the hardware and then hoping that people will buy new games. It’s about continuing to milk the revenue from those games through regular updates that people spend money on and also selling subscription services.

Sony’s deal flow, particularly with the Bungie acquisition, highlights this push.

Their goal is to have enough content to incentivize players to buy their own hardware, pay a monthly fee for PlayStation’s subscription service (PS Plus), and occasionally purchase a digital game through the PlayStation Store, for which Sony about a 30% discount,” Tom Wijman, games leader at data company Newzoo, told CNBC.

“Buying studios is the most fail-safe way to ensure exclusive content for their ecosystem, especially in response to the wave of takeovers of Microsoft, one of Sony’s main gaming competitors.”

Sony also wants to go beyond consoles. Last week, the Japanese giant said it is creating a special unit to oversee mobile game development, a relatively new venture for the company, which has been so dominant in consoles for years.

The acquisition of Savage Game Studios, which focuses on mobile games, is another key part of the strategy.

“Sony is stepping out of their comfort zone to stay competitive,” Wijman said.

According to Newzoo, mobile gaming revenues account for more than 50% of the total gaming market, while consoles make up about 27% of revenue. So Sony is going for an even bigger piece of the pie.

Sony’s acquisitions will help it strengthen its intellectual property and game library as it looks to expand into mobile gaming.

Tencent and NetEase

China’s two largest gaming players Tencent and NetEase have faced a more difficult domestic market, increasing the importance of their investment and acquisition strategies abroad.

Last year, Chinese regulators limited the time people under 18 could play online games and frozen the approval of new titles. In China, games need the green light from regulators to be released and monetized. Those approvals didn’t start again until April.

Meanwhile, a resurgence of Covid-19 in China and subsequent lockdowns in major cities in the country have hurt economic growth. That led to the worst quarter of revenue growth for a number of Chinese tech giants, including Tencent.

With a more challenging home market, Tencent and NetEase have sought growth abroad through acquisitions and investments.

“Tencent and NetEase have built their gaming business primarily in their home country of China. With their home market becoming more regulated and more difficult to operate, these two companies will accelerate their global expansion strategy,” said Wijman.

Chinese tech giant Tencent records first quarterly revenue decline ever

Tencent owns or invests in some of the largest gaming companies in the world, including League of Legends developer Riot Games.

NetEase’s strategy focused on acquiring high-profile intellectual property. With the Quantic Dream acquisition, the Hangzhou-based company has access to publish an upcoming Star Wars game. NetEase has already released mobile games based on the Harry Potter and Lord of the Rings franchises.

For the two giants, having interests in or owning the studios behind international mega-hits in the game world has become an important part of the strategy.

While NetEase has traditionally been less aggressive than Tencent in its deal business, it has stepped up its efforts over the past year.

Another part of the investment strategy of both companies also highlights their ambitions in the console sector. NetEase and Tencent have grown mainly by focusing on PC and mobile gaming, not consoles banned in China for 14 years until 2014.

But the two behemoths have begun to focus their efforts on console gaming.

NetEase hired a console industry veteran earlier this year to run its Japanese game studio. And developer TiMi Studio, owned by Tencent, has opened offices in Montreal and Seattle to focus on PC and console games.

Re-acquiring and investing in other game studios could help both companies gain access to IP for games on consoles as well.

Stricter regulation in China and the quest for growth may prompt NetEase and Tencent to continue their investment and acquisition strategy.

“Finally, if the Chinese government’s regulations continue to put pressure on NetEase and Tencent in their home markets, I think they too will be happy to look at mergers and acquisitions,” Wijman said. “Their global expansion strategies are just getting started.”