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During the third quarter of 2023, the gaming industry experienced a 9% decline in venture funding, dropping to $454 million compared to the second quarter’s $498 million. Gaming Industry Report – Q3 2023, conducted by Konvoy Ventures, reveals a trend that began with the peak of venture capital (VC) funding in gaming during Q4 2021, a staggering $3.32 billion. Since then, there has been a consistent decline in each consecutive quarter. The funding levels have failed to reach the billion-dollar mark since Q4 2022, suggesting a return to pre-pandemic norms.
The number of VC deals in the gaming industry also saw a 5% decrease in Q3, totaling 87 deals, down from 92 in Q2. Notably, the majority of these investments focused on early-stage ventures, with seven in the growth stage and four deals unattributed. What’s intriguing is that no late-stage deals were completed during Q3, marking the fourth consecutive quarter with a lack of late-stage investment activity.
Meanwhile, mergers and acquisitions in the gaming sector have normalized to pre-pandemic levels, with 26 deals taking place in Q3 and a total of 95 year-to-date. Although it’s unlikely to surpass the 141 deals seen in 2019, the gaming sector may still reach or exceed 100 deals by year-end if the current level of activity persists.
Despite the decline in Q3 funding, the gaming industry remains on an upward trajectory. Konvoy Ventures predicts the sector will generate $188 billion in revenue for the year, with impressive growth forecasted, reaching $288 billion by 2028, boasting a compound annual growth rate (CAGR) of 8.94%.
Leading gaming companies are well-positioned with substantial cash reserves, with Activision leading the pack with $13.2 billion in assets, followed by Nintendo ($8.9 billion) and Sea Group ($3.5 billion). Notably, these top game makers have thriving mobile gaming divisions.
In the realm of tech giants, Amazon leads with $51.5 billion invested in the gaming sector, closely pursued by Microsoft at $49.7 billion, and Google ranks third with $34.7 billion. The importance of mobile gaming is underscored by these figures, as all of these tech companies have robust mobile presences, either through game development, app store facilitation, or deliberate forays into mobile gaming.
Geographically, venture funding in Q3 primarily centered on Asia, amassing $193 million through 39 deals. North America followed closely with $172 million across 28 deals, and Europe secured $59 million through 18 deals. Australia reported one VC deal valued at $30 million, while Africa registered one deal with no disclosed value. Surprisingly, South America experienced a dry spell with no reported deals in Q3, following only one deal worth $1 million in Q2.
The allure of mobile gaming is undeniable, with a recent report shedding light on its ever-increasing popularity. An impressive 78% of gamers now favor the convenience of pocket-sized gameplay, illustrating the profound shift toward this platform. While it might be tempting to attribute this surge solely to popularity, the resilience of mobile gaming goes far beyond that. Even in the face of a temporary dip in consumer spending on gaming, mobile gaming stands as the most promising frontier for the gaming industry. Dominating the industry with the predictions of 56% of the money people spend on gaming worldwide going to mobile games in 2023.
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