Michael Metzger: "The Games as a Service Market Is Evolving in Response to Market Saturation"

Following the release of the Drake Star Global Gaming Report 2024, Michael Metzger, Managing Partner, provides further insight into expectations for this year, and also discusses the situation at Ubisoft and Electronic Arts, as well as Crypto Gaming and the current Games as a Service market.

Global technology investment bank Drake Star has released its latest Global Gaming Report 2024 (GamesMarkt reported). M&A and financing activity in the gaming sector grew by 39 per cent year-on-year to $27.3 billion across nearly 1,000 transactions. Activity is expected to continue to grow, and the outlook is very positive. We spoke to Michael Metzger, Managing Partner at Drake Star, about gaming M&A and financing in 2025, the current situation at Ubisoft and Electronic Arts, the upcoming Nintendo Switch 2, as well as Crypto Gaming and the current Games as a Service market.

GamesMarkt: In 2024, gaming M&A and financings were already on the rise. What do you expect for 2025 and what impact can such release heavy months as February 2025, the upcoming GTA 6 and Switch 2 have on this?

Michael Metzger: "We anticipate M&A activity to accelerate further in 2025. With $1.8 billion raised by VC funds last year, we expect a significant wave of seed and early-stage investments in gaming companies. However, mid and later-stage financings for studios will likely remain challenging. While we don’t see a strong direct correlation between title launches and M&A activity, highly successful game releases—and the resulting valuation increases—can boost confidence among gaming companies, leading to a greater focus on growth through acquisitions. Take-Two Interactive is fully focused on making GTA 6 a massive success, and it is poised to be the biggest game launch of the year."

GamesMarkt: How do you see Ubisoft's position at the moment? Buyout? Acquisition? JV? Will Tencent win the race or would Savvy Games Group also be a partner for the Guillemot family, after all Savvy Games Group is also financing the expansion of Assassin's Creed Mirage if current media reports are to be believed?

Michael Metzger: "If Ubisoft were to go private, we believe the Guillemot family would need to maintain a significant ownership stake to secure regulatory approval. From what we understand, they are currently in discussions with various parties. Savvy Games has long sought a major acquisition in the PC/console space, and Ubisoft could be a strong candidate, especially at an attractive valuation."

GamesMarkt: How do you rate the situation at Electronic Arts? In the last quarterly report the net booking of EA Sports FC 25 was below expectations - as well as Dragon Age: The Veilguard.

Michael Metzger: "The transition from FIFA to EA Sports FC was always a risk, and while the game continues to perform well, it may not have reached the same engagement levels as previous FIFA titles. Coupled with the underwhelming performance of Dragon Age and the high development costs of AAA RPGs, weaker financial projections could make EA more hesitant to greenlight future single-player RPGs. That said, EA maintains a strong cash position and remains one of the largest independent publishers in gaming. Internal misses on first-party titles could increase its appetite for acquiring successful external franchises. We hope to see EA pursue inorganic growth this year, especially since its last major acquisition was in 2021."

GamesMarkt: Do you think that Games as a Service titles have peaked and that the market is saturated? Especially as the trend seems to be going back to "shorter" gaming experiences.

Michael Metzger: "The Games as a Service (GaaS) market has matured significantly, but rather than having peaked, it's evolving in response to market saturation, shifting player preferences, and increasing competition. Recent success of shorter, high-quality single-player games (e.g., Resident Evil 4 Remake, Alan Wake 2, Spider-Man 2) shows demand for compact but impactful experiences. Even in multiplayer, premium-priced, complete experiences (e.g., Helldivers 2) are proving highly successful. The next big hits will be fewer but better executed, focusing on long-term player retention rather than quick cash grabs. We may see more co-op PvE games over traditional PvP-driven models."

GamesMarkt: What do you expect? Can Nintendo build on the success of the Switch with the Switch 2? These are very big steps, especially since the technology/performance will probably not reach the level of the PS5 and Xbox Series X.

Michael Metzger: "Nintendo faces a critical moment with the launch of the Switch 2, as expectations are high following the massive success of the Nintendo Switch. While the new console won't match the raw power of the PS5 or Xbox Series X, history suggests that Nintendo doesn't need cutting-edge hardware to succeed. Nintendo's advantage is its first-party games. If the Switch 2 launches with a new 3D Mario, Metroid Prime 4, or Zelda, it might drive massive early adoption."

GamesMarkt: In M&A and financing. Do you think that crypto gaming is still an attractive investment target?

Michael Metzger: "We remain bullish on Web3 and crypto gaming heading into 2025. The new U.S. administration appears to be supportive of the crypto industry and is expected to provide clearer regulations, which could drive further investment. Investment activity in crypto gaming has remained strong—out of 711 private gaming financing rounds in 2024, 250 were in the crypto gaming sector. Additionally, tokens associated with blockchain gaming projects offer an attractive incentive for investors and venture capital firms, allowing for early distributions and liquidity opportunities."

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