There are roughly 2.7bn gamers around the world, all with a huge appetite for popular upcoming game releases like Grand Theft Auto 6. Gaming’s popularity is evident through the active M&A market, too — in Q1 of 2025, this rose to $6.6bn, marking its highest level in over a year.
“The gaming industry is at a dynamic turning point, particularly for the European market,” says Mark Gerhard, co-CEO and chief technology officer at Scottish gaming scaleup Build A Rocket Boy.
Mike Turner, partner at Latham & Watkins, a global law firm which works in the video gaming sector, agrees the industry is undergoing a significant transformation.
“Gaming has become a bit like Hollywood. People are talking about these triple A games in the same way as they do with big Hollywood films coming out. I think we’re going to see a lot of consumer and market excitement about whether the next big releases become hits,” he says.
So what factors are driving this surge, and where are the big growth opportunities?
The investment landscape
Turner says that recent market fluctuations have opened the doors for M&A activity. One notable transaction is Sweden-based Embracer Group selling mobile developer Easybrain to Miniclip for $1.2bn last November. Elsewhere, London-based mobile game developer Tripledot Studios bought marketing platform AppLovin’s mobile games studio portfolio for $800m in May.
Encouragingly, we’re now seeing private equity coming to the video games market.
However, securing early-stage venture capital funding remains challenging for video gaming startups.
“It’s a difficult space to back from a VC perspective because it essentially involves taking a bet on the success of a video game,” says Turner. “But encouragingly, we’re now seeing private equity coming to the video games market, almost for the first time ever, offering new opportunities for growth and investment.”
It’s also not impossible to find VC backing. Build A Rocket Boy raised a $110m Series D led by RedBird Capital Partners, which closed in early 2024.
“This funding is a game-changer, enabling us to bring our three flagship interconnected experiences MindsEye, Arcadia and Everywhere to life,” says Gerhard. “They embody our vision of delivering innovative, premium player-driven entertainment experiences, and it’s exciting to see this resonate within our industry which is desperate for fresh, innovative, new experiences.”
Industry challenges and opportunities
Despite the uptick in player numbers and investor activity, the video gaming industry faces significant challenges.
“Sadly, over 60% of all video games that are in development will never launch,” says Gerhard. “Our industry is also currently struggling with sequel fatigue, where players are given little choice of new fresh content and have limited choice in the premium content category to a few sequel-driven titles.”
Clear ethical guidelines and cross-industry collaboration can ensure AI is a tool for progress, not destruction.
The integration of AI’s also changing the video gaming world. Gerhard notes that AI enables developers to create more responsive and personalised worlds, and it is helping smaller studios keep up with larger global competitors.
“AI is transforming how games are made and how players engage with them,” he says. “It makes interactive experiences more believable.”
AI also brings concerns, particularly regarding copyright and job displacement. Gerhard says: “Clear ethical guidelines and cross-industry collaboration can ensure AI is a tool for progress, not destruction.”
Startups can ride the surge
Turner highlights an increasing number of very specialised video games VC funds now who are willing to invest in smaller startup studios.
The video games sector is the single most valuable slice of the home entertainment market globally — period.
“It’s a really good idea for studio founders to try to raise money from one of these houses if they can,” says Turner. “Other than the pure capital perks, the benefits of having the experience those investors can bring to the table is significant. The ability to turbo charge the game development and publication with a little more capital is always going to be beneficial.
“Many of these studios are trying to do it with their own revenues to self-fund these games, which, unless they’re a very significant success early, is always going to hold them back.”
Looking ahead, Gerhard predicts continued consolidation of successful studios by the large multinational public companies. Turner agrees, noting his expectation for M&A in the sector to remain significantly strong.
“The video games sector is the single most valuable slice of the home entertainment market globally — period.”
Read the orginal article: https://sifted.eu/articles/video-gaming-brnd/
