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M&A Report

M&A in Media and Entertainment: To Interactivity and Beyond

M&A in Media and Entertainment: To Interactivity and Beyond

With interactivity on the rise, everybody’s betting on video games.

  • min read


M&A in Media and Entertainment: To Interactivity and Beyond
Executive Summary
  • As technologies advance and we move into a web3 world, interactive media will only gain in sophistication and reach.
  • Two acquisition strategies help bolster capabilities for a more interactive future: deals to extend capabilities; and deals to build next-generation megaplatforms.
  • Consider where your consumers will be in the future, and make sure you maximize your M&A or partnership options to reach them there.

This article is part of Bain's 2023 M&A Report.

At the start of 2022, we talked about the rise of the megaplatform. We increasingly saw media companies turn toward M&A to become scale, go-to destinations across consumer touchpoints, and that trend remained strong throughout the year. Amazon, aiming to build strength on the entertainment side of its megaplatform, closed a deal to acquire MGM, which gave Amazon a greater intellectual property (IP) library and increased its talent base in content production. To extend its content reach, WarnerMedia merged with Discovery, broadening both its library and direct-to-consumer (D2C) base. These plays reflect the trends we’ve seen over the past few years—during which time, the more you could function as a one-stop entertainment shop for consumers, the more of a competitive advantage you could obtain.

Now, the most exciting growth in 2023 will be in deals that allow companies to expand deeper into interactivity. Most notably, everyone’s betting on video games.

It’s no secret that interactivity is redefining media and entertainment—with the rising popularity of video games and the advent of social media, consumers have grown accustomed to being part of the content. Consumers shape content as amateur creators, they forge their own paths through virtual worlds, and they increasingly view online worlds as key life touchpoints. In fact, according to Bain research, close to half of people aged between 13 and 34 years old would rather socialize with their peers in a video game setting than in the real world. As technologies advance and we move into a web3 world, interactive media will only gain in sophistication and reach. Megaplatforms and others in the media and entertainment ecosystem are realizing that they need to play here to win with consumers over the long term, which means acquiring companies that have made forays into the space.

As companies invest in gaming, we see two primary strategies for building future capabilities in a more interactive world:

  • Acquire to extend gaming capabilities.
  • Acquire to build the next-generation megaplatform.

Nearly half of people aged between 13 and 34 years old would rather socialize with their peers in a video game setting than in the real world.

Acquire to extend gaming capabilities. Microsoft announced the biggest deal of the year, with its $69 billion planned acquisition of Activision Blizzard. Although this builds on smaller gaming companies acquired in the past (as well as Microsoft’s hardware capabilities), it represents a clear stake in the ground for owning both the game publishing piece of the value chain and the massive D2C reach that Activision’s games support.

The next biggest deal of the year was Take-Two acquiring the mobile-focused Zynga. Given the strong growth in mobile-casual gaming, this makes sense for the publisher to diversify its reach. While it may feel like scale M&A, the deal also has a scope dimension. Mobile game development is a very different muscle than Take-Two historically has built, and extending capabilities with Zynga gives it a right to play across more consumer touchpoints in the growing gaming market.

Much less flashy but equally indicative of how gaming feels critical to the future was the New York Times’ acquisition of simple mobile word game Wordle for an undisclosed sum in the low seven figures. Although it was a small acquisition by the standards of global M&A, it was a significant investment for the New York Times, which is banking on a more interactive future. The reach of Wordle’s fan base and interactive format helps bolster the New York Times’ prospects as a large consumer platform in the future.

Acquire to build the next-generation megaplatform. Growing a gaming presence is one angle, but there are many companies that are looking at gaming as the vehicle for the broader entertainment space and, therefore, the foundation for their megaplatforms. Meta has made the most noise about extending its activity across new interactive spaces, with massive investment in its vision of owning the metaverse as well as acquiring gaming targets that play in the virtual reality (VR) space (Armature Studio, Camouflaj). Forced to acknowledge declining legacy businesses, Meta is relying on investments in new modes of interactivity—namely, metaverse and VR-enabled gaming—to pull them out the other side. Companies such as Meta are why we think of these trends as not just gaming as we know it today but rather the entirety of interactive worlds.

We’re seeing heavy investment in a virtual future that crosses social networks, gaming, and other media sectors.

Indeed, we’re seeing heavy investment in a virtual future that crosses social networks, gaming, and other media sectors. Similarly broad in scope, Epic Games has been explicit about investing in its own metaverse with both organic development and M&A. In true megaplatform style, it is working to bring other media sectors into that metaverse, as showcased by its acquisition of Bandcamp in March. Given Epic’s early forays into bringing music into gaming worlds in innovative ways, such as hosting concerts in Fortnite, we can expect to see more plays like this going forward.

Just as not everyone can be a megaplatform, a whirlwind of investment in interactivity has different implications for different media and entertainment companies. Those already in gaming may want to look at consolidating capabilities to compete with larger players, particularly in merging quality IP development capabilities with advancing tech capabilities that will enable new consumer interaction modes. They’ll need to consider whether there’s an avenue through M&A or partnerships to grow more platform scale.

For those not in a more interactive space today, consider how your sector might benefit from either M&A or partnerships in this area. For IP hubs, translating content to gaming in some form should be a key part of any franchise strategy, but licensing and partnerships might be the right model if an acquisition doesn’t fit with corporate capabilities or budget. For other distribution platforms, thinking about what technologies might enable you to grow into a more interactive space, such as hosting traditional media events within a gaming world, could spark discussions regarding where acquisitions or partnerships might be more viable.

One thing that can’t be ignored is that interactivity is rising—be it social, in-game as we know it today, or in a metaverse of the future. Carefully consider the right way to play that boosts your core, such as through a specific type of content (think New York Times-Wordle) or an on-brand partnership that leverages tech capabilities you don’t have (think music players partnering with Fortnite for concerts). As always, companies need to be strategic about where they play and the partners they choose, depending on fundamental considerations such as appetite and risk/reward profile.

You don’t need to be a tech innovator to take advantage of the future. But you do need to consider where your consumers will be, and make sure that you maximize your options in M&A or partnerships to reach them there. The big message for 2023: Don’t get left behind in a static world.

Read our 2023 M&A Report


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