Asia dominates gaming IPOs, set to earn $45B annual revenue by 2018: report

2014 saw a record US$24 billion worth of video game company exits worldwide in 2014, US$15 billion in acquisitions and US$9 billion in initial public offerings.

"Asia accounted for over half the games IPOs in 2014, and has dominated games IPOs for the last 5 years," says Tim Merel, managing capital of Digi-Capital, the research and consulting firm that published the report. That includes Candy Crush Saga maker King Digital Entertainment, which raised US$500 million in March 2014.

Asia is also the number one games market in terms of revenue. Digi-Capital predicts it will reach US$45 billion in revenue by 2018, out of a total US$100 billion worldwide. China, Japan, and South Korea will drive that growth.

Newzoo reports Asia’s gaming revenues currently stand at around US$36.8 billion, 45 percent of the global US$81.5 billion figure.

Squeeze on the mid-tier

Digi-Capital says major gaming corporations and small indie studios will thrive in the coming years, but mid-tier companies will feel the squeeze.

Corporates already have hit games with lots of users generating lots of cash. They can use that cash to invest in marketing and grow their infrastructure, which in turns leads to more players and higher cashflow. Indie studios don’t have those scale advantages, but neither do they have big staffs to pay or high infrastructure costs.

Mid-tier companies, however, don’t have any major hit games yet, but still have to shell out for their larger staffs, marketing, and infrastructure. On top of that, the large corporates typically don’t want to acquire mid-tier ones because they don’t have want to incur all those costs. Small indie studios are in a much better position to get acquired. China and the US are the top acquirers.

For these reasons, the report says mid-tier gaming companies struggle to raise investment. Digi-Capital recommends they either up the ante and get big or slim down to survive.

See: Gumi files for IPO and Japan prepares to welcome another gaming unicorn