Support NeoGAF

[Draugoth]

Excitement over the upcoming release of Grand Theft Auto VI is letting publisher Take-Two Interactive Software Inc. deflect investor attention from a big problem: its $12 billion foray into the shrinking mobile-games business.

With just a small presence in the fastest-growing segment of video games — titles played on smartphones — Take-Two splurged last year on Zynga, known originally for Facebook games like FarmVille and Words With Friends. It was the biggest deal ever in video games and boosted revenue from mobile titles to half of Take-Two’s $5.3 billion in annual sales.

Unfortunately for Take-Two and longtime Chief Executive Officer Strauss Zelnick, the deal closed just as the mobile-games business was heading into a downturn. With the end of Covid-19 restrictions, consumers who had embraced casual games during the pandemic turned to other diversions. At the same time, Apple Inc. built new privacy features into its software that made it harder for Zynga to attract new players.

“They closed the deal, and the mobile industry spent the next 18 months correcting,” said Doug Creutz, an analyst at Cowen Group who nonetheless recommends buying Take-Two shares because of its other titles, including prospects for GTA VI.

Since the spring of 2022, sales from Zynga’s five highest-grossing games have fallen 23%, according to researcher SensorTower. It’s part of a broad decline in the $90.4 billion mobile-games market that began in 2021 and is expected to let up starting next year, according to researcher NewZoo. Based on Take-Two’s own estimates, Zynga will finish this fiscal year with sales down about 5% from 2021.

Mobile Gaming Hits the Skids​

Mobile gaming sales will recover slowly from a post-Covid hangover

Source: NewZoo

Zynga’s pipeline offers little encouragement. After putting out an average of seven games a year over the last decade, the company released just three titles in 2023. And just two new releases are on the calendar for the next 12 months, according to Take-Two's latest earnings report. That includes a Star Wars smartphone game that’s been delayed at least three times.

“Our vision for mobile is to be the largest mobile gaming company in the world, based on market share,” Alan Lewis, a company spokesman, said in an email. Take-Two is investing in new intellectual property and has a growing mobile ad business that, he said, “enables us to monetize nearly all of our players, which is a distinguishing characteristic vs. other mobile companies.”

Take-Two was among the last of the major publishers to scoop up a mobile-games company. The Zynga purchase, financed with cash and stock, provided a stable of proven titles. The goal was to prepare the company for the coming hegemony of mobile gaming.

But after soaring to new highs during the pandemic, mobile-gaming revenue fell by 7% industrywide in 2022, according to NewZoo, and is expected to finish 2023 with another 2% drop. Take-Two has lowered projections for Zynga this year, saying in November the division would account for 49% of total bookings — a measure of sales — down from a projected 53% six months earlier.

In May, the company reported $465 million in impairment charges related to Zynga, reflecting the declining outlook for a few titles.

More at Bloomberg

 

[graywolf323]

I’m kinda curious how the health of King compares to Zynga since they’re likely the other really major player in the mobile market that also just had a ridiculously massive acquisition conducted (supposedly primarily for them)

 

[Magic Carpet]

Should have put that money into Neflix games.

 

[adamsapple]

Mobile Gaming Hits the Skids​

Mobile gaming sales will recover slowly from a post-Covid hangover

Well, yes. This is a long-term investment.

 

[mckmas8808]

Samething will happen to Live Service games. Don't believe the hype is real.

 

[R3TRODYCE]

Sometimes I forget how large the mobile market is.

 

[GHG]

No sympathy for companies or individuals who chase trends and then get stuck buying the peak.

 

[Humdinger]

I didn't realize the mobile gaming market was down. All I ever hear is how much money it makes.

Zynga was the place Don Mattrick shifted to, after he left Xbox. He was then let go a few years later.

 

[Anime-Vix]

Well, yes. This is a long-term investment.

Exactly, I don't see the point of this article. Mobile gaming isn't going anywhere and it will continue to grow in the foreseeable future.

 

[mckmas8808]

I didn't realize the mobile gaming market was down. All I ever hear is how much money it makes.

Zynga was the place Don Mattrick shifted to, after he left Xbox. He was then let go a few years later.

People in the video game media want you to think mobile gaming is the next BIG thing! The even said in 2012 that it was going to be the thing that chased console gaming out of here.

 

[ReBurn]

Zynga's problem is that they ended Mafia Wars

 

[James Sawyer Ford]

No sympathy for companies or individuals who chase trends and then get stuck buying the peak.

Yep

Greedy ass morons performance chasing thinking fickle app games that are cheap to make just print money into infinity

 

[ChuckeRearmed]

I wonder if we will a similar situation as with GaaS games - where there will be strong established games and new and weaker entrants won't be able to attract new players anymore. Even before acquisition I believe Zynga was in decline.

 

[SirKicksalot]

I’m kinda curious how the health of King compares to Zynga since they’re likely the other really major player in the mobile market that also just had a ridiculously massive acquisition conducted (supposedly primarily for them)

Their first major game post-acquisition was Legend of Solgard, a decent Clash of Heroes clone that bombed. They eventually transferred ownership of the game to the studio that made it.
King's old games seem to be fine but nothing made after 2016 was a success.

 

[StreetsofBeige]

T2 bought Zynga in Jan 2022.

That was when interest rates were the lowest ever (possibly in history) and sales from tech related companies had ramped up during 2020 and 2021. 2022 is when most places probably opened up in full and life got back to normal. Embracer during covid years bought up tons of companies too.

Hindsight is 20/20 but that was the worst time to buy most tech companies as they all were overinflated even though stock prices came down by early 2022. Any tech company that was heavily hinged to stay-at-home sales boosts were ripe for a major correction and sales drops going forward. And Zynga was one of them.

If you want to see major covid corrections, check out Roku, Docusign and Zoom Video stocks. Insane.

 

[March Climber]

I didn't realize the mobile gaming market was down. All I ever hear is how much money it makes.

Mobile games are going through the same struggle that Gaas and BR games are still going through: Everyone wants to be the sole 'forever game' and now there's a market who have bought into this and have no reason to buy or play other games.

Also to add onto this, Zynga was known for making really fun bite-sized timewaster games and they're one of the companies who still kind of use the 'energy' system where you are only allowed to do so much before you have to pay for more 'energy' to play the game more. How can this system compete against something like Roblox, Fortnite, Genshin, Honkai, etc. where they allow you to play a full, constantly evolving experience with infinitely with buyable skins and exclusive access to paid content? How can little timewaster games compete against actual full game experiences on mobile(that have also gotten better in bite-sized pacing with their content)?

Zynga needs their own Genshin Impact, not a 'moPets' or 'Golf Rivals' or 'Freecell 3D'. Will mobile games recover and grow? Of course, that's the future we are all slowly headed to. However, will Zynga be in that future?

 

[ByWatterson]

Bud Light.
Wii.
Kinect.
Woke MCU.
Mobile gaming.

Stop chasing people who don't actually care about your product.

 

[ChuckeRearmed]

If you want to see major covid corrections, check out Roku, Docusign and Zoom Video stocks. Insane.

Damn, I checked the market caps - crazy. Roku - 60b -> 13b; Docusign - 60b -> 12b; Zoom - 158b -> 21b.

The hilarious part is that ABK dropped to 45b or something around the acquisition time (as it reached almost 80b by itself at one point) which was basically the correction for ABK.