After the recent news of Microsoft acquiring Zenimax Media, we’ve changed our view of acquisitions and mergers. I constantly see a general sentiment being that Sony might not be able to acquire a publisher because they can’t afford it… Well, that’s false and I’ll explain why in this post.
While I don’t think Sony needs, nor should, acquire a publisher I see the sentiment passed around a lot. Whether on Twitter, Reddit, or forums like ResetERA a lot of people want an “answer” from Sony.
Seemingly, the thought process seems to be that if one company acquires something, all the competition should do the same.
Well, it’s true that we’re currently living in a period of time in the gaming industry where companies grow by consuming other companies. We’ve seen it time and time again, just from memory alone, we have the following acquisitions.
- Microsoft acquiring Double Fine, Ninja Theory, Zenimax Media, Obisidian (And MORE)
- Sony acquiring Insomniac
- Facebook acquiring Sanzaru and Ready at Dawn
- Tencent acquiring a whole lot of studios, including the publisher Leyou Interactive.
- Google acquiring Typhoon Studios
- Rockstar acquiring Ruffian
- THQ Nordic acquiring basically every single indie developer.
- Divolver Digital acquires Croteam
These are just a few examples, the fact of the matter is that we’ve seen around 1-2 acquisitions each month this past year. And my bet is that they’ll continue, and that includes companies like Sony that I suspect has one or two acquisitions lined up in the future. More on that in another post.
While I find acquisition talk a little exhausting at times, one thing I find even more exhausting is the sentiment being passed around that “Sony can’t afford X, Y, Z developer or publisher”
According to different people, Sony is apparently a poor company.
If we’re taking a look at Sony as a company. According to Yahoo Finance, we can quickly figure out that Sony’s market worth is close to 100B (99.937B). We can similarly look at the amount of Cash on Hand that Sony has available, which according to their Financial Holdings should be around 33.05B (And increasing)
Even better: Sony almost has no debt.
This means that Sony is actually in a very good position for acquisition. And if we’re looking at a company of similar size, AMD, which is valued at 93.103B and with around 1.77B cash available on hand they’re obviously in a much worse situation than Sony. One could think that they wouldn’t be able to purchase anything with 1.77B.
Well, AMD just acquired Xilinx for a staggering 35B. Of course, they did this by creating a lot of risks, for example, they were able to acquire them in stock which is a risky move. This is also a long-term move by AMD, while Sony’s studio acquisitions would most likely need some “short-time” profit.
The fact of the matter is that Sony COULD acquire pretty much any publisher simply from Cash-on-Hand alone. They could even acquire two or three. They’d theoretically be able to purchase both Take-Two (Rockstar, 2K) and all of Ubisoft with only their cash-on-hand.
The question that this leads to isn’t “Can Sony afford a publisher”, it more-so shifts to “Can Sony outbid a company like Microsoft, Tencent, Google, Facebook and/or Amazon?” and should be the point of conversation.
The easy answer is… No. Sony can’t outbid a single one of them. The chance Sony would have is simply that they have better support from upper management than their competitors for an acquisition of this scale. What I mean by that is that Google, Facebook, and Amazon do have a lot of money, but will they spend multiple billions of dollars on a video gaming publisher? Most likely, no. Not as it currently stands.
However, Microsoft and Tencent is a more curious case. Earlier this year Sony was said to bid around 1.2B for the publisher Leyou Interactive and lost to Tencent. This means that Sony is looking at acquisitions, but not necessarily willing to go to great lengths for them if they don’t believe they’re that important to them.
This fits with the recent comments by CEO Jim Ryan in an interview with Reuters in which he said the following
Sony’s will continue to grow its studio capability organically Ryan said, adding that “where we can bolster our in-house capability with selective M&A that might be possible.”
This very much fits the perspective that Sony wants to grow, but not necessarily by acquiring developers.
As I said earlier, from what I’ve heard (And from what we’ve seen regarding the Leyou bidding) Sony is laying low, but keeping an eye out for potential acquisitions. From what I’ve gathered they’re more likely to acquire a Multiplayer focused team than they’re a single-player one with some exceptions. There are perhaps one or two acquisitions lined up for the future, and they’ll also reveal the new Sony First Party studio working on a new entry in the Uncharted franchise sometime in 2021.
However, I do think it’s worth bringing up that I don’t think a company like Square Enix, Capcom, Koei Techmo, or Bandai Namco will, nor should be acquired by Sony (Or anyone for that matter), the same goes for Western-based publishers. If they aren’t for sale, or in need of support, they shouldn’t be sold. Easy as that.