| Hi everyone, it's Jason. This week, Epic Games announced plans to purchase Tonic Games Group, maker of the hit Fall Guys. It's another in a long string of recent video game acquisitions and growing evidence that the $180 billion industry is consolidating. In fact, it's become nearly impossible for independent gaming companies to survive. Just a few years ago the big-budget video game industry was complemented by a healthy number of independent companies that could make hits with fewer resources and more creative risks. Double Fine Inc., which employed fewer than 100 people, was known for an eclectic mix of artistic titles. Obsidian Entertainment Inc. had a reputation for building deep, complicated roleplaying games. But both companies faced financial struggles. They were often contracted by publishers on work-for-hire projects, leaving their fates tied to the whims of whatever executives wanted in a given quarter. Losing a contract could be devastating, leading to layoffs and budget crunches. So it was no surprise to see them both get swallowed up by Microsoft Corp.: Obsidian in 2018 and Double Fine a year later. Even big publishers aren't immune. Last fall, Microsoft purchased ZeniMax Media Inc., the parent company of Bethesda Softworks, in a $7.5 billion deal. ZeniMax, which released several commercial flops such as Prey and Fallout 76, had reportedly been looking to sell itself for years. It was the only major U.S. game publisher that wasn't publicly traded. Which brings us to Tonic Games, whose subsidiary Mediatonic saw a jolt of success last year thanks to Fall Guys, one of the pandemic's most popular online games. It was addictive, satisfying, and the perfect way to interact with strangers during extended lockdowns.
But Mediatonic struggled to maintain momentum for the game, even with a surge of hiring and planned new features. Rather than risk further player dropoff and potential financial uncertainty, the studio's top executives sold out to Epic, one of the richest game companies in the world. The move will likely lead to faster, more regular updates for Fall Guys than Mediatonic could have ever developed on its own. Even as the video game industry has boomed during the pandemic, making games has always been a risky proposition. Customers can be fickle, development costs have grown exponentially, and ideas that seemed unique early in development may have become ubiquitous once a game is complete, three or four years later.
The landscape can be difficult to navigate even for the most successful independent developers. Companies that were otherwise stable, like Gearbox Entertainment Co. and Insomniac Games, have also been sold in the past two years. Consolidation seems like a win-win. Sellers can guarantee themselves stability, while buyers get more content to serve a fanbase that's hungry for new games. But there are also costs. An industry dominated by a handful of big companies could eventually lead to creative stagnation and other symptoms of monopolization, like limited choices and higher prices.
It's great to see developers finding financial success, but it's hard not to be worried about the long-term ramifications for video game fans and makers. By the time we see the results, it may be too late. — Jason Schreier | 
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