The State of Play: 2024 (Ep. 9)

Valuation

The gaming industry's valuation stability is a fascinating aspect, especially when compared to the volatility seen in other sectors. Mitch Lasky highlights how gaming companies have historically maintained stable valuation multiples, typically clustering around four to seven times trailing twelve months revenue 1. This stability is evident even in private companies, as seen with Scopely's $5 billion deal, which fell within the expected range 2. However, Blake Robbins points out that the limited number of enduring public gaming companies often leads to acquisitions as the primary exit strategy for studios 3.

The other piece here is that there aren't that many great public gaming companies. I think you mentioned the 25 or so, maybe 15 of those are really enduring businesses.

--- Blake Robbins

This environment creates a unique landscape where stability coexists with challenges in public market access.

   

Growth

The post-pandemic era has brought significant adjustments to the gaming industry's growth trajectory. Mitch Lasky notes that the pandemic initially spurred a massive growth spike due to increased gaming during lockdowns, but now the industry is normalizing back to pre-pandemic growth rates 4. This normalization process is challenging, as companies and investors reassess their positions in a market that experienced unprecedented short-term growth 5. Blake Robbins emphasizes the need to understand these shifts to navigate the current state of the gaming business effectively 6.

The pandemic was obviously a double edged sword on the one hand, yet created a bit of a log jam around production that's resulted in this kind of oversupply in the short term.

--- Mitch Lasky

As the industry recalibrates, the focus is on finding a sustainable growth path amidst these changes.