The gaming industry’s top three companies are facing pressure from investors to sell their games at less than their peak levels, according to a report from The Information.
The report, which includes data from the gaming industry, the video game industry, and game developers, says that the top three gaming companies have a total market value of $1.8 trillion and are projected to hit $2.2 trillion in 2021.
This year, the top five gaming companies generated a combined $9.7 billion in revenue, according the report.
The information company estimates that the three companies — Activision Blizzard, Electronic Arts, and Warner Bros. Interactive Entertainment — have a combined market value that would make them the most valuable companies in the history of the industry.
However, the information company says these are only the projected market values for 2021.
“The big question is, can these three companies reach that peak of value, which is $1 trillion,” says Michael Pachter, director of the Center for Game Innovation and Research at the University of Utah.
Pachter says the companies’ peak value would be a “significant loss” for the industry, particularly as these companies have the potential to generate more revenue over the next decade.
“This could be one of the biggest companies to ever fail, and it could be a very bad year for the gaming economy,” he said.
Pichter says Activision Blizzard and EA have a good chance of failing.
“They have a lot of good people there,” he says.
“It would be an absolute disaster if these three entities fail.”
The information report also says that Warner Bros., which owns the top video game franchises, would suffer if the top companies fail.
“With $6 trillion in revenue and $2 trillion market capitalization, Warner Bros.’s shares are highly attractive,” Pachters says.
“In order for Warner Bros to become a viable company again, it would need to be able to sustain that growth,” he adds.
Pikko Koski, senior vice president and head of the game development and distribution business at EA, has said the company is doing everything it can to compete in the market.
“Our team is focused on delivering innovative new products and experiences that will be transformative for gamers,” Koski wrote in a blog post on Friday.
“We’re confident that our game development teams and our customers are up to the task, and we will continue to build on the momentum we’ve built in the last year.”
The Information also reported that Activision Blizzard’s shares fell 6% in the third quarter, down from a 13% gain in the same quarter a year ago.
The company is projecting that it will lose $150 million in the second quarter.
Pachster says that Activision will be able gain even more revenue by the end of 2021.