Zynga headquarters in San Francisco, California.
Photographer: David Paul Morris/Bloomberg The rationale behind Take-Two Interactive Inc. ’s $11 billion purchase of Zynga Inc. can be summed up in two words: GTA Mobile.
Grand Theft Auto V, developed and published by Take-Two subsidiary Rockstar Games, is one of the most successful video games of all time, selling more than 155 million copies since its release in 2013. But it could be even bigger. Unlike competitors such as Roblox and Fortnite, GTA V is only available on computers and consoles, limiting its potential user base at a time when smartphones are increasingly expanding the audience for video games
For Take-Two, the deal is a massive — and some say desperate — gamble late in the game. All of Take-Two’s major rivals made their big mobile acquisitions years ago at what now look like bargain prices. Zynga, which got its start making an online poker game, was once a leading social game publisher but has since moved to mobile, with mixed results. Somehow, it’s cashing out in the video game industry’s biggest deal ever.
Take-Two shareholders responded Monday by selling the stock, causing the biggest intraday drop in 12 years. The 64% premium offered over Zynga’s share price last Friday seemed to some investors a high price to pay for a late-to-the-party deal.
For some analysts, the deal still makes sense. The global mobile gaming industry is more lucrative than it’s ever been, generating $93 billion in revenue 2021, accounting for more than half of the total market, according to estimates from industry researcher Newzoo. As the pandemic kept people homebound, more phone users downloaded games, making mobile the “biggest and fastest growing content segment” in gaming, according to Mat Piscatella , an analyst with the NPD Group.
But Take-Two has few internal studios dedicated to mobile development, which is why Chief Executive Officer Strauss Zelnick is gambling that San Francisco-based Zynga will fill the gap. In a conference call with investors Monday morning, Zelnick said he thinks Take-Two has “the best collection of console and PC intellectual property” but that the company has failed to take advantage […]
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