The game market continues to grow over the next five years, and midrange game developers are being squeezed?

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January 21 News, according to foreign media reports, the game industry, 2014 is worth a year in the Annals of history. In the year, the amount of investment withdrawal through mergers and acquisitions reached a record $24 billion trillion.

Of these rewards for the executive team and early investors, there are half on mobile games. From an amount perspective, this is equivalent to 10 "Minecraft" deals (Microsoft bought the game's developer Mojang for a 2.5 billion dollar price).

Of the total withdrawal, more than 15 billion dollars came from mergers and acquisitions, 5 of which accounted for $8.1 billion trillion in massive deals. Another 9 billion dollars came from initial public offerings, with Asian companies taking a major share. You may think this is a bubble, but it may not be. If you focus on the flow of money, you will find that there is a deeper meaning.

At the beginning of 2014, we predicted that the game industry would reach $100 billion trillion by 2017 (with more hardware), and other analysts made similar judgments in the year. But this judgment is not accurate.

After 2014 years of tracking industry dynamics – from Asia's vibrant mobile gaming market to the revival of the Western host gaming market – we see a change in the nature of growth. The industry has been fixed. So while we are still predicting that the gaming industry can achieve 100 billion of billions of dollars in revenue, we now believe it will take another year to reach that level-the end of 2018. Mobile gaming is the only business that achieves double-digit growth, although virtual reality is expected to be a breakthrough new platform. Asia is the world's largest gaming market, driven by China, Japan and South Korea, where revenues are expected to reach $45 billion trillion in 2018. We expect the game software/hardware business to grow at an annual compound rate of 8.8% between 2018 and 2014. Although it looks very healthy, this is an increase in the number of units, which means that a lot of things will change.

Global game revenue Forecast (1 billion USD)

Big squeeze of living space

In a market where the number of units is growing, not all pigs can fly in the sky. The difference between good and great will be better reflected in the competition.

When the market develops to this stage, large companies have a great deal of intellectual property, a large number of users and sufficient cash flow, can be in a stable growth of the market at the cost of marketing and infrastructure construction, and thus compete. That would depress profitability across the industry. Independent developers have neither heavy intellectual property rights nor scale advantages, but they also have no cost pressures. Although there is a big difference, both companies can create hot work. In the middle of the game companies do not have the intellectual property rights, no scale advantage, marketing and infrastructure costs are higher. They can also develop hot-selling products, but the cost base increases their risk. They are the real victims of the big squeeze.

Another challenge for gaming companies in midstream is the nature of mergers and acquisitions in stable growth markets. Acquirers manage their own cost base and are not enthusiastic about team acquisitions. The last thing they want to do is to buy the costs of others. Midrange gaming companies, which are not dominant in this regard, are also hard to raise. In 2014, game investment grew to only 1.5 billion dollars, 25% lower than in 2011.

It's hard to go beyond the top 100 companies in the mobile gaming market, so the market is squeezing the survival space of midrange gaming companies.

Growth compressed Midrange Game developers

In 2014, the shares of listed gaming companies fell by 14% in total. But big corporate acquirers will manage their own cost base, looking for independent developers with the potential to develop their own marketing and infrastructure. They can also buy dark horses with high quality games (rated higher) and products that load higher up and down on mobile platforms.

In the 2014, the top ten acquirers came from the US and China, which are two markets that we believe are still in demand. The work of independent developers is as usual: developing great games for honor and prestige (and perhaps the desire to be acquired). The squeezed midrange gaming companies now have a choice: to become a great company and to be bought, or to scale down and become an independent developer to survive. Just being good is not enough.

Consolidation remains the industry's theme unless the market accelerates growth as the next innovation arrives. For all gaming companies, it's time to pursue greatness.

Author Tim Mallo (Tim merel) is Digi-capital