Technology

Why Take-Two Will Pay Nearly $13 Billion for Zynga

Take-Two Interactive just announced its intention to buy Farm village developer Zynga for $12.7 billion in what could be the largest acquisition in video game history. It’s an absolutely huge deal; to put it in perspective, the acquisition would be $5 billion Lake than the $7.5 billion purchase of its parent company by Microsoft Skyrim creator Bethesda Softworks. You can throw in the money Disney paid for Lucasfilm and still have cash left over.

So what does Take-Two get for its money? Yes, big Zynga games like Farm village, Words with friends, and High heels! will join Take-Two’s own roster of franchises, including: Grand Theft Auto, NBA 2K, and Civilization. Perhaps more importantly, though, Take-Two can now leverage Zynga’s expertise in building hugely popular free-to-play mobile titles so it can craft new hit games based on its own properties. In fact, Zynga will be the new brand for Take Two’s mobile efforts, and current Zynga CEO Frank Gibeau will lead that organization, signaling the possible direction of Take Two’s mobile future.

Developers across the industry have brought major franchises to mobile and made a lot of money doing it. PUBG mobile was the top-grossing mobile game in the world in November 2021, earning “nearly” $254 million, according to Sensor Tower. League of Legends: Wild Rift, the mobile-optimized version of the popular PC MOBA, was in the top ten for App Store revenue that same month. pokemon go brought in more than $5 billion in revenue as of its five-year anniversary in July, Sensor Tower reported. The studio owned by Tencent Call of Duty: Mobile reportedly made $10 billion in 2020.

And some of the biggest publishers have been buying their way into space for years, with Activision Blizzard purchases Candy Crush maker King for $5.9 billion in 2015 and purchase by EA Kim Kardashian: Hollywood developer Glu and Golf Clash creator Playdemic in 2021. Mobile games are big business and it’s not hard to see Take-Two releasing free mobile versions of its biggest franchises with the help of Zynga.

Take-Two was quite explicitly planning to go down this road on Monday. “We see tremendous untapped potential to bring Take-Two’s renowned console and PC features to mobile, a high-priority initiative that will be fueled by the addition of Zynga’s industry-leading development, publishing and live operations teams.” Take-Two CEO Strauss Zelnick said in a talk with investors Monday. Take-Two also noted that the acquisition provided a “clear path to bring Take-Two’s console/PC games to mobile” in an investor presentation (PDF). (The deal is expected to close in Take-Two’s first fiscal quarter of 2023, which ends June 30, 2022.)

The Zynga acquisition doesn’t mean Take-Two will bring its franchises to mobile for the first time. Right now you can download and play Grand Theft Auto III, Vice City, and San Andreas on your phone for example. But those are paid titles on the iOS App Store and are probably not nearly as lucrative as some of the huge free-to-play hits currently on the market. (Take-Two already has some experience in that space, with its microtransaction-laden version of) NBA 2K for mobile.)

And talked about GTA, it’s not hard to imagine Take-Two’s huge success GTA Online on mobile platforms with Zynga’s expertise. Despite being released in 2013 – and requires you to own it Grand Theft Auto V to play it (well, for now) – GTA Online has remained hugely popular. In February 2021, Take-Two said the game had “more players every month and for the entire calendar year 2020 than in any other year since launch,” it said. GameSpot. It also offers in-game currency for real money which has proved lucrative; Take-Two named the game one of its biggest contributors to revenue, as recent as its November release (PDF).

Besides the very obvious business opportunity out there – it’s hard not to see some kind of free to play GTA be an absolute huge hit – Zynga also brings years of expertise in supporting games. Zynga still offers multiple free-to-play versions of Words with friends, with both a “classic” version and a sequel, Words with friends 2, which seems like a better way to generate long-term revenue from a franchise than one-offs like 2K Games’ expensive and short-lived iOS port BioShock. Imagine Take-Two and Zynga replicating the long-term model for: GTA, Red Dead Redemption, border areas, and the rest of its titles, and you can begin to see why Take-Two decided to pay as much as it did for the Farm villagemaker.

The deal is not only about turning Take-Two games into mobile hits. Take-Two highlighted how its “console/PC expertise can be applied to Zynga’s cross-play ambitions;” Zynga is going to stick its toe in console gaming with Star Wars: Hunters, coming to Nintendo Switch, iOS, and Android sometime this year. Take-Two plans to use Zynga’s Chartboost ad platform to “recruit new users more efficiently and optimize mobile ad inventory.” And yes, there could be something going on with NFTs in the future — Gibeau said during Monday’s investor call that “the idea that players will play to earn or play to own is a very compelling idea that we think will have legs like the industry is evolving,” said decode.

But it seems likely that the biggest shift after the acquisition is for Take-Two to expand its core franchises into the lucrative world of free mobile games. While we don’t know exactly when the first games of the Take-Two/Zynga tie-up could be released, the acquisition could mean the following GTA might not be as far off as fans have been concerned — it might be on your phone instead.