Game investments doubled to $2B in 2011; acquisitions grew 160 percent

No matter how you look at it, the game industry is red hot.

The game industry had a record year for investments and acquisitions in 2011, according to an annual report by game investment advisor Digi-Capital. Private placement investments grew 96 percent to $2 billion, spread across 152 transactions. Mergers and acquisitions grew in value by 160 percent to $3.4 billion across 113 transactions.

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The average funding round was $13 million, up 17 percent from a year ago. Counting the $1 billion initial public offering of Zynga and the $1.2 billion Nexon IPO, investment value nearly quadrupled. The average acquisition size was $30.4 million, up 38 percent from a year ago. The data is consistent with GamesBeat’s own data that showed a record-breaking year in 2011.

The social, mobile, massively multiplayer online, and middleware sectors led the industry, according to Tim Merel, managing director at Digi-Capital and author of the report.

Social and casual games accounted for 57 percent of the private placement value and 45 percent of the M&A value. Digi-Capital said the Zynga IPO may be the high water mark for social games, as it will become harder to keep and acquire users. Still, some companies such as Wooga and King.com are demonstrating growth in daily active users. In 2012, Digi-Capital expects it will be a big year for social gaming M&A.

Mobile and tablet games accounted for 30 percent of private placements and 27 percent of M&A in numbers of deals, but in value, it accounted for 16 percent of private placements and 4 percent of M&A. Japan’s DeNA grew its 2011 revenue to $1.4 billion and Gree grew to $1.4 billion, showing the potential of mobile games in the world market.

The MMO market accounted for 31 percent of the M&A value and 8 percent of private placements. Nexon led the charge in the space with its IPO as the market shifts toward free-to-play games. Strong Chinese and South Korean game companies are looking at Western companies for M&A and investments.

Middleware, such as tools for publishing games, accounted for 18 percent of the value of private placements and 16 percent of the M&A.

Here’s some other data in the report:
— Mobile and online games will grow from $22 billion worldwide in 2010, or 30 percent of global game revenue, to $41 billion in 2015, or 50 percent of global game revenue.

— Western and Japanese game makers are focused on value via high-quality games where users pay lots of money per title; Asian game makers are focused on high volumes of users, free-to-play business models, and small numbers of dollars per user.

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— Asia and Europe will likely take 87 percent revenue share in the online and mobile games market.