Sony's $3.6 billion purchase of game developer Bungie is the latest development in a flurry of M&A activity in the video game industry that broke records in 2021 and is set to do the same this year as game giants vie for dominance.

The acquisition is only the third-biggest gaming deal announced this year. Last month, Microsoft agreed to buy Activision Blizzard for $68.7 billion—the largest game developer acquisition on record. That deal came just over a week after Take-Two Interactive, which owns "Grand Theft Auto" developer Rockstar Games, announced it would buy mobile game giant Zynga for $12.7 billion.

Last year was already an outstanding year for gaming industry M&A, with around $25.6 billion transacted across 214 deals—that is now set to be dwarfed within the first few months of 2022 alone, at least in terms of deal value.

The uptick in activity comes at a confluence of gaming industry trends. According to Deloitte, the pandemic has accelerated engagement with gaming, and in 2022 the console market is expected to generate $81 billion, up 10% from last year. The ecosystem has also evolved from one focused on one-off sales to one that is increasingly focused on online multiplayer gameplay, microtransactions and subscriptions.

The same Deloitte report predicts that by 2025, console software sales alone will have reached close to $70 billion. Over this period, the share of sales from digital purchases—such as downloads, subscriptions, games passes and in-app payments—will grow from 65% to 84%.

As this market evolves, major players are using acquisitions to compete with one another for scale, intellectual property and exclusivity of popular game titles. The two biggest competitors being Microsoft and Sony, owners of rival gaming consoles Xbox and PlayStation, respectively.

Both Microsoft's $8.1 billion purchase of ZeniMax Media, which was completed in March last year, and its pending Activision Blizzard deal, have been regarded as a gaming content coup for Xbox. ZeniMax Media is the parent company of Bethesda, the developer of popular titles such as "Fallout," "Doom" and "The Elder Scrolls." Activision Blizzard, meanwhile, owns blockbuster game franchises such as "Call of Duty" and "World of Warcraft."

Together, these transactions add to a vast library of gaming titles available to Microsoft's Xbox Game Pass subscription service, which has already helped the company increase its game content sales by $2.3 billion from 2020.

With its recent purchase of Bungie, the developer of the popular "Halo" and "Destiny" franchises, Sony is now apparently playing catch up ahead of its rumored release of an Xbox Game Pass rival. PlayStation has already made clear its intentions to buy more, and it is unlikely to be only one.

Featured image from "Spyro Reignited Trilogy" courtesy of Activision Blizzard

Related content