Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 447

The future of media: It's game on, now!

During a span of just 21 days in January 2022, the rapid pace of change in the media and entertainment industry inspired three blockbuster deals.

Microsoft announced its intention to buy video game publisher Activision Blizzard for US$75 billion, a transaction that aims to bring the iconic Call of Duty and World of Warcraft franchises under the tech giant’s umbrella. Take-Two Interactive unveiled its plan to shell out US$12.7 billion for mobile game maker Zynga, best known for the FarmVille franchise. And Sony agreed to purchase Bungie, creator of the popular Halo and Destiny games, for US$3.6 billion.

If all three deals close, that’s US$85 billion of M&A activity centred on video games, the fastest growing segment of the media sector. The Activision deal is Microsoft’s largest acquisition ever and could vault it to the top of the US$200 billion gaming industry, just behind China’s Tencent.

Gaming’s global appeal fuels industry leaders in Asia and the US

Sources: Capital Group, Newzoo. Quarterly revenue figures are estimates by research firm Newzoo, as at 30 September 2021.

Driven in part by a pandemic-era gaming boom, the fast-changing media landscape is fundamentally transforming the way people interact and entertain themselves in a world where traditional TV viewing and movie attendance are in serious decline. That dynamic makes interactive games even more valuable to the likes of Microsoft, Sony and others. Portfolio Manager Martin Romo says:

“I think it’s a testament to how powerful and alluring video games have become. The global gaming industry provides compelling entertainment at a reasonable cost and it’s already surpassed the movie industry in terms of annual gross revenue. Fundamentally, I think that growth is likely to continue and even accelerate in the years ahead.”

Streaming and social media competition heat up

The disruption extends to other areas of the media world, as well. Jody Jonsson, a Capital Group Portfolio Manager, says:  

“Another big theme playing out here is that you have a lot of companies trying to get into each other’s business. There was a time when they had these sandboxes all to themselves, but that’s changing. Everyone is looking at everyone else’s sandbox and trying to jump in.”

For example, Netflix - the clear leader in streaming video - is encountering fierce competition from Amazon and Apple, as well as old guard media companies such as Disney. In less than three years, Disney’s streaming service, Disney+, has grown to 130 million subscribers.

In the social media space, TikTok is challenging Facebook parent Meta Platforms, attracting hordes of young viewers thanks to the power of its short-form videos. Facebook has responded by launching its own short-form video offering, dubbed 'Reels', which is growing in popularity, just not as fast as TikTok, which was the most downloaded app of 2021.

Other battles in the media business were lost years ago. For instance, a precipitous decline in traditional TV viewership - especially among young people - raises the possibility that cable TV packages, once a must-have in the US, may no longer exist in a few years. If live sports and news programmes ever move en masse to streaming services, that could spell the end of cable TV in its current form.

Young people are increasingly shunning pay TV in the US

Sources: Capital Group, Nielsen. Traditional TV includes live TV and recordings of live TV (for example, using a DVR).

There’s no business like show business

This type of momentous change and disruption may appear surprising to some, but it’s par for the course in the media and entertainment biz, explains Capital Group equity analyst Brad Barrett, who has covered the industry for two decades:

“Media is always being roiled by technological change. It felt like a huge amount of change when the internet started disrupting traditional media outlets in the early 2000s. It felt huge when YouTube burst onto the scene. And then came social networking, smartphones and video streaming. They all caused a great deal of disruption and continue to do so.”

A new trend is the globalisation of content production and consumption. Case in point: Three of Netflix’s most popular series - Squid Game, Lupin and Money Heist - are filmed in South Korea, France and Spain, respectively. And they come with English subtitles, which had previously been a deterrent for many native-English speaking viewers. Not so anymore. Consumers are watching content from all over the world and English speakers embrace these non-English shows with enthusiasm. It’s a breakthrough for global creativity.

Metaverse now?

Looking ahead, what will be the next source of media disruption?

Based on the rising number of sensationalist headlines, the metaverse is certainly one candidate. Depending on who you ask, the much touted metaverse is either the future of the internet or a virtual reality pipe dream.

As technologists have described it, the metaverse is an incredibly immersive and expansive digital world in which people can interact, transact, play games, attend concerts, watch movies, meet co-workers in a virtual office and engage in myriad other activities through user-created avatars.

The idea is so powerful it prompted Facebook to change its name to Meta Platforms, promising to transform the social media giant into a 'metaverse company'. It will have plenty of competition, however. Microsoft declared the Activision deal is, in part, driven by a desire to develop compelling content for the metaverse, a world where virtual reality headsets may become as common as smartphones.

There are also many independent websites with a metaverse focus, including Sandbox, founded in 2012, and Decentraland, launched three years later. Users of these sites are already buying virtual land, virtual houses and virtual artwork, often with cryptocurrencies such as Bitcoin, Ethereum, Cardano and Solana.

The term metaverse was originally coined by Neal Stephenson in his 1992 novel Snow Crash. The concept was further popularised by Ernest Cline in his 2011 sci-fi novel Ready Player One, which was subsequently turned into a movie. One oft-cited answer when people ask, “What is the metaverse?” is to read Ready Player One or at least watch the movie.

Clearly, the concept has been around a while and it’s not all hype, says Peter Eliot, a Portfolio Manager:

“When I ask friends what they think of virtual reality, very few have tried it. That’s going to change fast, and it means the race is on for investors to appreciate and understand the metaverse. There’s already a lot happening, and it’s growing exponentially. I don’t think this is 10 years away. It’s more like metaverse now.”

Bandwidth needs are expected to soar amid the growth of the metaverse

Sources: Capital Group, TeleGeography. Actual data through 2020. 2021 to 2023 are estimates.


Jody Jonsson and Martin Romo are Equity Portfolio Managers at Capital Group, a sponsor of Firstlinks. This article is neither an offer nor a solicitation to buy or sell any securities or to provide any investment service. The information is of a general nature and does not take into account your objectives, financial situation or needs. Before acting on any of the information you should consider its appropriateness, having regard to your own objectives, financial situation and needs.

For more articles and papers from Capital Group, click here.



The digital transformation of Australia’s media

The death of the single-industry superannuation fund

The ‘streaming wars’ could penalise viewers


Most viewed in recent weeks

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Welcome to Firstlinks Election Edition 458

At around 10.30pm on Saturday night, Scott Morrison called Anthony Albanese to concede defeat in the 2022 election. As voting continued the next day, it became likely that Labor would reach the magic number of 76 seats to form a majority government.   

  • 19 May 2022

Comparing generations and the nine dimensions of our well-being

Using the nine dimensions of well-being used by the OECD, and dividing Australians into Baby Boomers, Generation Xers or Millennials, it is surprisingly easy to identify the winners and losers for most dimensions.

Latest Updates

SMSF strategies

30 years on, five charts show SMSF progress

On 1 July 1992, the Superannuation Guarantee created mandatory 3% contributions into super for employees. SMSFs were an after-thought but they are now the second-largest segment. How have they changed?

Investment strategies

Anton in 2006 v 2022, it's deja vu (all over again)

What was bothering markets in 2006? Try the end of cheap money, bond yields rising, high energy prices and record high commodity prices feeding inflation. Who says these are 'unprecedented' times? It's 2006 v 2022.


Tips and traps: a final check for your tax return this year

The end of the 2022 financial year is fast approaching and there are choices available to ensure you pay the right amount of tax. Watch for some pandemic-related changes worth understanding.

Financial planning

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.


Listed infrastructure: finding a port in a storm of rising prices

Given the current environment it’s easy to wonder if there are any safe ports in the investment storm. Investments in infrastructure assets show their worth in such times.

Financial planning

Power of attorney: six things you need to know

Whether you are appointing an attorney or have been appointed as an attorney, the full extent of this legal framework should be understood as more people will need to act in this capacity in future.

Interest rates

Rising interest rates and the impact on banks

One of the major questions confronting investors is the portfolio weighting towards Australian banks in an environment of rising rates. Do the recent price falls represent value or are too many bad debts coming?



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.