On May 5, analyst Jim Suva (via CNBC) talked about potential merger and acquisition targets that Apple (NASDAQ:AAPL) could pursue. On the list were media companies, video game companies, and a well-known electric-vehicle maker.
The three video game companies listed were, of course, the three major publicly traded companies: Activision Blizzard (NASDAQ:ATVI), Electronic Arts (NASDAQ:EA), and Take-Two Interactive (NASDAQ:TTWO).
To the analyst's credit, he didn't assign a particularly high probability to Apple buying any one of these three video game publishers -- just 10%. However, I'd like to argue that those odds are way too high.
Apple cares about gaming, but...
I can see where this speculation comes from; Apple has indicated increasing interest in potentially developing its own content (and signing exclusivity deals for some third-party content).
Having compelling, internally developed, and exclusive content is one way that platform companies like Apple can try to increase the stickiness of their platforms. This model has worked for Netflix (NASDAQ:NFLX), which has been extremely successful in attracting and retaining viewers with its internally developed content, and exclusive content is a time-honored tradition for the major game console vendors, too.
It's not surprising that Apple would be interested in exclusive TV/music content, nor would it be surprising to see Apple dabble in building exclusive gaming content for its platforms as mobile gaming is quite popular.
Indeed, Apple clearly cares about gaming on its iOS platforms considering that it endows its mobile processors with powerful graphics processors, and it has invested very heavily in its custom Metal graphics programming interface.
However, I don't think that buying large game publishers that make much of their money from selling titles targeted at game consoles (i.e., not iOS devices) would make much strategic sense.
Remember, Apple's only truly important gaming platform is iOS (macOS is not a reasonable gaming platform), so any gaming-related acquisitions would need to be done with the explicit aim of developing great mobile games designed for the iOS platform.
Would Apple even need to buy a studio?
If Apple were to try to buy its way into the game industry, it'd probably be better served by buying a smaller studio with a track record of developing compelling mobile-first games than one of the major game publishers.
However, what'd probably be a better move for Apple would be to build up its own game studio (e.g., "Apple Game Studios"), staff it with industry veterans, and let them go wild in building great titles.
Such a studio under Apple would be unique in that it wouldn't be building games explicitly to make money from selling games (Apple ought to offer them for free with the purchase of an iOS device), but it would be focused on building games simply to create great games that help keep users anchored to the iOS platform.
The talent to build great games is out there, so the only reason that Apple ought to outright buy a studio would be to gain access to valuable intellectual properties that it would want to make exclusive to its platforms. There's merit to that strategy, but probably unnecessary.
In a nutshell, it simply wouldn't make sense for Apple to drop tens of billions of dollars to buy major game publishers to support internal game development efforts, if that's something it ultimately wants to pursue.