Some may view the videogame industry as a niche market or geared toward younger individuals. However, some of the world’s largest companies comprise the current gaming industry. For example, Sony produces the PlayStation system; Apple and Google include gaming platforms within their operating systems; and, obviously, Nintendo has been a mainstay within the industry since the 1980s. Current market research indicates that the gaming industry includes revenues of $150+ billion per year. Accordingly, this week Microsoft purchased Bethesda Game Studios and its parent company for a whopping $7.5 billion.

While the public generally thinks of Microsoft as a computer company, Microsoft is a major player in the gaming industry as well. Since the early 2000s, Microsoft released the Xbox, Xbox 360, and Xbox One consoles. Yesterday, Microsoft opened up pre-orders for its new Xbox Series X console that sold out within minutes. In a pretty crowded industry with very few, very large competitors, every company must find some way to stand out. For Nintendo and Sony, that means developing console exclusive titles, such as Super Mario or The Last of Us. Microsoft, however, is not exactly set up as a big first-party, console exclusive game developer. As such, for Microsoft, standing out means acquiring studios to develop games for its Xbox consoles.

Intellectual Property Attracts Microsoft to Purchase Bethesda

ZeniMax Media is a huge holding company that owns subsidiaries that publish some of the biggest game franchises in the world. Perhaps the biggest subsidiary, Bethesda Game Studios, developed the Fallout and Elder Scrolls series of games, including Fallout 4 and Skyrim. For Microsoft, ZeniMax Media represents one of the current crown jewels of the gaming industry. Microsoft could put time, effort, and money into growing its own series; from a copyright perspective, so long as the code differs from that of competitors, Microsoft is free to develop its own intellectual property. Instead, however, Microsoft paid a premium – $7.5 billion – for ZeniMax’s intellectual property, including copyrights and trademarks. To put that in perspective, the figure is almost double what Disney paid for the Star Wars franchise.

The lesson here is that intellectual property can become huge assets to a company and targets for a potential buyer. ZeniMax built up equity in its company through its code development (copyrights) and branding (trademarks); now, Microsoft can focus on using those intellectual property assets to grow its new console.