Despite what some Gen Z members believe, the video game industry wasn’t born in the 2000s or the 1990s. In fact, its roots go back to the 1950s, with MIT’s 1962 Spacewar, for most, standing as the first example of what we now consider interactive entertainment. Though it is true that in the past two decades, this sector has seen dramatic shifts, and its architecture has reached remarkable complexity. It has hit levels few imagined in the arcade era.

In the past, things were simple: you had a game studio that built titles, and a distributor that put them in stores. If a company was a mega power, it could do both. Today, this sphere is dominated by such entities, called mega-holdings by many. These are corporations that coordinate multiple studios and technically oversee the entire game production and placement process. This also holds for actual interactive gaming, meaning sites like those featured at Casino Groups that facilitate prize-staking. The structure is repeated in that arena, as it is through various businesses. This is not a phenomenon exclusive to gaming fun of any kind.

In the video game domain, the best example of this arrangement is likely Microsoft’s gaming arm sitting atop a thirty-developer workforce, or the Chinese conglomerate, Tencent, boasting entire or partial ownership of countless studios. However, to many, it is still unclear what the benefits of this kind of consolidation are, and whether it impacts creative distinctiveness. That is what we explore below.

The Anatomy of a Gaming Mega-Holding

For those unfamiliar with what a mega-holding is, let’s break this down in simple terms. A mega-holding is nothing more than a corporate ownership structure. A corporation is separate from its owners. It can own property, employ people, and buy other companies, which become its subsidiaries and are organized within its hierarchical structure. A parent is the company that owns and controls others beneath it.

Microsoft and Sony are parents to many subsidiaries that serve the market needs necessary to grow Microsoft’s and Sony’s consoles – PS and Xbox series. Xbox Game Studios grew organically, but then began acquiring other companies. For instance, it picked up ZeniMax Media in 2021. Sony, on the other hand, with its Sony Interactive Entertainment arm, pursued a parallel strategy, acquiring exclusives like Naughty Dog, Insomniac, and Guerrilla, to name a few.

Then, you have publishing conglomerates. For instance, Electronic Arts and Take-Two Interactive manage internal studios organized around franchise labels. These are game series that most readers have probably not only heard of, but played. Electronic Arts’ umbrella holds franchises such as Sports FC, Madden, Battlefield, and The Sims under it, while Take-Two’s features NBA 2K, GTA, and Red Dead Redemption. Without question, these are some of the biggest video games of all time.

Ubisoft, renowned for the Prince of Persia and Assassin’s Creed series, operates as a hybrid. It coordinates many internal studios from its Paris headquarters, but also with help from various outposts in places like Montreal, Barcelona, and Chengdu. The list of Ubisoft subsidiaries is too long, and it includes 1492 Studio, Ketchapp, Kolibri Games, Blue Mammoth, Red Storm, and many others.

We also have investment holdings, which the previously mentioned Tencent functions as. This is less of a traditional publisher and more of a shareholder empire. It owns Riot Games and Funcom, fully owning these, while boasting majority stakes in Sharkmob and Klei Entertainment, and having decent minority shares in Epic Games, Remedy, Don’t Nod, Bloober Team, and dozens of studios.

As you can tell, each architecture demands different managerial tactics, and we explain some of the challenges that coordinating so many players brings.

Is Centralization the Best Approach?

There will always be an autonomy-vs-control tradeoff when it comes to one parent company trying to manage multiple subsidiaries. A central point must govern and coordinate a wide range of tasks and operations of companies that sometimes share technological infrastructure.

History has shown us that over-centralization can be harmful, and this is something that has been visible in the gaming world many times over. One example that is often cited is Westwood getting absorbed into Electronic Arts, which led to the studio closing its doors five years after this move, on account of it losing its organizational distinctiveness and creative flair, failing to capture the magic it once easily did with its slew of Command & Conquer 1990s hits.

You see, a parent should not dictate release cadence, budget, employment policies, in-project schedules, and the like. Micromanaging in game development is not smart, since it has been proven to influence creativity. There are many stories that prove this time and time again.

That said, excessive decentralization also has its dangers, as without central coordination, studios functioning under the same parent can waste time and money on the same technology that a sister company is investing in. A conflict in market strategies, promotions, and releases can also emerge.

Accordingly, a proper balance is needed, such as central management overseeing portfolio strategy, franchise assignment, and the like, with studios retaining creative control and getting day-to-day production freedom.

Franchise as an Organizational Principle

Many people are often confused about what the term franchise actually means; in gaming, it does not refer to the business model that McDonald’s, for instance, uses. In the entertainment realm, a franchise is usually a word that is synonymous with IP, intellectual property, or a distinct series. If you are wondering how franchises can be factored into corporate organization, well, you just have to not only look at them as commercial assets, but as management instruments also.

They give parent entities a way, a means, a pipeline to be able to precisely allocate work across their network. To illustrate this in action, we will note that many franchises get built relatively fast, with new releases dropping annually due to them getting developed in multiple studios across the globe. Each takes the lead on a different installment, and this shortens the development cycle as a whole.

The Assassin’s Creed and Call of Duty franchises have implemented this principle at different scales. Activision’s network, Infinity Ward, Treyarch, Sledgehammer Games, Raven Software, and so on, has worked on CoD in a rotating production system.