[For a view on gaming investing myths, read this guest post from YetiZen CEO Sana Choudary. -Ed.]

In 2012, investors were excited about the game market’s march toward billions of new users with the rise of smartphones and tablets. But that excitement fizzled as Zynga’s fortunes wavered, and it reported weak earnings starting in August. Consequently, game investments rose dramatically for a while, and then they tapered off.

The data for this story comes from GamesBeat’s own original research into fundings during the year, with contributions from Sana Choudary of YetiZen, Tim Merel of Digi-Capital, Internet Deal Book, Signia Venture Partners, and Electronic Arts.

The upshot is that game investors have been spooked and they aren’t making as many deals as they once were. That means that higher-quality startups will receive funding, but copycat ideas aren’t necessarily going to. And as weak as the year was in investments, nobody is changing any forecasts about the march of gaming into the stratosphere in revenues and player numbers over time. So the industry is facing a confidence contradiction. Game companies are growing, but the money they’re raising isn’t.

The number of game investments rose to 188 deals, compared to 145 a year ago. But the value of the announced deals was $901.3 million, compared with $1.540 billion in 2011. That represents a 29 percent increase in the number of deals, but a 42 percent decline in dollars invested.

By comparison, the value of game acquisitions rose 23 percent in 2012 to $3.47 billion, compared to $2.87 billion a year earlier. The number of game acquisitions fell from 77 in 2011 to 58 in 2012. According to Avista Partners, the value of publicly traded video game companies is about $153 billion, but 78 percent of the value is in the top 10 companies, with China’s Tencent leading the list.

A big gap exists in investor thinking, according to analyst Peter Warman of Newzoo in a recent interview with GamesBeat. Fear kept investors from pouring money into a sector that was actually producing much better results in terms of cashing out through acquisitions. Since 1997, Avista Partners says that games have produced $44 billion in value for venture capitalists and private equity investors since 1997.

Tim Merel, the managing director at Digi-Capital, said that the collapse of social gaming investments in the wake of Zynga’s troubles accounts for almost all of the decline in the game investment deals. Investment capital continued to shift from traditional console games to social, mobile, and online games.

But the clear bright spot for the year was mobile gaming. Merel reported that mobile deals account for as many as 40 percent of the overall game deals. But a mobile game studio with 10 employees can produce a game and get it into the market. It doesn’t need the same kind of capital that earlier game startups required, so it makes sense that the average size of a game deal is getting smaller.

In 2012, the average size was $4.8 million, compared with $10.6 million a year earlier. Zynga’s crash in the stock market (it’s trading at 25 percent of its peak value) also deflated game investment valuations.

Another savior for many game companies was Kickstarter, the crowdfunding platform that raised $83.1 million for video games and board games from 520,000 backers (we’ve included Kickstarter deals in our list). Of that amount, $55 million went to 296 video game companies (we haven’t included most of those on our list). The average amount raised via crowdfunding was $186,000, as most projects raised money for games instead of trying to finance whole companies.

More than anything, Kickstarter changed the dependence of developers on major publishers for funding. Midsized game companies such as Double Fine Productions, which started a Kickstarter mania back in March, could turn directly to their fans for the first time to raise money to make games. The crowdfunding platform became an important place to test disruptive ideas such as the Oculus VR virtual reality goggles and the Ouya Android video game console for televisions.

Certain sectors saw a boom, as hardcore game companies such as Kabam and Kixeye saw huge demand for free-to-play hardcore games. And social casino games debuted by the dozens on Facebook and mobile game platforms. More disruptions are happening as game companies adopt new business models such as free-to-play games, where you play for free and pay small amounts for virtual goods. Gaming also has its own version of the war for talent as big companies acquire smaller ones. Green Throttle Games raised $6 million on the hope that its Android game controller and app could disrupt $60 console games on the television. Such trends serve as grist for the bigger investments.

Signia Ventures (which did eight deals in games in 2012) noted that about 80 percent of investments in 2012 were in North America, with a lot of excitement continuing in mobile gaming, analytics, distribution and the larger consumer mobile ecosystem.

Investors probably shied away from the sector because of the almost total absence of initial public offerings. China’s YY and Zattikka staged a couple of small IPOs, but no one grabbed the attention or the investment dollars like Zynga and Nexon did in 2011, when both companies raised $1 billion each. Zynga raised $515 million in a secondary offering not long before its stock collapsed. And Tencent completed a $598 million fixed income offering. If the IPOs return, you can bet that the investors will as well. But perhaps the only trend to count on is further consolidation with a continued acquisition boom.

Here’s a cautionary note about these numbers. If we knew the value of every deal, the numbers would be much higher this year. We’d love to know how much money Tencent invested in Epic Games, but we don’t. But we have the same problem every year as the majority of the dealmakers keep their values secret.

Here’s a look at the deals of the year below. We’ve organized them by dollar value of the transactions. For those deals where the value is unknown, we have listed them in reverse chronological order. We have linked to our own VentureBeat/GamesBeat stories where we covered them. For deals we didn’t cover, we have linked to other publications or press releases.

Major VC firms such as Accel Partners, Sequoia Capital, DCM,  Kleiner Perkins Caufield & Byers, Andreessen Horowitz, and others all poured money into big game companies this year. Google Ventures continued its role as an active strategic investor. Check out the GamesBeat game investments list in the following pages.

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Those countervailing forces affected the year in game acquisitions and investments. Acquisitions saw a boom year, rising 23 percent to more than $3.477 billion spent on game companies, compared to $2.827 billion a year earlier. But the number of deals declined and investments fell off.

Of course, if we knew the value of every deal, the numbers would be much higher this year. But we have the same problem every year as the majority of the deals keep the values secret. 2012 saw 58 game-related deals, compared to 77 in 2011, according to original research by GamesBeat with contributions from Sana Choudary of YetiZen, Tim Merel of Digi-Capital, Internet Deal Book, and Electronic Arts. The average deal size (where values were disclosed) was $60 million, compared with $36 million from a year earlier.

Acquisitions and disruption go together. Deal valuations are building because traditional game companies and major entertainment brands are adapting to the major shift away from the consoles toward social, mobile, and online gaming. And the barriers between social casino games and real-money online gambling companies are falling. With the prospect of legalization in the U.S. driving up values, casino games were hot in 2012. More disruptions are happening as game companies adopt new business such as free-to-play games, where users play for free and pay small amounts for virtual goods. Gaming also has its own version of the war for talent as big companies acquire smaller ones.

Zynga slowed down its acquisitions from its torrid pace of one per month, but it still bought nine companies during the year. Japan’s Gree stepped up its acquisitions of mobile game studios as it tried to expand ahead of rival DeNA into the U.S. market. Many game companies raised money through crowdfunding, obviating the need to sell out to larger rivals. Electronic Arts paused to digest its $1.3 billion purchase of PopCap Games from 2011.

As far as initial public offerings go, the only stand-outs were China’s YY, which raised $81.9 million in November, and London’s Zattika, which went public and acquired three companies. Microsoft was curiously absent from the acquisitive companies. That’s very odd for a company that is preparing to launch a new video game console sometime soon.

Here’s a look at the deals of the year. We’ve organized them by dollar value of the transactions. For those deals where the value was not disclosed, we have listed them in reverse chronological order. We have linked to our own VentureBeat/GamesBeat stories where we covered them. For deals, we didn’t cover, we have linked to other publications or press releases.

1. Nexon bought 14.7 percent of massively multiplayer online game publisher NCsoft for $688 million. This was a private transaction where Nexon purchased shares owned by Taek Jin Kim, chairman and founder of NCsoft, publisher of titles such as Guild Wars 2, Aion, Lineage II and Wildstar. By comparison, last year’s top deal happened when Electronic Arts bought PopCap Games for up to $1.3 billion, including $550 million that depended on performance targets.

2. China’s ZheBao Media bought GameABC.com from online game publisher Shanda Games for 3.18 billion renminbi, or $503.8 million.

3. International Gaming Technology paid $500 million for Double Down Interactive. This deal in early 2012 signaled the beginning of the bubble around social casino games, just after the Justice Department ruled that online gambling could be legalized in the U.S. if states pass laws allowing it. That opened the door for synergy between gambling companies like slot machine maker IGT and social gaming companies like Double Down, which had just 70 employees. IGT’s latest quarterly report shows that its social casino game revenues are still growing.

4. Nexon bought Gloops for $486 million. This deal may go down as the most money ever paid for a mobile gaming studio (at least so far). Nexon cut its teeth on free-to-play online games such as MapleStory, but it went public in 2011 and has cash to burn. It spent some of that on NCsoft, and it also bought Gloops, a developer based in Japan. Gloops is known for its JapanPro Baseball Card Battle and Warriors of Odin games.

5. Sony acquired Gaikai for $380 million. While Gaikai had almost no revenue, this deal signaled the arrival of cloud gaming as a contender. It was accompanied soon after by the collapse of cloud gaming leader OnLive, whose assets were sold for a pittance. Sony hasn’t said what it will do with Gaikai. But by offering cloud games on its next console, it could certainly disrupt its own $60 disc-based console game business. Better for Sony to do that than somebody else.

6. Gree paid $210 million for Funzio. Gree’s move came in the spring, when the bubble around games was still inflating and the company was aggressively trying to break into the U.S. mobile games market. Funzio seemed to have cracked the code with hit games such as Modern Combat and Kingdom Age. The Japanese company was generating more than a billion in revenue from its mobile social gaming network, and it was betting that U.S. mobile gamers would behave the same way. By the end of the year, Gree was still acquisitive, but it was also laying off staff.

7. Zynga bought OMGPOP for $180 million, plus more if the company hit is targets. But OMGPOP’s Pictionary-style hit game Draw Something fell apart just as Zynga closed the deal. Zynga had to write off $95 million of the deal’s value before the year was over. Still, the social gaming giant justified the deal as a big investment in the mobile market.

8. Gree bought collectible card game maker Pokelabo for $173 million. Pokelabo created digital collectible card games such as Mystic Monsters for iOS and Android. This deal took place in October, after Zynga’s struggles were clear and game investments were on the decline. As such, the high dollar amount shows that Gree wasn’t deterred by a small hiccups in the game market’s investment cycle.

9. NCsoft acquired 76 percent of Korean casual game developer Ntreev Soft for $96 million. Korea’s NCsoft saw the move as a chance to shore up its casual game expertise. It was in talks with SK Telecom to buy the stake for months. Ntreev makes the online golf game Pangya and the massively multiplayer online game Trickster.

10. PlayPhone paid $51.5 million for mobile marketing firm SocialHour. This stock-based deal positioned mobile social gaming network PlayPhone to offer non-incentivized cross promotions for games on its network.

11. China’s ZheBao Media bought CGA.com.cn from Shanda Games for $49.1 million.

12. Wargaming bought BigWorld for $45 million. Wargaming is printing money with its World of Tanks online game, which has 45 million registered users for its 3D tank combat game. BigWorld builds middleware to create massively multiplayer online worlds.

13. Amaya Gaming bought Ongame Network for $32 million. Bwin.party sold off its business-to-business online poker network to Amaya Gaming in the online gambling market.

14. Glu Mobile paid $28 million in stock to acquire Griptonite Games in Kirkland, Wash., as an expansion into free-to-play games.

15. China’s Rekoo paid $20 million for the acquisition of social gaming firm HappySNS.

16. KongZhong purchased Noumena Innovations for $15 million. China’s KongZhong is expanding its online game presence in Asia and acquired Noumena, the maker of the smartphone mobile-game engine Handymo.

17. Big Fish Games acquired Self Aware Games for $12 million. The move was a relatively inexpensive way for casual game market firm Big Fish to dive into the social casino gaming market, which stayed hot for most of 2012.

18. Glu Mobile bought Blammo Games in Toronto as a further expansion into mobile games. The deal was worth around $4.5 million in stock.

19. Zynga bought social game maker Wild Needle for an undisclosed price. A source told us the deal was valued at $3.8 million.

Here’s our list of deals where valuations were not revealed, in reverse chronological order.

19. Aeria Games merged with Japan’s Gamepot, as the companies created PC and mobile game powerhouse.

20. Arktos took a majority stake in Hammerpoint Interactive, creator of The War Z downloadable game.

21. Corona Labs acquired mobile cloud services startup Game Minion.

22. Kabam bought Balanced Worlds to gain a 3D social game development team in China.

23. Zynga bought November Software as it maneuvered to become a bigger player in mid-core games, which are hardcore in nature but can be played for a shorter time.

24. Disney picked up LucasArts, the venerated game publisher, as part of its $4 billion acquisition of Lucasfilm.

25. Saban Brands acquired kid-friendly online video and gaming site Zui.

26. Electronic Arts bought online game development studio ESN. ESN developed the Planet web-based games framework and had been working on the Battlelog online social network for Battlefield 3.

27. Zynga acquired midcore social game startup A Bit Lucky, maker of Lucky Train.

28. Gree acquired mobile game developer App Ant Studios as the Japanese company continued its expansion in the U.S.

29. Playsino made its move into casino games with the acquisition of Popover Games.

30. And on the same day, Playsino announced its acquisition of Foghorn Games.

31. NaturalMotion acquired Boss Alien as it harvested the fruits of its 3D iOS games.

32. Epic Games acquired People Can Fly to stop its talent from flying out the door. That was one of the few console-PC deals of the year.

33. Saban Brands bought Zombie Farm game maker The Playforge.

34. Glu Mobile acquired GameSpy Technology from IGN as a move into multiplayer gaming technology.

35. Mobile ad network Tapjoy bought the core team of social gaming network startup Viximo.

36. Aeria Games assimilated three major online shooter games owned by Ijji.

37. Downloadable games firm Green Man Gaming and social gaming network Playfire merged.

38. Roadhouse acquired social-mobile game maker The Embassy Interactive.

39. Kabam acquired Wild Shadow Studios, the maker of the 2D shooter game Realm of the Mad God.

40. Zynga picked up Buzz Monkey, a team with console gaming experience on titles such as Army of Two: 40th Day.

41. Japan’s Klab acquired social game company Pikkle.

42, 43, 44. Zattika buys three social game firms after its initial public offering. Zattika bought Hattrick Holdings, Sneaky Games, and Concept Art House.

45. Kabam lifted Gravity Bear, a maker of social games such as Battle Punks.

46. Angry Birds maker Rovio bought its fellow Finnish game firm Futuremark Games Studio.

47. King.com bought Fabrication Games as it pushed beyond social games into mobile.

48. Otoy acquired Refractive Software as part of a move to create cloud-based digital animation and gaming tools.

49. Z2Live swallowed Big Sandwich Games, maker of the mobile game Battle Nations.

50. Peak Games acquired Saudi Arabia’s Kammelna as part of a move to go big with social games in the Middle East.

51. Linden Lab acquired LittleTextPeople for some new development talent.

52. Kabam purchased Fearless Studios, led by former Star Wars game developers.

53, 54, 55, 56. Zynga bought four mobile game companies: Gamedoctors, Page44 Studios, HipLogic, and Astro Ape Studios.

57. 6waves Lolapps acquired mobile game maker Escalation Studios.

58. Ascend Acquisition Corp. merged with mobile gaming firm Andover Games in a reverse acquisition.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Game acquisitions set a new record in 2012, with a total transaction value of $4 billion, up 18 percent from $3.4 billion a year earlier. But investments in new companies fell in transaction value by 57 percent to $853 million from a year earlier, according to game-focused investment bank Digi-Capital.

The data shows that games have become a dynamic industry on a global stage, but investments in new companies are down for a variety of reasons. Those startups have become the fuel for growth at the larger companies, which are adapting to the new age of digital games through strategic acquisitions.

Zynga’s rapid growth in the past few years drew the attention of big companies, including ones in China, South Korea, and Japan. But Zynga’s fall in the stock market, brought on by weak earnings, crushed the value of all game companies, resulting in smaller transactions. On top of that, Tim Merel, the managing director at Digi-Capital, said that venture capitalists almost abandoned their investments in social-game companies. Social-game investments accounted for 94 percent of the decline in overall investment. Merel warned there could be a “games investment gap” in the medium term.

Digi-Capital estimates that the total industry could grow to $83 billion by 2016, with 57 percent of that revenue produced by online and mobile games, compared to 49 percent in 2012.

If you add up the returns of the game business by combining acquisitions and initial public offerings, the numbers from 2005 through 2012 add up to a six-fold return. As for acquisitions, the number of deals were down 27 percent to 83 transactions in 2012. But the overall figure rose because the average transaction size rose 60 percent to $49 million. More and more of the buyers are in Asia, as seven of the top 10 deals involved buyers in South Korea, China, and Japan. Digi-Capital believes China could take 32 percent market share in online and mobile games, compared to 21 percent for Europe.

Massively multiplayer online games accounted for 38 percent of the transaction value in acquisitions, followed by 27 percent for mobile, 18 percent for social and casual, 13 percent for middleware (such as gamemaking tools) and gamification (using game-like tactics to increase engagement in nongame applications), 4 percent for console and PC, and 1 percent for advertising. By volume, mobile was 28 percent of transactions, MMOs were 20 percent, social and casual were 19 percent, middleware and gamification were 19 percent, console and PC were 12 percent, and advertising was 1 percent.

For game investments, the average transaction value was down 57 percent, but transactions were up 9 percent to 165. That might be because more mobile-game studios were funded, but the dollars needed for such studios are much smaller. The average size of an investment was $5 million, down 60 percent.

Middleware and gamification were 35 percent of all game investments in terms of transaction value, compared with 31 percent for mobile, 18 percent for MMOs, 7 percent for social and casual, 7 percent for console and PC, and 1 percent for ads. In terms of transaction volume, mobile was 39 percent, middleware and gamification were 29 percent, social and casual games were 10 percent, console and mobile were 10 percent, MMOs were 9 percent, and ads were 2 percent.

Kickstarter, meanwhile, complemented VC investments. The crowdfunding site account for 6 percent of all investment ($49 million, excluding board games). Kickstarter was 63 percent focused on PC games and 23 percent on hardware. About 87 percent of the value was in just 7 percent of the projects, such as Ouya, which raised $8 million for its Android game console.

Merel said that there was significant volatility across individual game sectors. The potential exists for the “mispricing” of both public and private game market assets in 2013.

Free to play continues to grow as a business model. It is expected to be 55 percent of mobile and tablet app revenue in 2016. It is expected to be 93 percent of mobile and app downloads in 2016. Merel said that gamification is attracting significant early stage investment, but a lot has to happen before the market achieves its potential.

In 2013, Merel said the new generation of consoles could reinvigorate the console market this year. Last year, game sales fell dramatically for home systems.

As the market shifts toward digital games, Merel believes development will switch from a focus on producing one big hit to investments in multiple, low-cost parallel efforts. Companies will abandon failures quickly and move behind hits fast.

On the highest level (see picture at right), Digi-Capital sees games shifting toward high-value titles in the West, particularly in the U.S., along with the rise of subscription MMOs and console games. Meanwhile, Asia will diverge into a high-volume market, with China leading the development of mobile/tablet games, free-to-play titles, and casual online titles.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Data from the Corum Group, a mergers and acquisitions services company, and Digi-Capital show that this year continues to be a hot one for the game industry, according to a presentation by Jim Perkins and Alina Soltys at the Casual Connect game conference in Seattle.

“Gambling and gaming has become a very important sector,” Perkins said. “Overall, M&A in gaming is a frenzy.”

Two big deals signal the shift that is happening this year toward mobile and cloud gaming. Zynga bought OMGPOP for at least $180 million as it sought to capture the benefits of the fast-growing mobile gaming title Draw Something. And Sony gave a big endorsement to cloud gaming with its $380 million acquisition of Gaikai.

Of  the two big game companies that recently began trading publicly, Zynga saw its stock price drop about 46 percent, while Nexon’s has risen 15 percent. In 2011, Zynga was among the top three  in all of tech in terms of the number of companies acquired — 13. Zynga’s M&A activity was behind a lot of the momentum we saw in 2011, and we’re seeing that trend continue in 2012.

Perkins and Soltys also pointed to some huge activity in Asia this year, where lots of game companies have gone public and are flush with cash. NetEase has the most cash with $2.2 billion in cash. Tencent has $1.25 billion. Shanda Interactive has $1.2 billion. Ren Ren has $1.05 billion. Others with a lot of cash include Sohu, Shanda Gaming, cYou, Perfect World, Giant Interactive, KongZhong, The9, and Taomee.

The overall number of mergers across all of technology has slowed somewhat from the first half of 2011. Aggregate valuations have dropped somewhat to about the same level as the third quarter of 2010. The big rise in gaming M&A deals is all the more impressive against the backdrop of that general slump.

Digi-Capital reported that game M&A deals totaled $3.5 billion in 2011, compared to less than $1.5 billion in 2010. Seven major game companies (Zynga, Gree, WeMade, Tencent, IGT, Rovio, and Nexon) acquired 21 companies in the first half of 2012. As you can see in the chart below, online games were the hottest category for game acquisitions, accounting for 71.5 percent of deals in 2011, compared to just 43.2 percent of deals in 2010.
So far this year, the picture has changed, as you can see from the charts below. Online games now account for just 56.3 percent of deals. The big growth in M&A has been for mobile games, which now account for 29.2 percent of deals in the first half of 2012, compared to just 7.5 percent of deals in all of 2011. Payment-related deals have fallen from 15.5 percent in 2011 to just 5.2 percent in the first half of 2011. The PC and console core game market accounted for only 3.1 percent of deals in the first half of 2012, compared to 4.5 percent for all of 2011.  

Perkins predicts that mobile games would account for the bulk of game-related M&A deals in 2013. Mobile is expected to account for 42 percent of all deals in gaming in 2013, while online will account for 39 percent. Soltys noted that smartphone penetration of the U.S. population is now at 50 percent. Ten percent of U.S. households now have three or more iPads. iPad and overall mobile data usage is up dramatically.

About 41 percent of game deals so far in 2012 have taken place in the U.S., compared to 11 percent in South Korea and 8 percent in Japan.

In terms of investments in game companies, mobile accounted for 34.4 percent in the first half of 2012, compared to 5.1 percent in 2011. Online accounted for 44.8 percent of deals in 2012, compared to 69.8 percent in 2011. As you can see in the chart below, U.S. entities accounted for 48 percent of the fundings in game companies in the first half of 2012. That was followed by 7 percent for China and 6 percent for the U.K.

Perkins said that game mergers and acquisitions are accelerating, though game IPOs are mixed. The core gaming industry is narrowing its focus to blockbuster games like Diablo III. But the real sales growth of the industry is coming from games for smartphones and tablets. The social game industry’s profit growth has slowed, and new frontiers that could get investments include motion-sensing and voice recognition.

The active acquirers in the game world include Gree, Zynga, DeNA/Ngmoco, WeMade, and Neowiz. Overall, Perkins predicted the console market consolidation will continue, Asia game companies will acquire U.S. firms, mobile will be a big driver in 2013, and the possible legalization of online gambling in the U.S. is fueling a speculative boom in social casino games.

“I think social casino games will keep on growing,” Perkins said.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Just six months into the year, games M&A is already at 88 percent of the transaction value for all of 2011, which was the previous record year. In the first six months of the year, Digi-Capital has tracked 51 transactions worth $3 billion in transaction value. The average value of each transaction was $59 million. The firm tracked 113 transactions in 2011 worth $3.4 billion, with an average value of $30 million. That means we’re seeing fewer transactions, but the values are higher.

“More than ever, now looks like the time for strong independent and larger, more established games companies to consider their strategic options,” said Tim Merel, managing director at Digi-Capital and a speaker on the investments panel at our GamesBeat 2012 conference next week in San Francisco.

The categories with the most activity are massively multiplayer online (MMO) games, social and casual, mobile, and middleware.

In the first six months of 2012, there were 73 investments in game companies that generated $481 million in transaction value at an average of $7 million.

In 2011, there were 152 transactions worth $2 billion at an average investment of $13 million. The transaction volume is down by 4 percent, and the transaction value is down 51 percent. If this trend persists, then the game investment level for 2012 might return to the respectable level of 2010, the second-highest year on record.

Mobile, middleware, and MMO investments led the way, while the decline in transaction value was largely due to fewer social and casual deals. That makes sense in that Zynga dominates that category on Facebook and new startups have been steering into mobile instead. In 2011, social and casual constituted 57 percent of the transaction value and 32 percent of transaction volume, but they’ve constituted only 11 percent of the transaction value and 6 percent of the transaction volume so far this year. Merel predicts consolidation to continue in the social and casual space.

Mobile games investment accounted for 31 percent of the game investment transaction value and 49 percent of transaction volume. Mobile will likely continue to drive deals for the rest of the year. Games middleware (and gamification, or the use of game mechanics in non-game applications) were 33 percent of the transaction value and 18 percent of transaction volume. Gamified education and health are growing.

MMOs were 22 percent of the transaction value and 12 percent of transaction volume, largely because of the attraction of the free-to-play model, where users play for free and pay real money for virtual goods. Chinese, Japanese, and South Korean acquisition and investment continues to be a big part of mobile, mobile-social, and free-to-play MMO both domestically and internationally.

GamesBeat 2012 is VentureBeat’s fourth annual conference on disruption in the video game market. This year we’re calling on speakers from the hottest mobile, social, PC, and console companies to debate new ways to stay on pace with changing consumer tastes and platforms. Join 500+ execs, investors, analysts, entrepreneurs, and press as we explore the gaming industry’s latest trends and newest monetization opportunities. The event takes place July 10-11 in San Francisco, and you can get your tickets here.

[Image credits: economic collapse and Digi-Capital]

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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In 2011, 77 game companies were acquired for at least $2.827 billion, according to research by VentureBeat and other sources. We didn’t count the numbers for last year, but IHS Screen Digest reported that game acquisitions and fundings are likely to be twice as large in dollar value in 2011 compared to 2010. This original report by GamesBeat complements our research that showed game companies raised a record $1.54 billion in 2011.

The money going into games has fundamentally shifted from the consoles to social, mobile and online gaming, as investors and game creators chase the consumers who are playing games on many different kinds of devices and are embracing new business models, such as free-to-play games, where users play for free and pay small amounts for virtual goods.

Acquisitions have heated up as the big companies scramble to gobble up more nimble startups. The war for talent has matured. Instead of fighting over employees to hire, rivals are in a battle to see who can be the first to acquire whole game studios. During 2011, Zynga bought a game studio every month, scrutinizing hundreds of companies before making a single offer. In doing so, it was capturing talent before rivals such as Electronic Arts or DeNA could buy them.

And there were more game studios to buy than ever because developers were able to create startups more easily, thanks to the ecosystem that grew up around apps on Facebook and the smartphone and tablet platforms.

Tim Merel, managing director at Digi-Capital, summed up the changing landscape with a few observations: the rivalry between traditional console game makers like EA and new social game makers like Zynga was driving deals; China was moving to unseat America in games; and everyone was scrambling to get a piece of the emerging mobile games market. Game companies had to invest for growth or exit the market.

A number of the deals involved mobile game studios such as Rovio buying animation houses so that they could improve the animation features within their games as well as produce films for promoting the games.

Here’s a look at the biggest deals of the year, in terms of the dollar value of the transactions. Where the values of the deals were not disclosed, we simply listed them in reverse chronological order. We created this list based on our own original reporting and have linked to the relevant stories. For the deals we didn’t cover, we have linked to other publications. Beyond our own sources, we also consulted lists from the Internet DealBook and Digi-Capital. If you see some deals we missed, please say so in the comments and we’ll update the list.

1. Electronic Arts bought PopCap Games for up to $1.3 billion. July 12. EA beat out Zynga in this mega-deal, which consists of $750 million in cash and stock and a bonus of $550 million if PopCap meets performance targets. At a potential $1.3 billion in overall value, the deal far eclipses last year’s biggest deal, where Disney acquired Playdom for as much as $763.2 million.

2. Tencent bought Riot Games for nearly $400M. Feb. 4. The Chinese social networking giant bought the maker of the popular League of Legends free-to-play online battle arena game.

3. Private equity investors bought majority stake in Bigpoint for $350M. April 27. Summit Partners and TA Associates bought out the stakes of prior investors to acquire control of Bigpoint, a publisher of free-to-play online games with hundreds of millions of users.

4. Visa approved this transaction: PlaySpan for $190M. Feb. 9. The deal helped Visa move into the lucrative virtual goods payment transaction market.

5. Changyou.com acquired online game publisher 17173.com for $162.5 million in cash. Nov. 29. The deal showed that Asian game companies were also on a buying spree.

6. Japan’s Gree bought OpenFeint mobile social gaming network for $104 million. April 21. The deal helped Gree move into the worldwide mobile social game platform market.

7. In three-way transaction, Marvelous Entertainment, AQ Interactive and Liveware merged in a $89.6 million deal. May 10. Console game companies consolidated in Japan.

8. China’s Perfect World bought Atari’s Cryptic Studios for $49.8 million. May 30. The deal showed that Chinese companies are moving into the U.S.

9. Caesars Entertainment Casino Group bought 51 percent of social game developer Playtika for an estimated $40 – $50 million. May 19.

10. Autodesk bought Scaleform to expand game middleware offerings in a $36 million deal. Feb. 16.

11. Electronic Arts bought KlickNation, maker of Superhero City and other hardcore social games, for an estimated $35 million. Dec. 2.

12. Glu Mobile bought Griptonite Games for $28 million in stock. Aug. 11.

13. Korea’s Joymax bought IO Entertainment for $17.7 million. March 24.

14. Celestial Asia (CASH) bought Oberon Media Asia Pacific for $10 million. June 8.

15. DeNA bought Chilean mobile game firm Atakama Labs for estimated $6 million. Oct. 4.

16. Glu Mobile bought Blammo for $4.6 million in stock. Aug. 11.

17. QuePasa acquired Brazilian social game maker XtFT for $4 million. Feb. 1.

18. Double Fusion bought assets of in-game ad firm NeoEdge Networks. Dec. 14.

19. Red Robot Labs bought Supernomo for mobile game expansion. Dec. 9.

20. Japan’s Sega bought Three Rings for an undisclosed price. Nov. 17.

21. Ubisoft bought Finnish Xbox Live developer RedLynx for an undisclosed price. Nov. 2.

22. 6waves Lolapps bought social gaming firm Smartron5 in China for an undisclosed price. Oct. 28.

23. Microsoft bought Xbox Live game developer Twisted Pixel for an undisclosed price. Oct. 12.

24. MocoSpace bought Geocade for an undisclosed price. Oct. 3.

25. DeNA bought Vietnamese game maker Punch Entertainment for an undisclosed price. Sept. 15.

26. Virtuous, a video game maker in Shanghai, bought assets of Vietnamese animation house Sparx. Sept. 14.

27. Ngmoco bought Facebook sports game developer Lionside for an undisclosed price. Sept. 13.

28. Germany’s Bigppoint bought sports games specialist 49Games for an undisclosed price. Sept. 12.

29. BigDoor acquired small business gamification firm OneTrueFan for an undisclosed price. Sept. 7.

30. Zynga bought mobile game studio Astro Ape for an undisclosed price. Aug. 16.

31. Digital Chocolate bought game developer Sandlot Games for an undisclosed price. Aug. 16.

32. Nordic Games bought assets of JoWood and The Adventure Co. for an undisclosed price. Aug. 16.

33. Electronic Arts bought mobile game developer Bight Games for an undisclosed price. Aug. 15.

34. Intel’s Havok division bought Trinigy for an undisclosed price. Aug. 8.

35. AR Games bought a 25 percent stake in Syncopate for an undisclosed price. Aug. 8.

36. Wang Sicong bought pro-gaming team CCM for more than $6 million. Aug. 3.

37. Sony bought console video game maker Sucker Punch, creator of inFamous, for an undisclosed price. Aug. 2.

38. NCsoft bought smartphone game maker Hotdog Studio in Seoul. July 28.

39. Halfbrick bought stake in animation house The People’s Republic of Animation. July 20.

40. Live Gamer bought Brandport and GamerDNA for an undisclosed price. July 19.

41. 6waves merged with Lolapps for an undisclosed price. July 18.

42. Riptide merged with Projkt Nine to form mobile game firm. July 11.

43. Zynga bought Toronto mobile game firm Five Mobile for an undisclosed price. July 8.

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