As reported last week, Scopely is nearing a $3.5 billion deal to acquire “Pokémon Go” studio Niantic’s gaming division, a significant deal that is less a vote of confidence in gaming’s growth potential and more the stark reality of a once-promising tech impresario purging itself of gaming entirely. Scopely is, of course, a prolific M&A player that has acquired several studios in the past few years to add to its portfolio of mobile games, led by its own “Monopoly Go!” The company’s penchant for scooping up studios and maintaining its portfolio drew the attention of Savvy Games Group, the gaming investment arm of Saudi Arabia’s sovereign Public Investment Fund. Savvy acquired Scopely for just under $5 billion in 2023. That makes Niantic’s gaming assets the obvious target of the proposed “megadeal” that Scopely’s chief revenue officer Tim O’Brien described to my colleague Andrew Wallenstein at Variety’s Entertainment & Tech conference last fall. O’Brien indicated Scopely was looking to acquire a “scaled global franchise doing hopefully at least a billion dollars in revenue.” Launched in 2016 to an instant player base of 500 million, “Pokémon Go” certainly meets that mark. Sensor Tower pinned the augmented-reality game as having generated $6 billion in player spending by 2022, indicating it was pulling in roughly $1 billion per year. But a year later, other reports described monthly declines in revenue to the tune of 40%. Niantic itself laid off 25% of its workforce in 2023 as the studio’s other games faltered, most notably “Harry Potter: Wizards Unite,” which shut down the prior year after launching in 2019. This forced the studio to make “Pokémon Go” its top priority. But it sounds like Niantic’s tune changed before these acquisition talks with Scopely took off. Last November, Niantic Labs announced it was building a “large geospatial model” to achieve “spatial intelligence,” which would enable it to “deliver new types of AR experiences.” In the same breath, the company stated that “merely walking around playing our games does not train an AI model.” Even if Niantic is going to remain an AR-oriented tech company, it has clearly moved past gaming. Likewise, the gaming industry is still being rocked by job cuts. A day after the Scopely-Niantic news last week, Chinese tech giant NetEase announced cuts to the teams working on “Marvel Rivals,” including its entire support studio in Seattle, to “optimize development efficiency for the game.” This came as a shock to the industry, as NetEase’s own financials revealed the game had topped 40 million players before the layoffs, a reminder of its popularity after it launched in December. That follows EA shrinking its lauded BioWare studio to less than 100 developers in January, underscoring the difficulties still facing the PC and console game spaces. Even if mobile gaming is still faring better enough to comprise big new M&A moves, Niantic parting ways with its flagship title to free up money for AI-adjacent development is hardly an indication the industry is back to a state of glory.