Activision-Vivendi's Game-Changing Deal
The new Activision Blizzard will give EA a heavyweight to contend with in the increasingly important market of massive multiplayer online games
by Reena Jana and Matt Vella
The $18.9 billion tieup between Activision (ATVI) and Vivendi (VIV.PA) is numbingly complex in its structure, but the motivations behind it are simple: Video game publishers want to bulk up to cover the rising costs of developing games, which can easily soar to tens of millions of dollars. And increasingly, game companies are tying their fortunes to trendy online, multiplayer games such as the popular fantasy title World of Warcraft—developed by Vivendi's Blizzard Entertainment—which has 9.3 million subscribers and will be owned and operated by the new venture.
If approved, the deal could effectively realign the industry landscape, creating two massive gaming heavyweights with similarly matched creative clout and global distribution. During a Dec. 3 conference call, executives said the new company, called Activision Blizzard, would start with 15% of the worldwide games market, including PC and console games. In 2006, the total video game market was worth some $28 billion, according to research firm NPD Group. Activision Blizzard's revenues for 2007 are expected to be about $3.8 billion.
All Sights Are on the MMO Market
But rival Electronic Arts (ERTS), with expected 2007 revenues of $3.2 billion, has been on its own spending spree. It is retooling its portfolio of games to include more online multiplayer games and original content. In October EA announced the $860 million acquisition (BusinessWeek.com, 10/29/07) of two independent games studios, in part because one is developing a massively multiplayer online game, or MMO, which analysts and industry insiders say could challenge World of Warcraft. In 2006, EA spent $76 million to acquire Mythic Entertainment, an independent developer of online games.
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http://www.businessweek.com/technology/content/dec2007/tc2007123_075300.htm?chan=innovation_game+room_top+stories
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1 comment:
Mergers and acquisitions are a perfect example of the benefits of cartelling. In this case the current merger had a history before because it is a reaction to a merger which has occurred before. As the other players in the game merged to benefit from lower costs and improved products, the players on the market follow them in order to achieve the same benefits and be able to compete. Small players are left outside of the market unless they develop really innovative ideas, which would make them desirable and beneficial add-in to a big product portfolio.
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