EA and Take-Two

LOOK IT'S YEAR 2008 AND EA IS BUYING
It's yesteryear and more when I last updated this blog, but it sure looks like yesterday. Electronic Arts is at it again - buying smaller game industry rivals. Some might think that I have something personal against EA, why else this is the news that makes me write after such a long silence...

WELL MANAGED COMPANY
On the contrary, I cannot but admire their business management and strategic skills. EA is a company that does it better than any other company in game industry. They buy assets to increase turnover and streamline cost structure by booting redundant workers (marketing, distribution, finance, office and non-performing developers...). This generates profits, which in turn can be used to buy more assets, which generate even more profits. No end at sight for this company. Well, maybe News Corporation will place EA as one step on their road map of world domination.

FOCUS ON GAMES AND GENRES
Unlike many professional analysts I don't think (not anymore anyway) that Electronic Arts minds about countries or market areas when they make their acquisition plans. Instead, I believe that they focus on on market share of post-deal combined product slate. You see them having two separate approaches - cement their current genre dominating position OR pushing boundaries of their present game genre reach.

IMPACT ON GAME MARKET?
In their genre conquering strategy they flirt with classic monopoly setting. Marketing and distribution dominance make competitors to shy away from these genres. If this doesn't increase genre specific profits... So all that anticipated financial muscle can be used to garner more market share in other genres.

SO WHAT WAS THE IMPACT ON GAME MARKET?
We will have less companies and developers will have less choice what comes to publishing and distribution channels. Let's say EA is totally happy with their success in genre of "watch the paint to dry" -games. Now if I have the killer idea of adding more colours to my upcoming WTPTD title and I already have a working demo, it very well might be that EA doesn't want to finance it and everybody else are afraid of the huge financial push (rendering drying paint can be horrendously demanding on engine department).

EA's motive would be their cash cow that doesn't need anything but cosmetic changes like new shade of white paint. It will go on for years to the point that developers start to have mental problems for coding the same game over and over. Also there is no need to educate gamers about new title in this genre, there's just that one household name, which purchase even mom can't fuck up if you ask her to go and buy it for you.

So, yet more difficult to get your game published and quite possibly less choice of games, the turnover growth will instead come from increasing game prices.

MY ADVICE
GO BUY GTA IV, BETTER YET, BUY THE WHOLE SERIES. If you still have some money left, use it to buy Take-Two stocks... if some day it is bought, it is good that you have something that somebody else wants.

Electronic Arts’ Jamdat purchase

Even Electronic Arts paid a big money to get Jamdat, they seem to have made a good deal. We all remember Jamdat from long and winding shopping spree, in which it kept acquiring smaller mobile game companies to gain that critical mass. That mass wasn’t enough to ward off from Electronic Arts, or could it be that this was exactly Jamdat’s planned exit strategy? Anyway, now Electronic Arts seems to have finished the primary fusing operations and it should be just continuous flow of published mobile games ala Electronic Arts.

Small can still beat big

Under is my post from my mobile phone games blog.

Many have been asking why a relatively small publisher and distributor, PlayerX, got Miami Vice into their stables. Because they care their partners, that’s why. They offer excellent service that can overtake bigger competitors who have degenerated back to corporatism. Now all they need to do is to produce a great game, easier said than done... Original news source The Inquirer has a picture of Miami Vice detectives. Do they look like Sonny and partners, what do you think?

Anyway that got me thinking. Will it always stay the same? Small and hungry players come to the market. These can be found in some industrial complexes running away from high rents. They do everything to strech that last mile and they create something wonderful, therefore they manage to beat the big girls and boys.

After the success slow decay starts. More people join the company and they are more interested the benefit package than working somewhere at skid... Company grows and leans towards management and total shift from innovation to evolution happens. It is time for some small player to come along and challenge the biggies.

Activision hit by employee lawsuit

Does this mean that workers in every single U.S. game company will raise hell? How this will affect to game development investments? Asia is already strong contender in game development, and this sort of lawsuitism that is getting more common will trash the economics of U.S. game development.

Sony Computer Entertainment

Sony’s division is also in trouble as similar class action lawsuit is sneaking on its doorsteps. Really troubling, I wonder how rigid this will turn game industry in general?

Game industry shakedown

Interesting news from Gameindustry.com they ran an article that among other things writes:

Michael Pachter of Wedbush Morgan Securities, who has pinpointed the struggle between Toshiba and Sony in the high definition movie space as crucial to how the games market will move in the coming years.

It all comes down to different DVD standards that the game consoles support. Far bigger customer to decide the future development of storage standards is the movie industry. This industry’s choice will thrust the market to either direction and that promises difficulties on other game console block. Fascinating.

Empire acquisition gets closer

More names are associated with possible Empire buyout. SCi is emerging as the most likely candidate. Grabbing dominant market share by buying out competition is the oldest trick in the CEO book of “Ways to make money”. Let’s hope that further game industry consolidation in U.K. will eventually lead into continuous game industry evolution and not just inefficient monopoly stagnation.

One more thing, it really pisses me off to read about how SCi managed to turn around the faltering Eidos. Eidos had good product slate and they just needed money to monetize their titles - SCi brought money to the mix and magical potion was ready to be served for investors.

Game industry integration

The other day I was minding my own business and shuffling through the pages of local newspaper. I haven’t been paying attention on games market for a while, as my day job has become an activity that incorporates most of my time. Anyway, it stroke me... game publishing is really a very centralized industry. On one page there were tens of different games on display but they were divided between four different publishers. What is the meaning of this? Just that those big players have the contacts and financial means to promote their games for thousands and thousands of curious eyes.

This is of course something I have known for a long time, but only just now it HIT me. I suppose that time outside game industry has done some good for me. Now I understand outsiders’ point of view much better. Only games related information that one gets from mainstream media are paid advertises that are stuffed between economy and sports pages.

Chinese Online Game Companies Sinking

Online game companies in China are yesterday’s news. Recent financials from Chinese online game companies show that the frenzy is over and seemingly endless growth has receded. The9 dropped 12 percents in Friday’s trading. Despite their massive marketing efforts and stellar game selection, they only managed moderate growth. They are the best on the market and if they produce just ok results, then what is the point of going into Chinese online game market anyway?

Cinemaware acquired by eGames

This is yet another life for Cinemaware, a game company that did well during 80’s and closed down 1991. Lars Fuhrken-Batista bought Cinemaware assets and restarted the company in 2000, now he is selling present Cinemaware assets to eGames. Seems like the business logic runs to the direction in which eGames turns classic Cinemaware game assets into casual games. From Gamasutra.

Electronic Arts settles overtime dispute

Electronic Arts buried the hatchet and agreed to pay 15,6 million dollars in overtime dispute with workers. Furthermore company agreed to change terms for entry-level artists so that they are also eligible for overtime pay.

I think that EA once again made best of poor situation and now they have black on white, in case there are further complaints form workers. It means peaceful working conditions as game companies are heading into new generation game production. Article at Orlando Sentinel.

Carmageddon development halted?

SCI/Eidos is rumored to have halted the development of mega hit Carmageddon. Read more about the news over here.

COMMENTARY
I think that this puts the merger into rather dubious light, because major part of the logic was in the arrangement that Eidos gets some desperately needed extra funding to complete the development cycle of their hits like Lara Croft and Carmageddon. Now big part of that business logic has been amputated. Well, some downsizing will do the trick, just hope that they don’t downsize back to zero.

Vivendi comeback

Vivendi is finally benefiting from the digital entertainment strategy that it chose under the command of Mr. Messier. Blizzard happens to be one of the best performing parts of Vivendi. Company is also making strides in the field of mobile music sharing. As a personal comment, they finally seem to get back into the ring after hanging in the ropes for quite a few years.

Ubisoft has a price?

Ubisoft can't seem to be able to shed the image of being a game stock. Game stock in a sense that they are a catalyst in coming game industry reorganization. Electronic Arts has been mentioned more than once, because they own that strategic 20% of Ubisoft.

Ubisoft itself hints that they would prefer some big media company as their partner in acquisition...

The latest development in this industry drama are the innuendos of Chinese game companies having their eyes on Ubisoft. It doesn't take but an ounce of imagination to put that just-acquired IPO capital into use.

Don't you think it's just so ironic that American capital could still be used to buy Ubisoft off the market?

Eidos management thrown out

It didn’t go exactly as the title says but it wasn’t far from it. Eidos shareholders sealed the fate of top management by voting in favor for the SCi offer. Board members made their own conclusions of the situation. It was out with the old in with the new. Now three persons from SCi govern Eidos. Another chapter has been written in British video game industry.

Ubisoft considers media concerns

This twist has been widely distributed, La Tribune, Market Watch, GamesIndustry.biz, Ferrago etc. Yves Guillemot commented that it could be interesting to team up (merge or something like that) with sizeable media company (Walt Disney or Time Warner) or with an equal game company.

To me it is quite strange how he wants to team up with big media company. Ubisoft would not be in balanced relationship in such a deal. Media giant would just absorb them and turn this little puppet into content transformer - let's make every popular series and movie into a video game...

I would be looking into arena of innovative and technologically advanced companies like Pixar, DreamWorks or maybe some special effects companies. This match would create (well, sure it is only my opinion) very interesting talent pool that could be sold for even higher bundle of money or that could function as an innovative industry leader. In this respect, a merger with a smaller video game company could be the most logical solution as there are no special needs to integrate operations and find special synergies.

Eidos deal locking on

Shareholders of Eidos approved the offer of SCi to purchase the company. Now it seems like there is very little room for any competing offers. Eidos is a goner and SCi is the taker. Great move guys. I hope Brits manage to keep this industry alive as so many others have gone under or been sold.

Game industry stocks fumbling

Electronic Arts, Activision, and THQ have shaken investors expectations for the future. This shows in the stock price of above-mentioned companies. It is especially the short-term expectations, which are rather depressing.

If the giants of the field are shaking, smaller competitors catch the cold in no time. No matter what is the situation of an individual game company, the valuation of these companies is going to fall. Luckily, many companies in the game industry are not public and therefore outside of these short term price fluctuations.

There are three companies that come in mind especially: Infogrames, Vivendi and Eidos. Because of their financial situation, these game companies will have trouble every time when somebody in the game industry sneezes. For example, as SCi’s price has been dwindling, the rumours for new offers on Eidos start to circulate.

Game companies that are working in the area of mobile games are whole different matter. Market size is growing at staggering speed. Development costs, although rising, are quite low. Game development cycle is short so companies are better able to manage revenue flow. Furthermore, just one mobile hit can bring lot of cash for the company.

Electronic Arts is in trouble

Lately we have been reading about the difficulties that Electronic Arts faces. Company seems to have taken the wrong off-ramp and is now stuck in competition and lack of demand for their games. Earnings have plummeted and there does not seem to be much to rave about in their present product slate. Shift to next generation video game consoles will just devour money and the company has also pushed very hard to invest into franchises. Bringing their game titles up to speed with content and technological development.

The problem for Electronic Arts is temporary. In relation to revenue its stock is expensive and near-future development looks dim so expect further decline in the price of the stock. Competitors like Activision and Take Two Interactive are cheaper and smaller. These smaller competitors now have good chances to score big growth with couple of successful games. Expect investors to make some changes in their video game company portfolios. Short-term prospects are appalling for EA, but it will get better just wait and see.

video game ads are coming again

Troy Wolverton wrote for TheStreet.com about advertising in video games industry and inside the games. He concluded that in-game advertising could bring extra one billion USD for the industry that now makes ten billion USD turnover per year.

He goes on and writes about the difficulties the industry is facing with the introduction of next generation game consoles. With next generation comes extensive network connectivity and there is some market speculation that business model will break out from the box. How fitting, because for the moment that model is solely based on retail box sales.

Anyone can see that this is quite a chuck of extra income for the industry. Given the challenges and possibilities of the future, it is quite likely that this new possible source of income will be embraced. As usual, it is likely that money talks or maybe even shouts and ads populate our beloved games.