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Grand Theft Equity
Merger fever hits the video-game business
Stop me if you've heard this one before: An established company that's losing market share is trying to buy a smaller, more creative competitor. The second company spurned the offer, but it may just be trying to get a better one; the first firm has a reputation for getting what it wants. And the price might not be worth it, because the problems of the first company can't be solved so easily.
I'm not talking about Microsoft's proposed merger with Yahoo but about the offer that video-game giant Electronic Arts just made for Take-Two Interactive, which makes the profitable and infamous Grand Theft Auto games. Like Microsoft, EA dominates its industry with reputations for commercial ingenuity and creative mediocrity — neither of which is entirely deserved. Like Microsoft, Electronic Arts has recently been dethroned — in this case by the merger of Activision and Blizzard. Both companies make massive amounts of money in areas where EA barely competes, Activision with Guitar Hero and Blizzard with World of Warcraft.
And, like Microsoft, Electronic Arts is making its offer out of weakness rather than strength. For years, the company was the leading third-party software maker, relying on film tie-ins and sequels to build hit franchises. But many of those franchises have run their course, gamers have grown sick of movie games, and EA hasn't found many fresh ideas to offer. EA expanded in a game business dominated by Sony's PlayStation and PlayStation 2. For the next few years, gamers will probably be more evenly divided among Sony's PlayStation 3, Microsoft's Xbox 360, and Nintendo's Wii.
I'm not talking about Microsoft's proposed merger with Yahoo but about the offer that video-game giant Electronic Arts just made for Take-Two Interactive, which makes the profitable and infamous Grand Theft Auto games. Like Microsoft, EA dominates its industry with reputations for commercial ingenuity and creative mediocrity — neither of which is entirely deserved. Like Microsoft, Electronic Arts has recently been dethroned — in this case by the merger of Activision and Blizzard. Both companies make massive amounts of money in areas where EA barely competes, Activision with Guitar Hero and Blizzard with World of Warcraft.
And, like Microsoft, Electronic Arts is making its offer out of weakness rather than strength. For years, the company was the leading third-party software maker, relying on film tie-ins and sequels to build hit franchises. But many of those franchises have run their course, gamers have grown sick of movie games, and EA hasn't found many fresh ideas to offer. EA expanded in a game business dominated by Sony's PlayStation and PlayStation 2. For the next few years, gamers will probably be more evenly divided among Sony's PlayStation 3, Microsoft's Xbox 360, and Nintendo's Wii.
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16:29 EST, 28.Feb.08