Monday, February 25, 2008

Electronic Arts Attempts Takeover of Take Two

Electronic Arts has made a 2 billion dollar play for Take Two, saying that they were making the generous offer because the merger of Vivendi Universal and Activision into a single entity will knock EA down to second in the industry in terms of size and sales.

Now much has been made about the fact that the timing of this takeover is to capitalize on the release of Grand Theft Auto IV in April, which will likely be very, very profitable for whichever company holds the reins.

But I don't think this deal is about the Grand Theft Auto series, which seems to me to be more the gravy in this deal. Yes it will be a huge money maker, but I think there is another aspect to this attempted takeover that few people are taking into consideration.

I think this takeover has quite a bit more to do with Sports. Take Two's 2K Sports division is practically the only competition that Electronic Arts has in this particular arena, and by acquiring the company, EA would then in essence have a monopoly on almost 20 percent of the video game market. To me, that seems like a huge incentive to make this deal. Since Take Two has an exclusive third party agreement with Major League Baseball until about 2013, Electronic Arts would also pick up this little perk in the deal as well, giving them the exclusive rights to not only professional baseball but the NFL(which is also in effect until 2013 I believe), NCAA Football, FIFA, NASCAR and the PGA Tour. And given the fact that most of the 2K sports titles are reviewed better than their EA counterparts, eliminating the competition seems like a perfect strategy, because the point isn't to make money from the 2K Sports properties, but to halt them so that their EA counterparts are the only game in town. And sports are EA's bread and butter.

Think about the financial lengths Electronic Arts went through to protect their flagship title, Madden, from 2K's competing and more affordable football game. They signed a massive deal with the NFL and the Player's Association for exclusivity, just to remove the 20 dollar a copy thorn from their paw. So it wouldn't surprise me to see them buy an entire competitor to improve their standing in one area of the market.

Now you all know that I love Rockstar Games, but as a division, well, aside from the Grand Theft Auto series, their other titles just don't have the prestige or sales to make them a major force in the industry. But for its size, the division also brings along a lot of baggage to such a deal, after all, their titles have brought nothing but negative publicity to the company for a few years now and consistent losses. And there are a few other big franchises under the Take Two umbrella, like Bioshock and the Civilization series which seem like additional assets worth having in this deal, but even with these enticements, I still believe that this whole deal hinges on 2K Sports.

But no matter how this came about, I still think this will be very bad for gaming in general. Innovation is the life blood of this industry, and with more and more consolidation in the business, new ideas will become harder to find. I really don't want to see this merger happen, but if it does, I hope Electronic Arts pays through the nose.


Becca said...

Unrelated but hey great new look for the blog!!

Megan said...

"It's in the game" is pretty universally recognized, no? But it sounds from what you say that EA might be playin' that card just a bit too hard? You think they might be getting scared of Blizzard?

MC said...

Becca: Thank you very much.

Megan: When you look at the sales figures for Madden and 2K Football in 2005, they were neck and neck(#3 and #4 respectively), and since EA signed the exclusive NFL agreement that year, Madden has been the top selling console game annually, so I think it is a plausible argument.

Arjan said...

I hate companies that drown the competition. Competition is what keeps games good.
Why make next-level games when you're game is the only one around.

Anonymous said...

I stopped caring about sports games once EA bought exclusive rights for the NFL. Madden sucked compared to the last couple 2K games.

I'm not spending money on a company that insists on using those profits to squash the competition instead of improving their own product.

And yes, I think you are right about this move.

MC said...

Thom: I used to be all about EA Sports... and then I slowly started playing some of the games the competition was making, and while there are some deficiencies in some of the presentational elements, I have been very impressed by the quality of work 2K does. I am glad someone else can see the same deeper implications I do in such a deal.

Arjan: That has basically become the attitude of a lot of studios these days.