More game industry consolidation
As we've pointed out before, the electronic game industry is now more significant and more profitable than the movie industry. In fact, the two industries are closely linked, as more games become films and more films become games. In any case, all media companies are considering game possibilities of any projects they consider as part of its potential profit stream. And media companies will have to worry as much about becoming subsidiaries of game companies as game companies worry about the reverse.
For that reason, it was no surprise to see the Walt Disney Company increase its videogame presence by two announcements over the past week. One was the acquisition of Avalanche Software, a game development company in the US. Secondly, the company announced it will finance a Canadian-based game startup, headed by an ex-Electronic Arts executive. These assets will supplement Disney's establish Buena Vista Games unit.
As the Wall Street Journal ("Disney Gets Into the Game With Two New Industry Deals", 4/19/2005) put it,
The deals mark a turning point for Disney, which has set a priority of conquering the fast-growing, $24.5 billion game industry. Rather than just license its movies and franchises for development by gaming heavyweights, as it has in the past, Disney has decided to build its own network of developers. Where once it engaged only in kids games, the company also is branching out into the teen and adult game market, albeit within limits.
The article points out that Disney considered one of the industry's big established players, such as THQ or Activision, but considered them overprice. The idea is that Disney within a few years will control all the games abase don its own content, rather than licensing it out to others.
In another level of the market, there's been announced a major deal in the business of retail sales of video games. GameStop, the leading retail chain devoted to game sales will buy out rival Electronics Boutique (EB) for $1.44 billion.
GameStop owns over 1,826 stores in the US. Electronics Boutique has even more stores, 2,000, with hundreds located in Europe, Australia, and New Zealand. The combined company will have annual revenues of almost $4 billion, beating out Wal-Mart was is currently #1. While other large retail megastores compete in the industry, no dedicated retailer comes even close.
In this expanding industry, the choices are getting fewer. As in many industries, it's a choice between the narrow choices and low prices of Wal-Mart and other discounters and the higher prices but wide selection of large focused retail chains.
