Electronic Arts attempts Grand Theft Auto
The headline in the New York Times technology section says it all: "Bid for Game Maker Seen as Effort to Buy Innovation", (Matt Richtel, 2/26/08). In yet another step in the consolidation of the lucrative gaming software industry, Electronic Arts,, the ten-ton gorilla, made a $2 billion bid for Take Two Interactive, a company whose claim to fame is the very successful (and much condemned) Grand Theft Auto series. That game, in three versions so far, has sold around 65 million copies, and a new version is due out soon.
Another area in which Take Two is strong is in sports gaming, with its 2K Sports division. In fact, it is the only real competitor to EA, which owns John Madden Football and other lading sports games. In fact, EA threatens to obtain a sub segment monopoly in this field.
As one analyst is quoted as saying ""The mere existence of Take-Two's sports games has caused EA to cut prices each of the last two years prior to the
holidays, while it historically held pricing until well after the holidays before Take-Two attempted to compete. Should the two companies combine, we believe that EA would grow its sports revenues by around $300 million annually,"
EA is the Borg of the gaming world. It has swallowed one game company after another (including, recently, Bioware and Pandemic), and they motive - the same problem with any massive company - real innovation. As Richtel points out, "Electronic Arts is without peer in putting out reliable sequels….But for several years, E.A. has been facing criticisms that it is not doing enough to create new hit games."
EA, to maintain its position, has to keep bringing in new revenues. And that can be done with popular new products - something it hopes that Take Two, which has other games in development can contribute to. And of course, if it manages to acquire the company, the pipeline may close down, as innovators walk away from the culture of a big, risk-averse company. As Richtel writes, "The additional risk in buying Take Two for Grand Theft Auto is that Take Two's creative talent may not come along for the ride. Rockstar Games, the studio that makes Grand Theft Auto for Take Two, is not under long-term contract and could become a free agent, industry analysts said."
Of course, the EA (hostile) offer has been rejected by Take Two's board. It's now a matter of how much sweetening is needed, and whether a competitor might step in. The bid is generally considered generous by the analyst communicty, and it is expected that the deal will eventually go through.
