Players in game deal a good fit
Vivendi’s planned acquisition of Activision Inc. would blend the companies’ strengths but won’t necessarily lead to cross-pollination among game developers.
Santa Monica-based Activision, whose shares rose nearly 13% on the news, is strong in console games, with titles that include the music game “Guitar Hero III,” the combat game “Call of Duty 4” and skateboarding games starring Tony Hawk.
Vivendi Blizzard Entertainment Inc. leads the market for subscription-based online video games with the widely popular “World of Warcraft” series.
“It’s a way to sort of have all their bases covered,” said Jeff Green, editor in chief of Games for Windows: the Official Magazine. “I don’t think this means Tony Hawk is going to show up in “World of Warcraft.” Everything is going to go along as it had been. This is an uber-company that has much more to rely on.”
Paris-based Vivendi and Activision said Sunday that their boards had approved a plan to combine Activision with the French company’s game unit, Vivendi Games, which includes Blizzard and three other divisions.
The transaction is expected to close in the first half of 2008, pending shareholder and government approval.
The two companies are behind some of the most popular and critically acclaimed video games of all time. The deal would create an $18.9-billion electronic entertainment juggernaut, rivaling the world’s current No. 1 publisher, Electronic Arts Inc., in the variety and types of games it would offer worldwide.
Citi Investment Research analyst Brent Thill said he didn’t expect Electronic Arts or other game makers to feel too threatened. Electronic Arts, he said, has plenty of strong offerings, such as games based on “The Sims” series.
David Cole, president of DFC Intelligence, said the deal showed how the $40-billion global video game industry was changing from a packaged goods business that made, sold and distributed boxed video games to a service business that delivered online PC games such as “Warcraft.”
“It’s no longer that you can just go out on one platform and be a one-trick pony,” Cole said. “With the costs of development and distribution, you’ve got to really have international scale.”
Cole said it remained to be seen whether the transaction would signal future consolidation by large media companies seeking to cash in on gaming’s growing popularity.
Blizzard executives said the deal would not affect upcoming titles such as a “Warcraft” expansion pack called “Wrath of the Lich King” or the highly anticipated “StarCraft 2,” both due sometime in 2008. Activision said it was already planning new versions of the current hits “Guitar Hero” and “Call of Duty.”
Colin Sebastian, an analyst at Lazard Capital Markets, called the deal a “very good fit” because the two companies complement each other.
One key is the addition of “World of Warcraft” to the Activision stable. Launched in 2004, the online fantasy world’s subscriber base has mushroomed to 9.3 million worldwide, each paying up to $15 a month to battle mythical monsters for treasure and other rewards.
