PS3 News: Analyst: Industry Consolidation "Makes Financial Sense" - PS3 News

Members Login: Register | Why sign up? | Forgot Password?

Analyst: Industry Consolidation "Makes Financial Sense"

With the recent news that Activision is making a play for Take-Two Interactive, the current state of the video game industry is once again a topic of discussion.

We asked EEDAR analyst Jesse Divnich what he thought of the possibility of the Call of Duty publisher snagging the Grand Theft Auto producer, and although he wouldn't comment on that particular scenario, he did talk about consolidation. In his eyes, it "just makes financial sense" if the industry wants to compete with the biggest entertainment corporations around. Said Divnich:

"Our industry will continue consolidate, it just makes financial sense. If there is anything we’ve learned over the last ten years it is that our industry is more than just about making video games, it’s about making entertainment. Companies such as Sony, Time Warner, and Disney are worth 4x that of our biggest company (Activision). To compete in the entertainment industry, our industry’s companies need to be larger and need access to greater resources.

I have no doubt in my mind that over the next 5 years are industry will continue to consolidate or they themselves be acquired by a media conglomerates. I prefer the former, as should we all."

Oh, I think we'll all agree on that last point. As gaming has become legitimate big business, we need to accept some inevitable changes, and hope those changes don't come at the expense of our entertainment. The sacrifice of quality is something the fans always fear but having our best companies snapped up by media conglomerates...well, that fills us with even more anxiety.

Tags: activision, take two, grand theft auto, eedar, jesse divnich

2/28/2011 11:55:32 AM Ben Dutka

Put this on your webpage or blog:
Email this to a friend
Follow PSX Extreme on Twitter

Share on Twitter Share on Facebook Share on Google Share on MySpace Share on Delicious Share on Digg Share on Google Buzz Share via E-Mail Share via Tumblr Share via Posterous

Comments (18 posts)

Highlander
Monday, February 28, 2011 @ 12:23:36 PM
Reply

I'm not sold on consolidation being a force for innovation or competition. It depends on the size of the investment required to operate in the market. Organizations need to be properly capitalized to be capable of operating in the market. You can't make a $100 million game without the ability to raise $100 million in the first place. On the other hand, such consolidation can also have a chilling effect on innovation and competition as it's often easier to squish your competition by purchasing them, and either absorbing them, or snuffing them out.

Consolidation leads to bigger players, and fewer players. The more powerful the companies get, the less influence or power the consumers have. Activision kinda proves that point. With the drift towards digital downloads and other less expensive forms of distribution, I would have thought that actually, consolidation might stifle the market more than grow it. As the costs of operating in the market decrease, the need for consolidation also decreases.

Agree with this comment 10 up, 1 down Disagree with this comment

Nlayer
Monday, February 28, 2011 @ 12:48:53 PM

I completely agree with Highlander.

"On the other hand, such consolidation can also have a chilling effect on innovation and competition as it's often easier to squish your competition by purchasing them, and either absorbing them, or snuffing them out. "

I also share this belief. I'd rather have more small companies than one or two really large one. I'd rather not buy a game that has been overseen by one company. These large companies that buy small ones usually force them to do things they don't want to do. The only large company style that I don't mind, so far, is something like EA. Activision seems like they enjoy buying small companies, then closing them down and moving all the employees around within one of their larger offices, wasting valuable talent.

I'd rather have a small company with people who care about making a game Together instead of a large company with bits and pieces of random good talent. Ego's will clash that way.

But who knows, I could be absolutely wrong!

Agree with this comment 4 up, 0 down Disagree with this comment

Excelsior1
Monday, February 28, 2011 @ 1:52:25 PM

great post highlander.

i agree with you about the price of oil being a huge drain on the economy. all the speculators driving it up is a real concern of mine.

i don't like this trend towards consolidation. ea and its download pass. activision with its $15 map packs, and annual sequels. i don't want that crap getting into other developers games.

Agree with this comment 3 up, 0 down Disagree with this comment

jaybiv
Monday, February 28, 2011 @ 8:41:21 PM

Well said Highlander. I don't listen to analysts. Most times they sound as if they know nothing about business. Consolidation rarely brings innovation. Also, comparing video game companies to large entertainment conglomerates is like comparing Little League Baseball to Major League Baseball. There is room in the market for both to exist.

Agree with this comment 0 up, 0 down Disagree with this comment

maxpontiac
Monday, February 28, 2011 @ 1:17:27 PM
Reply

Until the financial system in the world corrects itself, it's all about survival right now. To be honest, I am surprised that more studio's haven't closed doors or merged with larger conglomerates. The real question is, how much worse is the global economy going to get?

Agree with this comment 1 up, 0 down Disagree with this comment

Highlander
Monday, February 28, 2011 @ 1:28:11 PM

Bah! The economy was limping up until the oil price started to rise. the company I work for rides the leading indicators we know when a downturn is coming and when things are getting better. They'd been getting better. I'll have to start looking at some numbers again.

Expensive oil is like a huge money vacuum cleaner sucking money out of the economy.

Agree with this comment 4 up, 1 down Disagree with this comment

maxpontiac
Monday, February 28, 2011 @ 2:13:45 PM

Indeed. That's my point.

While the economy is limping up in certain areas, it still remains on life support in others.

This new Middle East crisis is just another reason why the system need to get repaired. The entire world depends on each other at a level that should make anyone uncomfortable.

As an American, I am not thrilled with the prospect of the US Dollar possibly being dumped as a the World's Currency Reserve. You take the US Dollar out of that picture, the American buying power will die due to inflation (maybe hyperinflation). If my memory serves me correct, that's 2.3 trillion worth.

The system is broken. The band-aids are not working anymore, and now my head hurts.

Last edited by maxpontiac on 2/28/2011 2:28:26 PM

Agree with this comment 1 up, 0 down Disagree with this comment

Highlander
Monday, February 28, 2011 @ 3:22:52 PM

My Bah! was more at the whole econommy thing.

I'll stop there, because this isn't the place for a 1500 word rant about economics...LOL!

Agree with this comment 3 up, 0 down Disagree with this comment

Ben Dutka PSXE [Administrator]
Monday, February 28, 2011 @ 3:44:03 PM

I'm with Highlander on the "Bah" part.

Just use your eyes. Malls and restaurants are so jam-packed around here on weekends, you can't even move. Purely leisure and luxury; such little trips would be the first to go if people didn't have any money.

Seems to me that people aren't hurting in the slightest.

Agree with this comment 4 up, 0 down Disagree with this comment

Highlander
Monday, February 28, 2011 @ 3:50:56 PM

Ben,

I think the reason for that is people are tired of being 'down, and many have killed a lot of their debt, and are enjoying living under the weight of less debt. People with little or no debt can better afford those little luxuries like eating out, and impulse buys. I just hope that people don't forget the lessons of the credit crunch and therefore keep a handle on their use of credit this time.

Agree with this comment 4 up, 0 down Disagree with this comment

maxpontiac
Monday, February 28, 2011 @ 4:10:55 PM

I agree. Economics are a subject that requires lengthy posts.

My whole point was not to drag this topic off it's course but just to bring up the fact that the system is in a mess. Gaming, when looking at the big picture is insignificant on the events that are on the horizon or occurring today.

Ben, I am not concerned over the expendable money that people have, especially around tax refund time. It's the local, state and federal end of things. Governments are running out of money nation wide. It's all going to come to a head soon enough, but hey. I'll stop.

Agree with this comment 2 up, 0 down Disagree with this comment

kraygen
Monday, February 28, 2011 @ 2:22:29 PM
Reply

Terrible idea, little companies tend to surprise people with great games, which should make larger companies take notice and realize that just because you dump 100 million doesn't mean you'll have a winner and that sometimes a winner is based more or ingenuity than cash.

Agree with this comment 5 up, 0 down Disagree with this comment

BikerSaint
Monday, February 28, 2011 @ 2:40:27 PM
Reply

I think in general, that most smaller companies tend more to hone their craft & are proud to show off their handiwork.

But once the big conglomerates get their money-grubbing claws into the smaller company, it then becomes only about all the Benjamin's waiting at the end of their speeding mass-produced assembly line.

And all the former artistry & flair got flushed right down the crapper.

Agree with this comment 4 up, 0 down Disagree with this comment

Lawless SXE
Monday, February 28, 2011 @ 3:01:17 PM
Reply

Well, it does make financial sense as the cost of making games has skyrocketed. If smaller companies aren't absorbed into larger ones, it becomes more difficult for them to produce the games.

However, often from a creative standpoint, it's a negative point. Smaller developers are closed down or pushed to the side. The projects that they love are sidelined for them to work at the publishers behest.

Being a part of a media conglomerate is dangerous. The developer could be forced to work on nothing but film or comic adaptions. Or, they could make a mark like Bethesda, who is wholly owned by Zenimax Media.

I know that the industry needs to grow, but I think the way that it is now is good enough. The large number of publishers makes for stronger competition, which pushes up quality. Start to chip away at that and anything could happen.
Peace.

Agree with this comment 0 up, 0 down Disagree with this comment

BIGRED15
Monday, February 28, 2011 @ 5:16:21 PM
Reply

Is it just me or is gaming one of the only industries uneffected by recessession. Thank god, otherwise companies wouldn't have as much to make games even on a yearly basis. Speaking of which, could anyone imagine if a company like naughty dog was bought by a consolidating force like activision (who i believe is demanding cod to make yearly installmnents). I think consolidation would only pump "generic" into the industry. Get all of the game companies to consolidate ad then you forget who the powerhouse was that started a franchise anyway

Agree with this comment 1 up, 0 down Disagree with this comment

maxpontiac
Tuesday, March 01, 2011 @ 8:32:48 AM

That is a good point. On my end of things, playing GT5 is exactly what I need when I come home from the office.

It's quite the diversion, and it's obvious that I am not alone on the subject.

Agree with this comment 0 up, 0 down Disagree with this comment

Jotun
Thursday, March 03, 2011 @ 10:22:03 AM

Exactly. It's been well established that during times of economic hardship the gaming industry continues to boom. There are a lot of small companies closing doors, but consider also that game development is vastly more expensive than it used to be and now a lot of companies are overshooting their target budget just to release a quality game(Bioware's upcoming Star Wars mmo is well known to be an example of this). People that work in the industry get payed very well and two major companies in my area, Irrational Games and Rockstar, have been expanding their teams for the past two years also. These are signs that things are still moving forward, but simply in a more concise and unified way. It's about having the backing to produce these games, which just can't be done by all but the biggest publishers in most cases.

As Ben said in reply to Highlander, now more than ever people search for cheaper, more affordable ways to entertain themselves during their downtime and can't afford huge vacations or day trips with their famalies, by and large. That's where malls, movies, and videogames come in. Why spend 4k to go to Disney for 5 days when you can spend $50-60 for a game you can play for months on end with your family? The Wii is a gigantic success exactly because so many famalies are looking for fun thigns to do together that don't cost a lot of money.



Last edited by Jotun on 3/3/2011 10:26:50 AM

Agree with this comment 0 up, 0 down Disagree with this comment

___________
Tuesday, March 01, 2011 @ 3:15:02 AM
Reply

not going to happen!
in fact if antivision buy out 2K ill eat my hat!
that would be a bigger surprise then me waking up tomorrow, and finding myself on another planet with a lambo parked on the driveway, and pigs serving me breakfast and reading the news paper!
just does not make financial sense for 2K.
if they were not doing well then ok, but they have one of the most innovative games in the history of games just about to release.
they have max payne 3, bioshock infinite, agent, GTA, RDR2, oh so many games thats going to be massive sellers for them!
id be the death of the industry too, 2K are one of the few third party publishers releasing great MP games.
without them, we would be stuck with antivision, EA and the only good publishers would be THQ and sony.
talk about a post apocalyptic world, antivision buying 2K would be the final nail in the coffin and completley destroy the industry!

Agree with this comment 0 up, 2 down Disagree with this comment

Leave a Comment

Please login or register to leave a comment.

Our Poll

Will Advanced Warfare rejuvenate Call of Duty?
Yes, this is just want CoD needed.
I hope so; it looks promising.
I doubt it, but I'm not sure...
No chance; CoD is going down.

Previous Poll Results