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Analysts: Activision Blizzard Deal Could Spur Further Consolidation
by Brandon Boyer
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December 3, 2007
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Speaking on Activision and Blizzard's new merger, analysts from Lazard, Opco, and Wedbush Morgan have said Blizzard's future growth could make the current price "a bargain," and have said the deal should kick off even more industry consolidation.
While saying that the deal will see a good amount of synergistic growth for existing franchises like Guitar Hero through Vivendi's other media businesses (mobile, music, and cable tv), Lazard's Colin Sebastian said it could have far broader impact on the industry in general.
"We believe the merger could potentially spawn other combinations in the industry," said Sebastian, "particularly as media companies face challenges in their core advertising and content businesses and video games offer potentially higher growth opportunities."
Opco's Shawn Milne agreed, saying "We believe the deal could have significant repercussions in the VG industry--forcing accelerated consolidation potentially with other publishers and clearly within the online gaming space."
Wedbush's Michael Pachter spoke specifically on the future of World of Warcraft in the partnership, saying, "We have much work to do to be in a position to explain the structure of the current deal, but our understanding is that Blizzard has opened up Asian distribution of WOW to competitive bid, and any renewal of the deal should be at substantially higher margins in 2010 and beyond."
"Accordingly," he concluded, "we think that the price “paid” for Vivendi Games (approximately 15x operating income) may end up being a bargain."
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