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The Impact of Activision Blizzard


June 9, 2008 Article Start Previous Page 4 of 4
 

The Impact on EA

Despite their position as the largest companies in the industry, both EA and Activision Blizzard are only going to "continue to try to get bigger" according to Michael Pachter, though he felt that significant competition between the two would be delayed, with "Activision having its hands full with Blizzard's business and its own online ambitions, and EA kept busy integrating the Take-Two merger for the next year or so."

Zenke felt it was "weird to see the companies compared": "Ultimately I think that Activision and EA are in two completely different leagues. While Activision Blizzard has a lot of great properties, EA is now in a class unto itself. There are just so many amazing titles under the EA umbrella -- World of Warcraft is an elephant in the room, to be sure, but there's a whole herd of smaller pachyderms over at EA."

He agreed that the companies, or at least EA, would continue acquisition - "There are few good-sized game companies I think EA isn't at least passingly interested in."

"Competition keeps things interesting," concluded Buscaglia, before referencing an entirely different kind of jungle dweller -- "If nothing else, it will be entertaining to have two nine-hundred pound gorillas in the industry instead of one."

The Impact on the Industry

But what does the new (though disputed) position as "world's largest pure-play online and console game publisher" mean for the rest of the industry? Pachter isn't sure it is going to have that big an impact.

"Their power really only gives them a first look at all third party ideas being shopped (movie licenses, studios for sale, merger opportunities...) Before, EA got the first look. I don't know that it means much that we now have two giants instead of one. Presumably, both will continue to behave rationally, but it's possible that two giants will occasionally get tied up in bidding wars."

There may be some impact on smaller developers, however. Pachter continued, "Bigger companies have higher thresholds for greenlighting games, meaning that small games likely won't appeal to either Activision or EA in the future. That leaves a gap for some smaller developers, who will have fewer outlets for their ideas."

"I suspect there will be a bunch of folks displaced in the process," agreed Buscaglia, but from a slightly different angle. "The consolidation of the portfolios of the two companies is likely to make it more difficult for an independent developer to get their games picked up -- for example, say a studio is pitching an FPS war game. Before Activision was a no go due to Call of Duty, but you might get a shot with Sierra Entertainment. Now there's one less publisher to pitch to. And that goes both ways and applies to competing games with every successful title on both portfolios now."

However, there may be opportunity in the "ton of IPs that one or the other company has moth-balled that the other may see some real value in," continued Buscaglia. "I expect to see some cool IPs that we have not seen around for quite a while showing up after this while merger thing settles in."

And though developers might find it harder to pitch new projects, the other publishers may find plenty of space to fit in the new industry landscape.

"Competition will be conducted on two levels: a very high level (Activision and EA), and a very low level (THQ, Ubisoft and the rest)," argued Pachter. "Activision and EA will only make games they expect to sell over 2 million units every year, while the others will still try clever Wii and DS games that make plenty of money at 500,000 units. If anything, I think that the DS may be overlooked by Activision and EA, giving THQ and Ubisoft an opportunity, and creating even greater opportunities for companies like Atari and Majesco."

The meaning for the MMO industry is less clear cut, however, according to Zenke. "I think ultimately it's too soon to tell [the impact of the merger]; I'd peg Lord of the Rings Online, the new Guild Wars boxes, and MapleStory's success in the US as the only vaguely interesting advances in the marketplace since December of 2004, but the growing acceptance of online gaming means there are more niches than ever for indie developers to occupy, despite very high standards being expected from the online gaming public."


Article Start Previous Page 4 of 4

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