Ed Barton, Screen Digest

General thoughts on mergers in the industry:

One of the biggest drivers has been the increase in development costs for all platforms, but, in particular, for graphics-intensive platforms. Sharply increasing development costs have increased the financial risk of games development.

Another factor driving consolidation is the eagerness of diversified media companies looking to expand their involvement with the video games industry.

As the current hardware cycle matures and the next generation of consoles approach, we might see something on a larger scale as a media group looks to acquire an entire publisher. The likelihood of this will increase during the hardware transition phase, which is traditionally when a publisher's financial performance suffers.

More recent transactions have been driven by the desire to expand both product and geographical reach. The marriage of Activision's proven Western hemisphere console publishing capabilities with Blizzard's global PC and PC online gaming capabilities is a compelling combination.

With EA and Take-Two, the story is more about domination of the U.S. market and combining some of the most exciting gaming IP around today. There is another significant quick win in the overlap between their sports games publishing operations with immediate savings to be realized, as well as market share gains, by eliminating duplication.

Other companies ripe for acquisition:

SCi Entertainment has attracted a lot of scrutiny recently, and any firm which must undertake dramatic changes in leadership and strategy will come under the microscope as acquirers look for cheap assets.

SCI/Funcom's Age of Conan: Hyborian Adventures

Major publishers are looking to build online gaming capabilities, both in the casual and core gamer spheres. I think some of the more successful developers and operators specializing in online games and MMOG's will present attractive targets to publishers looking to enter these markets.

Effects on developers and gamers:

If the publishing industry were to consolidate further, one might argue that a lack of competition could lead to a monoculture in which fewer risks are taken and innovation suffers.

However, recent developments in gaming (digital distribution opening up markets to smaller players, a renewed emphasis on casual games, and moving away from the two-year development cycles of graphic-intensive games) suggest that even the largest operators realize the value of diversity and its key role in the ongoing healthy of the industry.

I hope there exists the potential for smaller, smart operators with compelling products to grow and establish themselves.