Jesse Divnich, Electronic Entertainment Design and Research

General thoughts on mergers in the industry:

During periods of rapid growth, organizational expansion through acquisitions and mergers is a healthy sign of a maturing industry.

Because of this, it is far too easy to fall prey to industry outsiders looking to get a piece of the pie. We have seen recent examples of this with companies like MTV solidifying their industry presence in the gaming sector with the acquisition of Harmonix.

To prevent this, video game publishers must increase their company's value to make a possible acquisition far too expensive. Aside from increasing an organization's value, mergers and acquisitions increases the barriers of entry for outside competitors.

MTV makes for another good example: While MTV had the capital to purchase Harmonix, they did not have the resources or expertise to launch a product successfully in the retail channel. This ultimately led to the MTV/EA partnership on Rock Band.

Other companies ripe for acquisition:

THQ is about the only big one left. Potential acquirers are still deciding whether THQ is worth the premium price it would go for in today's market. It is safe to say that THQ is under a lot of pressure right now to prove that they are worth that premium.

There are also Majesco and Midway, both of which are struggling to achieve profitability. I would not be surprised to see both of their assets acquired within the next five years, especially Midway, since they do have a more robust selection of intellectual properties and wholly owned studios.

Midway's Mortal Kombat vs. DC Universe

In terms of developers, anyone who is not already owned by a publisher is ripe for the picking. We have already seen major acquisitions of developers such as DICE, BioWare and Pandemic. It is only a matter of time before others are picked up by publishers in an attempt to secure more intellectual properties and talent in the industry.

Effects on developers and gamers:

As the industry becomes more centralized, powers begin to shift from the largely scattered development community to the well-established publishing community. Less talented, smaller or un-established development teams will be forced to be acquired, or will lose crucial development opportunities.

For the already established, respected or acquired development teams, they will see many benefits. First, they will see bigger budgets. Second, as publishers continue to expand into new markets, their titles will have a larger geographical reach.

There is, however, an opinion that as our industry grows, creativity takes a back seat to proven design practices and established intellectual properties. This assumption stems from the idea that creativity is risky; therefore, publishers avoid creativity. I believe [this] is an illogical and erroneous assumption. In fact, publishers are constantly on the lookout for new development practices that will reduce cost as well as new gameplay elements that will increase appeal among gamers.