They told me to blog about this song, so I am. Quite funny.


posted by Greg at 3:49 PM

Activision merges with Vivendi Universal Games Group.

Apparently, Vivendi corporate get 52% of "Activision Blizzard," and Kotick gets to head up what may, depending on 4Q results, be a larger publisher than EA.

To give a little history here, the game assets of Vivendi were originally cobbled together by CUC International, a conglomerate that dealt mostly with travel companies; CUC merged with a company called HFC in 1998 to create Cendant, whose main assets were Days Inn, Ramada, HoJos, Travelodge, Avis, Coldwell Banker, Century 21, and Shoppers Advantage. That, plus PC gaming. One of these things is not like another.

To no surprise, they started shopping the game side around, and sold it to Vivendi's Havas division for something like $800m; turns out they needed the money too, because CUC had been cooking the books, its managers were indicted (and convicted) for fraud, and Cendant's share price went south.

It was never clear to me why CUC was in the game industry in the first place; I have to assume that someone there just happened to like computer games. But the net effect on Sierra, at any event, was more than a little disastrous; with weak internal management, and a series of owners (CUC, Cendant, Vivendi) with no real understanding of or expertise in the game industry, Sierra went from bad to worse. Blizzard, at least, was more or less left alone to do its thing -- its corporate masters at least had the sense not to kill a goose that produced golden eggs every few years. Blizzard is, of course, the value Vivendi is contributing; the tattered remnants of Sierra are not (alas) worth much, if anything.

There are some complexities to the deal, including the possibility of Vivendi increasing its stake to 68%, but this is one of the few big deals in the game industry that looks to me like it might actually make sense to stockholders; Activision has the kind of focus and industry expertise that Vivendi never did, and may actually do better with these assets.

From an industry perspective, though, it's kind of appalling. As the number of publishers continue to dwindle, independent developers' negotiating leverage dwindles with it, along with any real pressure for innovation. And while portfolio theory says size is important in a hit-driven industry, it's not clear that there are real gains to growing beyond some critical size, with Activision, at least, had surely reached before this. It looks to me like this is the end-game of the business conditions our industry has faced for decades--continuing consolidation of publishing--something that may prove to be basically irrelevant when the inevitable disruption caused by online distribution starts to change the nature of the game.

I wouldn't be surprised for this to renew rumors about an EA/Ubisoft merger, however.
posted by Greg at 5:08 PM