Why video game developer acquisitions scare me
Bloomberg is reporting that Activision Blizzard, with its $3 billion in cash and no debt, is looking to acquire game developer companies on the cheap as the economic downturn continues to worsen. This is scary.
Am I the only person who's concerned about the consolidation going on in the video game business? Activision surpassed Electronic Arts, formerly the world's largest developer, last year in its merger with Vivendi and now it wants to roll up even more developers to expand internationally and "fill holes in its product line," according to Bloomberg.
In the past five years alone, Electronic Arts has acquired developers JAMDAT Mobile, Mythic Entertainment, Phenomic Game Development, Digital Illusions CE, Headgate Studios, and VG Holding Corp. And it controls 15 percent of Ubisoft. All told, the acquisitions cost the company billions of dollars.
For its own part, Activision has been just as active. The company acquired Vicarious Visions, Toys for Bob, and Beenox in 2005 and followed that up in 2007 by acquiring a controlling stake in Bizarre Creations, which was trailed by its 2008 merger with Vivendi to become Activision Blizzard. In the meantime, its cash-on-hand has grown to more than $3 billion, and over the past four years, the company's revenue has grown from $1.4 billion to almost $3 billion annually.
Why does it matter that the two largest developers in the video game industry incur that much revenue each year? Because smaller developers like Capcom, Konami, Bethesda, and others have less chance than ever to compete. I understand capitalism, but the more we embrace these companies, the greater the chance that we will be left with an industry that mimics Hollywood: titles will be derivative, bank-breaking wastes of time.
If we consider Hollywood--the model to which the video game industry is always compared--it doesn't take long before we realize that it's dominated by a handful of studios that effectively control a large percentage of the industry, while the independent studios are left trying to defy the percentages and get their innovative and artistic films to the masses. Since most fail, it's the big studios that enjoy profits as the independents try to find some way to stay alive.
Who can say that this isn't where the video game industry is headed if companies like Activision and EA continue their acquisition frenzy? What if EA finds a way to acquire Take-Two Interactive? What if Activision decides that it will use its $3 billion to buy up small developers all over the place? There's a very real possibility that if both companies succeed in those endeavors, the video game industry will turn into Hollywood: EA and Activision will cement themselves as the major players in the space and the only other developers who will be able to consistently captivate audiences will be first-party developers, Nintendo, Sony, and Microsoft. All the others will be forced to pick up the scraps.
If that happens, what little innovation that's left in the video game industry could die with the small developers. Sure, there would be some games that would slip through the cracks and appeal to a mass audience, but they would be the exception, not the norm. And in the process, gamers will be inundated with sports games, first-person shooters, MMORPGs, and Grand Theft Auto wannabes.
As a gamer, I fear consolidation in the video game business. From a business standpoint, it might make sense to EA and Activision. But I feel it's the end of innovation and a surefire way to ostracize an entire generation of gamers who still look back fondly at the days of playing games that didn't look so realistic, but that were all about fun and innovation. Based on our experience so far with monolithic developers, they haven't offered anything of the sort. What makes us think that will change when they're the only developers making a real impact on the industry?
The game industry is in desperate need of innovation, and consolidation and acquisitions won't help it achieve that.
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Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
Acquisitions are a two edged sword. On one hand, they could save smaller companies feeling the heat in the current economy... but on the other hand, the larger entiries that gobble them up are large for a reason... it's all about the greenback, and the big company is going to go with the recipies that have worked to make cash before, not new and innovative or experimental.
Invariably, when game designers feel their creativity is being stomped upon, they leave and form new companies... which release 1 or 2 smash hits, get bought up, and then form a new company. That's the rinse-and-repeat formula of the game development industry and I don't see it changing anytime soon.
And by the way, that's how it always worked in all industries. When things get cheap and you happen to have a lot of cash, you buy stuff. You're were in capitalism before and you're still in capitalism now.
End of innovation??? What are you talking about? If anything, it's now easier to publish games than it was before because of XBL and PSN.
Lack of variety = lack of innovation = lack of competiveness. It's competiveness that drives innovation in any industry and when competiveness is eliminated (like Microsoft does) this is called a monopoly and it results in substandard products that consumers are pretty much forced to endorse because it's the only choice they're given (do you have lots of fun going to a store and finding a PC that doesn't have Vista on it?). This is a form of authoritarianism. And hence why it is illegal in theory (not practice because clearly Microsoft has more money than any organization looking to charge them).
Capitalism is based on competition, not across the board buy outs (something Microsoft has faced countless lawsuits for). The closer we get to few companies controlling the industry, the further we get from any sort of great advancements in playability or new ideas because people will buy the only games available simply because there are no alternatives. And as long as this giant company is making record profits because we're all buying from them), it's going to continue to put out all the same garbage it always has put out. Why? Because there's no longer a driving force. Innovation is squashed with simple satisfactory Halo 5000.
Part of the reason for all the manufacturing industries failing is because of a lack of manufacturing demand, especially in North America. Why? For one, because China has the monopoly on manufacturing. Their products are produced hardcore cheaper than domestic ones because of drastically lower wages and lack of environmental safeguards (and other things that add to the consideration of the final price). Secondly, because North American industries have, instead of choosing to compete some way with China, opted out of competition entirely by maintaining their bloated manufacturing costs through the refusal to implement new technologies, by increasing wages (especially CEO wages, bonuses, etc), and by simply remaining uninnovative as if they are the cream of the crop or something.
Treat this analogous to the video game industry. You cannot compete against conglomerates (China) without being innovative. However, for a single (or few) company (China) to control all or most of the raw market for said industry (manufacturing), it becomes very hard for any other company, especially if it's small (or doesn't have a lot of money), to enter and be competitive in the industry. This or these companies (China) are now in control of and set the demands of said industry (they pull the strings). If you're production costs are too much, you wages are too high, your entire manufacturing operation is going to be outsourced to where it can meet those demands (China). And ultimately, what do you get? Poor practices that result in ******, poorly innovated products. Why? Because there's simply no other companies offering and whom can afford to compete with this one giant company (China).
It's nearly impossible for small companies to enter the market and compete successfully with giant companies. Capitalism is based on competition, not corporate take over. Giant corporations are given giant concessions by the giant federal government, giving them the benefit of much lower operating costs (relatively) than newer, smaller companies. And this is why it's so easy for Microsoft to buy out any company that threatens it with innovation. Innovation becomes tremendously slow paced in the monopoly situation (because of no competition... it's a vicious cycle eh). Don is completely spot on with this. Video games, like every other industry in the market today, are headed in a truly uninnovative (actually more like backwards) direction.
Case in point: EA aquired numerous studios, including Westwood, makers of the Command and Conquer franchise, and Black Box Entertainment, creators of the Skate and Need for Speed franchises, only to close them down and consolidate them into the in-house development teams.
Sure, you could argue that "this is the way the industry goes, get over it," but when is the last time you saw a truly great, innovative movie with real artistic value come from the womb of Universal Studios or MGM? By and large, movies of the past decade are made with the artistic expression of the Model T. Or worse, you get a self-indulgent piece of crap that can't see its own plotline through the murky writing and wants to remind everyone that "I was created by a deep, brooding artiste, can't you tell?" Or, you get a film like Juno, that tries hard to be "indie" despite being made by Fox, and makes you want to hurl everytime the main character speaks because they over-do it on the "indie"-ness of a faux-indie film.
Yeah, publisher-owned developers might be the path the industry will take, but that doesn't make it a good one, by any means.
People don't have loyalty to software development houses the way people are rabbid fans of hardware (think video cards, fanboys, canon vs. nikon etc.). So people will always willingly switch to a different game if its good. And with video games, there is always room for 2 or 3 or 4.
No innovative idea to save us from endless WOW and SIMS will arrive if Activision and Electronic arts are the only companies left standing.
When the big publishers buy development houses, what exactly are they buying?
They buy IP and staff.
But the staff aren't slaves. They can and often do walk out the door.
Often to start their their own studio.
This kind of churn is actually good and you see a lot of it it Hollywood.
Creative people need to create and if they can't do it where they are, more often than not they find a place and a way to do it elsewhere.
Consolidation needn't be all bad; a well-run major publishing house can (and occasionally does) shelter development staff in ways that smaller operations can't by providing more resources, more leeway on schedule. How often does the review of an game from a smaller publisher (a Southpeak, a Midway, etc) end up with the game being labelled as wasted potential for having shipped unfinished, rushed...?
The simple reality is that major disk-based games are becoming to big, too complicated, too *expensive* to develop for the smaller studios to be able to bet the required investment on a single roll of the dice, whereas a bigger studio with multiple ongoing, staggered releases can afford to slip in a few riskier ventures in among the cash-cow releases.
The bottom line is the industry is changing, like it or not.
Entropy moves only one way.
Deal with it. :-)
Just like in my previous posts, basically what Sony and Microsoft have done is pushed video gaming too far in the last round and made it impossible for small developers to actually become up and coming developers. They released (mainly Sony) technology that was and still is expensive and have refused to subsidize those added costs to developing for the developers. This is the classic monopoly situation. The hardware companies basically set the stage for this to happen and are now using the downturn as a choke hold move on those developers actually investing everything they have into putting out innovative products. The future of video gaming is garbage.
It's the gamers who need to wake up and demand more from these companies, stop buying their crap games and they will get the message.
Robert
Their works are shown at regional film festivals, and sometimes at world-wide ones like Cannes.
Most of them are not cost effectve productions, but done as hobbies and labors of love.
The big film companies aren't preventing them from making their movies, just not allowing them to show them in their theaters. Which leaves regional film festivals for distribution to the home computer, VHS or DVD market.
Game companies are shutting out the little developers, they just aren't helping them any.
Unfortunately this is another article in the doom and gloom mode I've come to expect from you -if people all thought like this, the video game industry now wouldn't be bigger than the movie industry.
- by eNcryptedGnome March 12, 2009 11:36 AM PDT
- This is the way we see much of the business world work. It is a true and a actual fact of nature itself, "The strong either help or eat the weak". They usually end up eating the weak, whether it be litteraly or in large sums of cash. The weak usualy always become part of the strong.
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(24 Comments)However we are seeing a whole new face to the Video Gaming industry. Over the past decade we now have hot babes on hot cars at gaming expos... yes they are also dressed in really hot outfits. What does that have to do with a game anyway?
Of course we are going to see a "Hollywood effect" in an industry where unlimited creativity can be drafted out to a virtual environment. Instead of firemen and police men of yesterday, we have little Max Paynes, Laura Crofts and Master Chiefs. Because everyone wants to be on center stage. It is human nature alone that will make a small thing like video gaming once was, and explode it into a billion commercialized pieces amongst the masses.
I dont think this should be about the fine details. Anyone who has spent more than 5 minutes on this thread, understands where the gaming industry is going. It should be about the bigger picture. It's obviously going to happen, anyone who actually learns from history knows that. It's the people wasting their time reciting fine details that don't see the big picture.
Only as individuals can we change the way things function. Sometimes it takes many of us with one belief to form a common ground. Sometimes it takes one of us. Only you can change the way this industry works. You can drop your day job and go develop games yourself. You can donate to your favorite companies, you can only buy their products and no other competitors. It is a simple answer, but not even the average human would pursue it. To LAzy.