The Vivendi-Activision merger is bad for gamers

Now that the deal between Vivendi and Activision has been officially announced, it looks like the former will take two-thirds control in the popular developer and be able to compete more effectively against the video game industry's de facto big shot--EA.

Another sad day for gaming

(Credit: Vivendi)

And while the $1.7 billion will allow Vivendi to become a more "complete" organization that can offer a wide array of games for people on all platforms, I just can't see how this will benefit any consumers.

Sure, the merger between Vivendi and Activision will finally create a competitor for the behemoth that is EA and with Activision's current streak of 74 percent growth since 2003 as compared to EA's paltry 25 percent, it's certainly possible that the former could overtake the latter in terms of size within the next decade.

But is an environment where two major video game developers control a significant stake of the market really beneficial to consumers? Unfortunately, the answer is no.

EA acquired small developers for one reason: to improve its own game lineup without being forced to create unique titles on its own. And to make matters worse, most of the game franchises it bought were ruined after a few years with EA at the helm.

In fact, EA has averaged at least 1.2 acquisitions per year since 1995: Manley & Associates (1996); Maxis (1997); Westwood and Tiburon (1998); Kesmai (1999); Dreamworks Interactive (2000); former Sega Sports studio Black Box (2002); Studio 33 (2003); NuFX (2003); Criterion (2005); JAMDAT Mobile (2006; Mythic (2006); DICE (2006); and Bioware/Pandemic (2007).

Save for the latest acquisition, can it be said that EA improved any of these swallowed up studios? If you believe it has, I think you're mistaken.

Upon acquiring new studios, EA has taken a successful franchise and doled it out to studios all over North America to create sequel after sequel. And each time the sequel hits store shelves, the allure of the first title quickly gives way to a sense of contempt for the entire franchise. Is that really what we want from Activision and Vivendi?

Interestingly enough, Will Wright--the creator of SimCity and a victim of the "buy and reproduce" mentality of the video game industry--chimed in on the subject of sequels.

In an interview with German site Stern, Wright was asked about his thoughts on sequels and the following to say: "One would rather play it safe than be creative. Still, this seems to work. But for how much longer? Besides, there are simply too many games on the market. Lots of bad games are coming out because of this."

But it's not just Will Wright who believes creativity is what will drive this industry forward and create a better environment for gamers. In an interview with GameIndustry.biz last year, a representative from Ubisoft -- a company partially owned by EA -- explained that "it would be dangerous for a company like Ubisoft to get together too much with a company like EA, because it could kill creativity - and in [the game] industry...that's key."

But if all of these "experts" feel this way, why doesn't EA, Vivendi and Activision feel the same way? Is it because the almighty dollar is far more important to these companies than doing what is right for gamers? You better believe it.

A quick glance at the current state of the video game industry will immediately yield one fact: the most innovative games are not coming from huge developers, they're coming from small developers with titles like Katamari Damacy.

On the other hand, it's the larger developers like EA and now, Vivendi-Activision that create derivative gameplay that makes us all wish for the days of small studios creating games out of a love for video games and not a profit.

Unfortunately, the vast majority of video games are developed in a top-floor office by a group of suits who think they know exactly how to create a game that will sell well. And although some developers may have fresh ideas that will push this industry forward, most of those ideas are turned away and called "too costly" or "not commercial enough."

And while this may still help these large developers enjoy record profits, it won't last forever. And once the majority of gamers wake up and realize they are victims to a commercial enterprise and not the beneficiaries of innovative video game titles, I think we will see a major shift in the way games are developed.

[debitsandcredits]

I have just completed a study of Activision, Electronic Arts, and THQ, Inc. because the industry as a whole seems attractive and innovative. I wanted to add to the conclusions provided by the columnist that the large video game developers such as ATVI and EA are successful in terms of sales, but their income numbers are tiny net margins of around 5% for ATVI. In fact, most of the companies in the industry have consistently negative income from operating activities. I suppose that it is exciting to see these large companies continue to grow, but it seems that only EA has some stability to its net income and operating earnings' numbers. However, it has only been able to achieve this after climbing above $2 billion in total sales.

It seems that there is a lot of waste built in to the corporate development of video games if they cannot become reliably profitable until they reach $2 billion in sales. If the market for video game developers is as attractive and popular as it appears, then it is clear that the correct business model is to remain private and to remain creative. The organizational structure of a large corporation doesn't seem to align with flexible and entrepreneurial structure of these smaller firms.