Last week was a big one for news – including the end of Phil Harrison’s 15-year career at Sony and first details of CMP’s intentions to make GDC an invite-only affair for press – but no other story came close in importance to EA’s desire to purchase Take-Two.
Made public late on Sunday night, the news has both set the scene for the publisher supremacy scrap of this generation and cast EA CEO John Riccitiello – and his master plan for the company’s growth – in a vastly brighter light than has been seen in recent years.
The war of words between EA and new super-rival Activision Blizzard escalated dramatically last week, as Riccitiello was catapulted onto centre stage by the revelation that EA had bid $25, then $26 per share – almost $2 billion in total – for GTA publisher Take-Two, and that both offers had been refused. EA itself made the story public after the second rebuttal from Take-Two head Strauss Zelnick, intimated that it was still its intention to reach an amicable solution with the Take-Two board but sparing any illusion that it would secure control of Take-Two aggressively if necessary.
The normally sedate games-related business wires exploded with activity as analysts fell over themselves to get a handle on the meaning of the move. In a conference call held on Monday, February 25, Riccitiello and CFO Warren Jenson laid out in simple terms the obvious message: an EA take-over will be good for Take-Two investors, EA investors, Take-Two’s studios and Take-Two’s products. We’re lacking in M-rated titles, said Riccitiello, and Bioshock was my favourite game of last year. I wouldn’t change a line of its code: I’d just sell more of it. Take-Two, said the EA bosses, was beset with financial and legal problems and the move would provide stability for investors. And, of course, Rockstar and GTA were “the asset” driving the buy-out.
The sports category was barely mentioned in the call, with Riccitiello saying that Take-Two’s studios would be welcomed into the company. And that was that.
Back of the net
Behind the pomp, though, a picture was emerging of a titanic battle that is likely to define this generation’s software possibly even more than the hardware race itself. EA is now at war with Activision Blizzard following agreeance of last year’s $18 billion merger, and its move on Take-Two is in direct response to the fact that EA as it stands now is not big enough, not rich enough and suddenly bares the degrading moniker of “number two global publisher” after a seeming eternity as leader.
The wait for EA’s response to the merger ended last week. Everything Riccitiello and Jensen said surrounding the Take-Two approach was aimed directly at Activision Blizzard’s weak spots. GTA and Bioshock are games EA’s rivals cannot compete with in-category, and they were the main focus of the investor call on Monday.
The action games were the red herring to sports, obviously, and away from the Take-Two deal, the uber-virulent EA Sports boss Peter Moore not only became visible, but also outright aggressive towards Activision Blizzard. He was quoted in two interviews last week as saying the rival could not compete with EA in sports in any way. And while Riccitiello and Jensen shrugged sports off in the face of analysts, the not-so-stupid were quick to point out that a Take-Two sale would give EA not only US market supremacy in sports, but complete global domination.
Activision boss Bobby Kotick responded to the activity sulkily, saying he never wanted Take-Two anyway, and that it’d take a billion dollars to beat World of Warcraft. Ex EA global online boss Lars Buttler immediately responded, calling the mere assumption that no one could take WoW on a “bluff”. Riccitiello suddenly seemed in a good place, bullish on the prospect of acquiring Take-Two no matter what, and surrounded by favour-men and the irrepressible Moore, surely the one guy in the entire industry that can sell beef to McDonald’s.
Show me the money
While conflict between EA and Activision Blizzard ramped up, however, a sinister note crept into the unraveling of the Take-Two deal. It was shown that Strauss Zelnick had seemingly engineered a large payout for ZelnickMedia, the investment firm in charge of Take-Two, after refusing to accept the initial $25 a share offer. The news may have answered Michael Pachter’s “baffled” stance on why Take-Two had ever refused the price in the first place. The ramifications of this maneuvering by Zelnick are still unclear, but it does at least show that EA isn’t the only party involved that wants the take-over to happen, and adds more weight to the likelihood of a deal being completed.
Shadiness aside, it does seems likely that EA’s purchase of Take-Two will go ahead in some form. Take-Two, in actuality, would find it very difficult to stop it from happening, and by going public EA – or more specifically, Riccitiello – has to make the deal work or face the ire of the market, something EA can ill afford given recent share price history. Riccitiello has now laid out a clear path for EA’s mid-term, saying the company will hit revenues of $6 billion by 2011, employing Moore to globalise EA’s sports brands and making a heady move on Take-Two with all the bravado of a matador.
If by a man’s action shall you know him, last week showed us that Riccitiello is a fighter, that he has a serious plan to take EA back to the top-spot in global third-party publishing and that he refuses to quit in the face of the next level of competition.
John Riccitiello, we learned in the last seven days, is the goddamn CEO of Electronic motherfucking Arts, a fact you’re unlikely to be forgetting any time soon.
Clash of the titans
Assuming the Take-Two deal goes through, the publishing landscape will be dominated by a yin-yang affair with EA and Activision Blizzard for the foreseeable future, the question being not one of who will be successful, but who will be most successful.
Activision Blizzard has a surly line-up of ageing A-listers (Hawk, Spider-Man) and break-through hopefuls (Prototype, World in Conflict) led by a triumvirate of super-performers in Guitar Hero, Call of Duty and World of Warcraft, leaders in the rhythm action, shooter and MMO categories respectively.
EA will be undisputed leader of sports and M-rated action with FIFA, Madden, NBA, NHL, Bioshock and GTA, and may surprise the music sector yet with a global roll-out of Guitar Hero-competitor Rock Band.
Also, EA has a strong grip on the casual sector with 100 million-seller The Sims, Pogo.com and, of course, Spore. Activision Blizzard has nothing comparable.
The euphoria of creating the world’s biggest games publisher in Activision Blizzard may be short-lived. If EA can be fully mobilized, embracing the nebulous, mass explosion of social and casual gaming in its entirety, while drilling out its major opponent in sports and taking control of M-rated action, it will become a sledgehammer opponent in the mid-term. A big question mark hangs over the depth of the Activision Blizzard’s portfolio: the same simply won’t be true of EA if the Take-Two deal goes ahead.
Who will win? The question, largely, is irrelevant. The only way EA and Activision Blizzard revenues are going for the next few years is north. The leader will be “number one”, and good for them. That both companies will be “successful” isn’t in doubt, but the best thing to have arisen from the dust of the Activision Blizzard deal is a newly empowered John Riccitiello, his plan to buy Take-Two and his roadmap to EA’s $6 billion per year.
John’s punching, and the industry is all the better for it.