Search Results for 'warners' ↓
April 25th, 2008 — News analysis and background
Here we go at last. Using Warner’s distribution gives Sci some advantages of scale. However they are still probably not beig enough for AAA console game risk. And who is going to do the global marketing? So this looks like an interim position prior to Warners taking full control. Maybe not this year, but one day.
Placing and Open Offer
RNS Number:1083T
SCI Entertainment Group PLC
25 April 2008
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION IN WHOLE OR IN PART IN OR INTO THE
UNITED STATES, CANADA, JAPAN, AUSTRALIA OR THE REPUBLIC OF SOUTH AFRICA
(for immediate release at 7 am)
25 April 2008
SCi Entertainment Group plc
PLACING AND OPEN OFFER OF 171,605,424 NEW SHARES AT 35 PENCE PER NEW SHARE,
STRATEGIC PARTNERSHIP WITH WARNER BROS AND ARRANGEMENT OF NEW BANKING FACILITIES
INTERIM MANAGEMENT STATEMENT
Highlights:
* Raising £60m through a fully underwritten placing and open offer of
171,605,424 New Shares
* Strategic distribution agreement with Warner Bros. Home Entertainment Inc. for
the US, Canada and Mexico, to drive growth in the North American market,
additionally Warner Bros will subscribe for up to £15m New Shares
* Current trading is in line with expectations and the Company is on track to
deliver cost savings of £14m from its rationalisation programme at a cost of
£7m, as announced in February
* Following completion of the fund raising the company will have substantial
cash balances in addition to its new committed £25 million debt facility.
* Progress with Tomb Raider: Underworld remains encouraging and the game is
scheduled for worldwide release before Christmas 2008
Phil Rogers, Chief Executive Officer, SCI Entertainment Group said:
“Today we have significantly strengthened our relationship with Warner Bros. one
of the world’s largest media groups, to create an exciting strategic
partnership, giving us increased scale in the North American market, to the
benefit of all our major franchises.
“The new financing puts us in a clear position to deliver on the strategic
business plan which we announced in February with focus on cornerstone studios
and core franchises, delivering high-quality, world class games.”
Kevin Tsujihara, President, Warner Bros. Home Entertainment Group, added:
“This investment underscores Warner Bros’ commitment to becoming a major
presence in the video game business, With SCi’s new management team in place
along with their track record of rich franchises like Tomb Raider, Hitman and
Deus Ex we believe we have formed an exciting partnership and a powerful engine
for growth.”
March 26th, 2008 — News analysis and background
Just a quick state of the industry look.
- Casual gaming is expanding at an immense rate. If you look at all the PC casual sites and what the Wii has done it is an amazing phenomenon. But basically it is our fault that it didn’t happen sooner. For too many years we have pandered to a niche and ignored the bigger picture. Now we have seen sense and are bringing the wonders of interactive entertainment to all. And they like what they see.
- Mobile gaming is king. Nintendo have sold nearly 70 million DS consoles. This compares with about 50 million units for PS3, Wii and Xbox 360 combined. And things are hotting up with Nokia (nGage) Apple (iPod touch / iPhone) Sony (PSPhone?) and Microsoft (Zune) all ramping up to be massive.
- Boxed retail plastic and cardboard games are being replaced as a business model far faster than anyone expected. The online services from Microsoft, Sony and Nintendo are all vastly busier than their wildest dreams. The same goes for Steam. And the biggest games in the world now are mostly browser MMOs like Habbo Hotel and Runescape. Do not invest in game retail.
- When it comes to global publishers of AAA games the industry is consolidating down to a handful of players. The business advantages of scale are so big in publishing that the huge companies rule. Small and medium publishers have no hope of competing unless they are niche or online, both factors that mitigate scale advantage.
- Big global media is storming into gaming with massive investments. Vivendi, Warners, Viacom, barely a week goes by without another big announcement. They have no option, interactive media is demolishing old, non interactive media. Gaming will grow to be bigger than television and film combined. Surprisingly News Corporation have yet to make their move. Is Rupert’s age working against him now?
- User generated content is growing very rapidly. This will be the brave new world of gaming. It is set to be bigger than anyone can imagine. The business model of the big console manufacturers has held it back artificially. Go and look at the work that millions of people put into their FaceBook and MySpace accounts and you see the potential.
- MMOs, you ain’t seen nothing yet. The tradition is that these are fantasy games on PC that absorb endless hours of grind every week. The new wave will be far more casual, requiring less commitment. They will cover a wider range of genres and they will use every platform, including consoles and phones/mobile devices. Just wait for Electronic Arts to make a GTA MMO!
- Community and gaming are converging to be the same thing. MySpace and FaceBook are getting more and more gaming whilst games get more and more social networking. Steam added powerful social networking and Sony and Microsoft are upping the social element in their online services. All this is changing our perception of what a game is.
We live in interesting times. Nobody can predict the next couple of years, just as every forecast of last year was wildly out. What is for sure is that all the above trends will have a massive impact over the next few years. They will change the game industry in ways that none of us can imagine.
January 10th, 2008 — News analysis and background
Welcome back to the regular news spot for a new year. Things have understandably been quiet over the last couple of weeks, but now some important stories are emerging.
- Wii Fit sells a million units in it’s first month in Japan. And it was almost certainly supply constrained. Yes, Nintendo have done it again. This could be the biggest grossing “game” of 2008. I can’t see what will beat it. It will also be a massive system seller worldwide.
- Xbox Live has ten million users. And membership numbers are running six months ahead of Microsoft predictions. This is the real long term battle, the online platform. It is where Microsoft can show their superiority because they are a software company, not a consumer electronics company or a toy company like their competitors. Upgrades to Live this year should improve the social networking aspects.
- Leaked Microsoft memo demonstrates their lead in the US. Using NPD data for the year to the end of November Xbox turnover for hardware, games and accessories was over $3.5 billion. This is $2 billion more than for Playstation 3 and $1 billion more than for Wii.
- BT ties-in Microsoft for internet TV push. This UK deal is important as it shows how Microsoft are entering into strategic alliances that make the Xbox 360 into a powerful entertainment hub.
- BlueBay could soon own majority of Infogrames. If/when they convert bonds into equity. They are buying it cheap and, as an investment company, they will have an exity strategy. So expect more industry consolidation. This should be a very good move by BlueBay as Infogrames have kicked out the worst of their senior management and own a vast mountain of good IP.
- Warners back Blu-Ray. It looks like Sony may well be about to achieve their first new industry standard since the three and a half inch floppy disk, despite multiple attempts. It will be a very hollow victory though as flash memory and online largely replace rotating memory in consumer devices.
- Take-Two has announced the acquisition of Mafia developer Illusion Softworks. Yet more industry consolidation. But how long will it be before Take Two are themselves acquired? They do look like a very juicy M&A target.
- State Senator seeks videogame tax. More crass stupidity from the uninformed and ignorant. Hilary Clinton is anti games too. And so are the current British Labour government. And the boss of McDonalds. The sooner these Luddites retire and the gaming generation come to power the sooner we will see some sensible views from those at the top.
January 9th, 2008 — Crystal ball
2008 will be, quite simply, the best ever year for video games in the whole history of the industry. The success of gaming has brought a lot of money into the industry and that money is being converted into games. We are also at that sweet spot in each console generation where we are still getting new IP whilst this generation’s version of established IPs are starting to appear. So we are getting Assasin’s Creed and Halo 3 at around the same time, for example.
It takes a few years into each generation for development teams to master the new capabilities of each machine. So the technical quality of games will go up a lot this year. Especially for the Microsoft Xbox 360 which has a more easily understood architecture, better development tools and has been worked on for longer. The Nintendo Wii is already mastered from a graphics and programming point of view because it is just a souped up Gamecube, the advances here will be with innovative uses of the gesture interface.
The installed base of the DS is now so massive that it can be very profitable to address niches. So expect all sorts of oddball games for this machine. Increasingly the DS will be used as an educational tool so expect more titles in the vein of Brain Age to appear. This will be the thin end of the wedge of what will grow to be a massive industry. Education by playing games.
Game genres will mainly continue as before on the hardcore front. However beyond that there will be a lot of new family entertainment. The Wii has changed the market for ever.
On the publishing side we will see the continuation of existing trends. Big publishers will get bigger because they have huge advantages of scale. Small publishers will be taken over or go out of business because they lack these advantages. The exceptions will be niche players and online publishers. Remember that Jeff Minter is a global developer and publisher with two members of staff. Xbox Live Arcade allows him to bypass traditional publishing constraints. This must be a warning to the global media giants like Warners who are muscling into gaming. It could be that the business model they are buying into becomes obsolete.
Overall we live in very exciting times and it will be fascinating to see the year unroll with so much that is new. Some of it expected and much of it not.
December 3rd, 2007 — News analysis and background
Regular readers here will be totally unsurprised at this news. Let’s look at the background. There are three fundamental factors at work here.
Firstly the big global media companies like Vivendi, Warners and News Corporation are investing very heavily in gaming, which you can read about in this article. They have no option, it is a matter of survival, because gaming (due to fundamental and innate advantages) will grow to be the biggest media business and in doing so will supplant older media to a significant degree.
The second reason is that gaming is set to grow 40% in two years, which is covered in this article. Maybe even more with the Nintendo effect and iPod joining the market as a platform. This makes companies a lot more valuable when the city/street look at their future earnings.
Thirdly game publishing works with massive competitive advantages of scale. A publisher who can guarantee over a million sales, due to global distribution and quality marketing, before they even start work on a game, has an immense advantage over a publisher that struggles to get to half a million sales with a game of similar quality. Industry insiders will be able to point at lots of examples of this. This scale advantage means that when the dust settles there will only be a handful of global publishers, just as in the music and film industries. Survival, just now, is best served by takeover and merger. Especially cross border.
As ever there are a couple of caveats to the above. Firstly there could always be a role for niche publishers who cater for genres and platforms that the big boys cannot be bothered with. Secondly digital distribution could upset the whole applecart by removing publisher advantages of scale. In fact it could make publishers redundant. Just look at Valve and their Steam system for a glimpse of where this is going.
Now let´s look at the fallout this has brought to another area, developer consolidation. Here we are seeing three things happening.
Firstly the big global media companies are buying up development capacity. They own the IP but they need the bodies to convert that IP into games. They could do it the hard way by setting up studios from scratch, but they realise that this is a race for survival so speed is of the essence. Hence good, ready made teams are now very, very attractive. As in the Warners takeover of Traveller’s Tales.
Secondly you have the existing specialist game publishers realising that they are going to be starved of IP as the big media companies keep it for themselves. So developers with their own IP have become extremely valuable. We saw this with the EA acquisition of Bioware and Pandemic.
Thirdly Nintendo, Sony and Microsoft are always looking for AAA platform exclusive content. If that means they have to buy studios, then they have many times before and presumably will continue to do.
As I say continually, we live in very interesting times.
November 14th, 2007 — News analysis and background
There has been a lot of takeover activity recently. And some of the prices paid are very interesting indeed. Travellers Tales, a 200 staff development studio went to Warner Brothers for $200 million. And they don’t even have a mountain of IP, not that Warners need any more. Pandemic/Bioware went to EA for $860 million, this time definitely for their IP.
And there is a lot more happening at the moment. NCsoft bought a lot of development assets from Cryptic studios as well as the IP for City of Heroes. Ubisoft bought Digital Kids. And EIDOS is currently negotiating for their own sale. All this at a time of tightening money.
Why so much activity and why such high values (a lot of this has been discussed on here before)?
Firstly there is the effect of industry consolidation. Economies of scale are such that we are moving to having only a handful of general global game publishers. The small ones cannot survive unless they are niche players. This is the same as happened in film and music. You cannot beat such powerful economic forces. (Unless digital downloading takes off.)
Secondly we have the big global media companies either moving into gaming or vastly expanding their stakes in the industry. Warner Brothers, News Corporation and MTV have all made significant recent moves. They have no option as gaming continues to grow to become the dominant media. The advantages of interactivity, connectivity and non linearity make older media look limited and obsolete.
Thirdly the numbers are looking amazing. This industry currently does $33 billion of business a year, this will increase to $47 billion by 2009, a 40%+ increase in just 2 years. Very few other industries are expanding at this rate. It is incredible that the Wii continues to be constrained by manufacturing capacity and sells secondhand at a premium.
Fourthly the industry is very resilient to (the coming?) recession. People give up their entertainment last, as was proved by the movie industry in the great depression.
This really is a golden industry at a golden time. Acquisitions will command a premium because the future value will be so enormous.
So have you been bought recently or are you a buyer in this market? Please use the comments to add to the debate.
September 5th, 2007 — News analysis and background
Oh the power of these articles! A month ago we were talking about the inevitability of consolidation. Obviously somebody read the article because now it is happening.
The facts are very simple. Eidos cannot survive at their current size. They do not have the global marketing and distribution needed to bring in the earnings necessary to make competetive games.
However Eidos are very valuable to someone else. And obviously not for their marketing and distribution. Their development capacity, both internal and in relationships with externals is well worth having. But the jewel in the crown is the IP. They own a huge catalogue of IP going back to the early days of the industry with firms like Domark and US Gold. Quite frankly the current company has only been scratching the surface of the opportunities this plethora of riches presents.
There are rumoured to be two suitors. Warner and Electronic Arts. It is far more valuable to the latter than the former for the reasons outlined in the previous paragraph.
Basically Warners are an 800 pound gorilla that has seen the light. They realise that games are going to be far bigger than film and music put together so they need to be in, just to survive. They need to be one of that small handful of publishers that are still standing after the consolidation. Their problem is that they started late and are playing catch up. EIDOS to them represents some of that catch up and they already own 10.3% of it. They would probably even retain some of the EIDOS management. What they don’t need is the EIDOS IP, Warners already have vastly more IP than the whole games industry put together. And it doesn’t fit in with their plans to release the film and game of an IP simultaneously to maximise maketing synergies.
Electronics Arts are trying to solve a different problem. They are the biggest games publisher in the world but they are a castle built on sand, and they know it. Their problem is that they have built their business quickly by using other people’s IP. Mainly films, books and sports stars. So they actually own very little themselves, so their worth is just built on current earnings, not real value. To them the vast pile of EIDOS IP is like a gold mine sitting over the motherlode. With it they have more chance of surviving the consolidation.
So who is going to win. Time Warner turned over $44.6 billion in their year to 2006 so it is just petty cash to them. However they would not get anything like the value out of the aquisition that Electronic Arts would. Although EA are a $3 billion revenue midget the value they would get out of the EIDOS IP would be massive, they could easily increase the revenues of these properties tenfold in just 5 years. And they probably will.
Just as a reminder here is a list of some EIDOS titles:
So who do you think is going to go home with the goodies this time? And, more to the point, who is going to be left controlling the industry after the dust settles?
