Industry Consolidation in the News

Regular readers will know that publisher consolidation is an economic inevitablity, the scale advantages of being big and global are so great that anything less (with our current business model) will be squeezed out. Also the big film studios will have a big part to play, as role models, as co users of IP and as game publishers themselves as our industry grows to be bigger than theirs. Three stories currently in the news serve to give even more credence to these views.

EIDOS are for sale, we all know that. According to The Times there are now three bidders. Time Warner, who obviously can see the writing on the wall for the future of entertainment. Ubisoft, who presumably are trying to build a pan European champion to take on the Americans. And someone fron China who is presumably going to use it as the basis of a lot more aquisitions, sees it as a short term investment or doesn’t know what they are doing. To me the people who should be buying EIDOS are Take Two. This is because they have lots of money and a narrow IP base that desperately needs expanding. They could very easily afford EIDOS and they would almost certainly be able to make better use of the IP than the other players. It is just a pity that their management is in a bit of turmoil.

Square Enix are a very successful Japanese publisher of RPGs, however only 10 to 20% of their turnover comes from outside Japan. Now they are looking for an American partner and want to get 50% of their revenue from outside Japan within three years. This goes back to my proposal a few years ago to the owners of Codemasters, a strategic 3 way strategic alliance between mid sized European, Japanese and American publishers (with or without equity swap) has the potential to create a global player in a very quick and efficient manner. This may now be a good survival route for quite a few publishers to go down.

EA became the monster it is by piggy backing IP from other entertainment industries. But now they are behaving in a far more mature way. And this means that they can see that only getting 6% of their turnover from Asia is not only bad, it is dangerous for them. It is a weakness as we approach an age where being a true global player is essential for a publisher. So it is no suprise that EA announced at Tokyo Games Show that they are looking for Japanese partners. This has to be an absolute top priority for them. Jon Niermann, president of EA Asia said EA are “exploring everything”. This is an excellent open minded approach and augers well for the future of EA. 

These news stories are just a small taste of what is to come. There are still just far too many publishers for a realistic model of how publishing works and the immense potential of gaming is at last getting the serious attention of major global media companies.

So are you a buyer or a seller in this consolidation marketplace? Or are online distribution and niche publishing going to undo the plans and ambitions of these giant companies?


  1. I defintely think that digital distribution is going to take over in the next ten to fifteen years, to the exclusion of the “video game store”. They won’t go away completely, but they’ll decline, and publishers will adapt.

    The only thing that can stop it is retailers who don’t want to see themselves cut out of the picture. The possiblity of digital distribution of media to the mainstream consumer is a frightening concept, even to the big chains.

    One wonders if Best Buy and Walmart would even let something like that happen. But I think that the convienence of it all will win out eventually as more and more people move into having a central media space in their home which is connected to the internet.

  2. Thanks for this.
    We have already seen digital distribution in music with iTunes and the like. Ever increasing broadband speeds and clever techniques such as in Steam will kill off physical product. There will be no need for it and with digital download of games you can offer so much more.

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