Grand Theft Auto Takeover

According to the BBC, Grand Theft Auto bid goes hostile, the chief executive of EA said the offer was NOT hostile. “This is an incredibly friendly proposition: we’re offering a premium of over 60% of what [the share price] was trading at before our offer. I think we’re the best possible home for their creative organisations; frankly, we’re big fans.”

Only last Tuesday, Take-Two raised its profit forecasts for the year on the basis of better-than-expected orders for its new game. The deal would be the latest round of consolidation in the industry, following Activision’s $18bn take over of the gaming unit of Vivendi, which was announced last November.

That merger dethroned Electronic Arts as the industry leader by revenues. Buying Take-Two would put it back on top. According to the Economist at Video games - attempted carjack, a deal would make strategic sense. EA is not particularly known for creativity; it churns out reliably profitable sports games, movie tie-ins and lots of sequels but has tended to buy independents to generate ideas for new games. Acquiring Take-Two would bring it Rockstar Games, home to Sam and Dan Houser, the talented brothers behind the “Grand Theft Auto” series. Another motivation for EA may be to stop Take-Two competing with it in sports games. Take-Two, for its part, might benefit from a bit more stability. Its management is described as ‘chaotic’.

Indeed, EA would have found it easier to buy Take-Two early last year, when it was in deeper trouble. Now the EA chief executive argues that Take-Two is just too small to compete in a market where size is increasingly important: scale helps firms spread costs and risk as games become more elaborate and expensive to develop.

Game designers – especially those behind violent games like Grand Theft Auto – are well aware of the negative publicity that can surround their product. Whether or not this is justified, I am reminded of the moral panic whipped up by the daddy of most modern video games: the blockbuster of the late 70s and early 80s; Dungeons and Dragons. Hats off to its creator, Gary Gygax, who died last week.