Wednesday, September 17, 2008

OPINION: Of Mergers and Slap Shots

With the stock market crash on September 15, lots of investors and advisors were scrambling to make sense of what happened.  This isn’t a financial blog so I won’t go into the details but I will say that the tech industry will be feeling the pinch right away.  This is an industry that is still cautious from the dot com boom and bust of the 90’s.  One of the ripples you see that already touched the tech sector is the EA and Take Two games merger that was just scrapped on Sunday September 14th. 


There were lots of speculations on why Take Two was still holding out after EA continued to come back with counter offers.  That’s a moot point now since EA decided to walk away which caused EA’s stock to close on Monday at $43.30, dropping from $44.90 on the previous Friday while Take Two’s stock fell to a $15.45 low even before the NASDAQ opened on Monday from their previous Friday closing of $21.89.  That’s almost a 30% decrease in stock prices over a weekend. 


What does all this mean for you and I where we are gamers and not investors?  As a gamer, the news has been that this merger wouldn’t have been in our best interest.  No one like EA for various reasons; they are currently the second largest publisher in the industry and certainly use that to their business advantage by consistently releasing buggy games and incomplete builds (Battlefield 2 is an example of this).  Their games do traditionally go on to sell very well but in general, the majority of the problems are not fixed until a 1.2-1.3 patch.  Blizzard, EA is not.  But the primary concern for gamers with the possibility of the now dead merger, was that there would be no more major league sports games competition.  Take Two, while being famous for Rockstar Studios, also owns the 2K Sports studio, the only other major league developer in gaming. 


The question is this: Is it really that bad to have only one player in the sports gaming genre?  I personally believe that competition is great for innovation and for the consumer since this gives us choice.  But in the specific instance of EA VS. 2K Sports, I don’t think it is as important as so may believe.  2K has lost the license to NFL, their NBA games are still very playable but innovative they are not, and their NHL offerings the last 2 years (including this year) has not been innovative either.  In the field of innovation, EA certainly has been busy with their NFL and especially NHL products.  But with the introduction of this year’s “Be A Pro” EA is positioning the sports genre for a transition into the MMO format.  Eventually, I could see sports games becoming subscription based, with real time statistical updates, roster changes, and online fantasy leagues.


Fantasy leagues are a huge hit with armchair quarterbacks and couch goalies, just look around your office especially if you are in Canada and the hockey season is about to start.  If you offer them a way to play out these fantasies in both an active format (actually playing the games with a controller) and a way to play it simulated (stat driven only) then what you have is a cross genre product that bridges the gap between the different armchair jocks.  Unfortunately, it seems that 2K and EA will continue their dance until EA decided to throw more money at the cash starved NHL and make that license exclusive as well (which would not be good). 


The real issue then is would EA have been as motivated to do crazy things like Right Stick actions and Be A Pro if NHL 2K7 wasn’t as good as it was.  That is something only EA would know but as it stands at the moment, innovation isn’t necessary every year.  I would even argue that a new sports game isn’t necessary every year.  Did FIFA 07 change much going to 08?  Would players have been just as satisfied with patches to the engine and rosters?  You are asked to pay full price for a game that’s guaranteed to be out of date in 8 months.  Replayability is much higher on sports games by nature, so that could justify the higher price but instead of charging another $60 for the next year’s update, how about charging us half that price for an expansion – because lets be honest, most year to year updates are just glorified expansion packs.


I hope that EA will continue to give fans innovation and challenge themselves year over year to be the only name in sports games.  If the Madden series is any indication, I think we are fairly safe since innovation and tweaks have continued even though they are the only name in NFL video games.  In the meantime, keep your eye on 2K stocks, if it continues to slide, might be a good time to buy – because you know ActivisionBlizzard or even Ubisoft is keeping their eye on this.

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