Analyst: Big Media Buyouts Of Game Publishers? Not So Fast

The recession has brought with it plenty of increased buyout buzz, as weakened larger game companies seek smaller studios at low prices to help bolster their strategy. For example, at 2007's end, Atari, EA, A2M and Codemasters were just a few of the existing game companies making smaller acquisitions. But talk among analysts and finance media has widely suggested that major game publishers, many of which are now seeing much lower-than-usual share values, might themselves become the target of acquisitions. These could come from even larger tech and media organizations seeking to add video games to their profiles, or bolster their existing industry efforts. So why would major media companies like Fox, Disney or Viacom consider further increasing their portfolio buying big, existing game publishers? "There are numerous reasons why larger media companies are showing interest in video game companies," says Lazard Capital Markets analyst Colin Sebastian, talking exclusively to Gamasutra. "For one, the faster growth expected from interactive entertainment contrasted against the more mature filmed entertainment and television businesses," he says. "Secondly, moving towards an internet-centric media landscape, the monetization of games on a broadband platform has proven to be more successful than many of the attempts to migrate traditional media and videos online," Sebastian adds. The "network effects" and higher user engagement that multiplayer gaming offers looks like a big win to many media companies, Sebastian explains, and plays a large role in the increased attention to the video game space in a time when those companies are formulating key long-term survival strategies. So does that mean that we can expect to see, for example, Disney making a bid for Electronic Arts, as the Wall Street Journal speculated they should last month? Although he declined to comment on specific organizations, Sebastian suggested that large media and game company deals are an idea on the horizon, not a wolf at the door. "I wouldn't necessarily conclude that any big deals are imminent. The media companies themselves face depressed valuations, the credit markets are still tight, and speculation about massive consolidation of the video game industry has been around for years," he says.