(Update: T2 chairman Strauss Zelnick has responded negatively to EA’s offer. His stated reasoning is basically the same as mine below. “Electronic Arts’ proposal provides insufficient value to our shareholders and comes at absolutely the wrong time given the crucial initiatives underway at the Company,” he said. “Thanks to the extraordinary efforts of our creative and business teams, Take-Two has made enormous strides in the past 10 months toward our common goal of being the most creative, innovative and efficient company in our industry.”)

Electronic Arts has just announced its desire to acquire publisher Take-Two Interactive–parent company of Rockstar Games and its studios, 2K Boston and 2K Australia (nee Irrational Games) and their new spinoff 2K Marin, Civilization developer Firaxis Games, 2K Sports developers Visual Concepts and Kush Games, etc.–in a $2 billion cash deal that works out to about $26 per share. This apparently is EA’s second offer, after Take-Two rebuffed a $25 per share offer, which already adds a premium of at least 60% to T2’s stock price.

It’s a worrying development. EA CEO John Riccitiello has released an open letter describing EA’s offer and its motivations, which I imagine is intended at least in part to get shareholders (who, again, would stand to earn considerably on their stock) warmed up to the idea in the hope they will encourage T2 leadership to consider accepting.

In my opinion, this would not be the time for T2 to sell, because it seems to recently have gotten something of a second wind. It relocated its 2K Games publishing label out to California, is opening a new development studio in tandem with publishing operations, rebranded Irrational’s two studios to match with the company name, finally established a new critical and commercial hit with BioShock, and is right about to launch Grand Theft Auto IV, which is clearly the company’s biggest title of the year.

True, T2 had been reported to be on the auction block for some time, and the company has had some financial issues in the past, but this major confluence of factors–which consists both of concerted decisions as well as a bit of circumstance–suggests the company is ramping up to seriously position itself as a force in the industry beyond “the GTA company.”

I have been particularly impressed by its portfolio of late–games like BioShock, Bully, the Civilization series, Oblivion, The Darkness, and obviously GTA represent a good blend of franchises that are “safe” but evolutionary and important to hardcore gamers, and those that are more explicitly innovative. (Plus, if my past reporting is to be believed, Ken Levine has X-Com in the oven.) Titles that fall into those categories make up a higher percentage of T2 releases than they do at most other major publishers, and it would seem a bit of a shame to have that sensibility swirled into the vast EA empire.

On the topic of EA, I do like a lot of what the company has done recently, and I have said so in print. In today’s letter, Riccitiello claims the company’s new autonomous label structure–which separates studios and titles into broad categories such as EA Games, EA Sports, EA Casual, The Sims, and the more distinct EA Partners–is a benefit to developers, and I think that’s probably true. I think some of the company’s studios have taken some cool gameplay risks recently that have paid off, and EA Partners is getting involved with all kinds of interesting developers while letting them keep their IP.

Still, EA is undeniably on a buying spree, having most recently picked up BioWare and Pandemic, and I don’t exactly want the company to keep ramping that up to the point where it can start feasibly measuring its developer acquisitions in “purchases per month.” EA has got to be feeling the heat due to the recent conflation of Activision and Vivendi, but combating that by picking up T2 would seem frightening to the industry at large. T2 is already EA’s only possible competitor in the sports arena, and that’s a tenuous position at best.

We’d basically have Guitar Hero + World of Warcraft + Call of Duty + Spider-Man + StarCraft versus Grand Theft Auto + Madden + The Sims + Need for Speed + Medal of Honor + Rock Band + pretty much every other sport, with the rest of the industry continually marginalized in the shadow of these two lumbering giants. God damn.

Tags: acquisitions, electronic arts, electronic tarts interactive, take-two, vivactard

This entry was posted on Sunday, February 24th, 2008 at 2:34 pm and is filed under news. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.