Fighting a Giant: Take-Two’s defense of EA.
"We, in many ways, represent a white knight." - EA Chief Exec. John Riccitiello
Simple analogy of medieval times or a hinting business message?
One has the most sold series in the
While EA has been causing up a storm of attention, attempting to put pressure on TT's Shareholders to sue. They've also attempted to bought flat buyout TT's stock with a cool 2 billion Dollar deal. Again Take-Two is saying /no. They've made it clear they do not want to be bought out at the current time, flatly denying and not even bothering to come to the bargaining table. They refuse to even talk about the incident until that little ace in the sleeve mega hit known as Grand Theft Auto 4 is released later this month.
Why? Because GTA4 is one of the best selling and most well known series. It's over taken Mario as the title of the 21st century. It broke the mold in 2001 when it smashed all expectations with its free form sandbox action genre. It has dwarfed even the most lofty expectations and has spawned more clones then Star Wars. Unlike EA's Madden series, ever successful new title gets significantly better and better. GTA: San Andreas is commonly called one of the best games on the PlayStation 2, arguable the best console system to date. It is no wonder why EA wants this crown jewel of an IP. So EA sets forth the hordes, they've launched a massive campaign to lure TT's shareholders. There latest offering at $26 per share to any and all shareholders. Since then TT's stock has been trading higher and higher and currently resides at around that price level on the open market.
This isn't the first time EA has tried to take over a major game company just before a triple A title comes out. Cue back to Q4 2007 when Mass Effect was set to hit the market. In the coming weeks to the release, Bioware was snatched up by EA. The result? The Market loved it. EA was trading at a then 52-week high of $61.28.
Take-two is not without its cheat codes to dodge EA’s attacks. As under any hostile attack, they have there own arsenal of defenses, some we're already seeing.
The first has already been put into place. A massive Golden Parachute program in the event that they are stolen up by EA and fired as a result. That package for once doesn't just apply to the brass at the top. According to Reuters, the deal is as defined as "will give executives up to 1.5 times their salary and bonus for up to 18 months if they are fired without cause within a year of a change in control. Non-executive employees will receive up to six months' in salary, it said."
This makes any massive payout done by EA just that much more painful. A company that wants to be bought out doesn't do this so directly. It is also playing the waiting game. Passively delaying and stalling for as long as it can til GTA4 comes out. The game is expected to dwarf Halo 3's monster of a launch, and some experts are worried it will once again cut into the movie industry's weekend box off hits. Given some of the expectations of this game, TT could reasonable buy back enough of its own shares to take it self off the market from anything hostile from EA.
So what else can TT do? A passive little defense of themselves becoming hunters. Possibly taking up the prowl to snag new companies on there own? Possible suggestions include Telltale Games, famed creator of the hit Sam and Max content. The company has recently looked to expand into the Wii market and is a prime choice if TT can muster the capital. Another could be S2 games. The makers of the Savage series who are enjoying a moderate success with the Q1 release of there second game, Savage 2. Both companies added to TT would not only increase its potential market worth through goodwill and new IP benefits, but it would fall hundreds of new employees under the above Golden Parachute. Potentially sending EA's costs for TT in a spiral that might put it beyond reach.
Lastly, and most importantly, Take-Two could do the most devastating act by the most unconventional means. It could go to the gamers. Gamers in themselves are not big fans of company EA. Sure they'll buy EA’s games, because they buy games because they are enjoyable, generally not because they are made by a certain developer. But the mass view has become that EA is the big dog. They are Yankees, they are the USSR Hockey team, they are the New England Patriots. It becomes harder and harder to actively root for the big guy taking advantage of the little guy.
EA has also 'stuck it' to the gamers so many little times, it's not even funny. EA has been accused of putting out a less then quality product time and time again with there fames series, most notably the pro-Sports market in which that they have a licensed exclusivity monopoly upon several pro markets (which has as a result devastated Take-Two's sports division above anyone else.)
They've recently pissed off the community by now asking for micro transactions for things that were once free. EA's football hit Madden for example, has been charging for little extras like tutorial videos. EA’s Tiger Woods' golf game and Need for Speed Carbon have been charging money simply to allow unlockable content. What happened to cheat codes that open the entire game up? Finally, and perhaps most threateningly, to buying up companies like Bioware and Pandemic, worrying fans about the outcome of there beloved series.
These don't sit well with gamers, and they don't want to see this happen to Take-Two. They don't want GTA to become a yearly rehash of the same game over and over again.
So what is Take-Two could respond by going to the fans, those who buy the games and create the news. To level with their fan base and say they don't want to be taken over. To create a viral like effect that creates buzz and so much attention that EA is forced to simply withdraw. EA has been known to react strongly to fan base pressure before, as seen with the most recent move with Battlefield: Bad Company. Originally planned to have buyable extra weapons as buyable downloadable content and once again with EA considering downloadable alternative jerseys for its sports series. An outcry like protest struck through the online gaming community, calls to boycott and overall displeasure at EA's consideration. What happened next was EA quickly reversed their policy and offered the weapons as unlockables and the jerseys for free. With enough attention and enough potential push, EA might quickly realize that buying Take-Two would result in a significant backlash that might cost EA far more then the monetary cost. While actual expectations are impossible to predict, if EA gets into a messy, bloody hostile takeover with Take-Two, they might come out in the end owning the IP, but will be bitten hard by the resulting lost from the fans. Rule of thumb, in any entertainment industry, you don't bite the hand that feeds you.
We live in strange times when in the industry of gaming when the plot line of the year won’t be about an underwater dystopia or a ancient ruin being plundered, but of real world politics and big business.
-huginnSources
