Vivendi Games and Activision to Become One

By: Sharudin Rahmat

December 2 saw the birth of a new umbrella corporation in the gaming industry. Activision and Vivendi Games are to combine into one great powerhouse and be called ... Activision Blizzard! So what exactly are we looking at here? Apart from a slew of well known titles such as Guitar Hero (Activision) and Crash Bandicoot (Vivendi), the games libraries of both companies span across all platforms, consoles and handhelds, from this generation and previous ones.

As early as 2003 Vivendi was contemplating selling off its games division. Instead, the company's entertainment division merged with gargantuan US TV network NBC, so taking considerable pressure off the French company. Under that deal, Vivendi sold on Universal Studios, its cable TV networks and its theme parks, and they were paid $3.8 billion, while NBC assumed another $1.6 billion in debt.

The new company was called Vivendi Universal, a $43 billion dollar company. NBC owned 80% of the assets, which included Universal Studios and television network NBC.

The new deal with Activision is valued at $18.9 billion, and both companies have sent tremors through the industry as they unite to form the world's largest third party videogame publisher. The new publishing behemoth is expected to have around $3.8 billion in pro forma combined calendar 2007 revenues. The merger will create a company, whose collection consists of some of the leading videogame franchises in the industry, including Blizzard's World of Warcraft, Starcraft and Diablo, Activision's Call of Duty and Tony Hawk, and Vivendi's Spyro.

The deal is intricate and yet-to-be-approved, and it's expected to end with a 52% majority Vivendi-owned "Activision Blizzard" body trading on NASDAQ. But what are the main points and lessons we should gain from this immense deal? Obviously, there is a plethora, but here are some of the key points from the Activision and Vivendi Games merger announcement:

1)Activision is the dominant partner. The deal calls for Vivendi to fold its games unit, which is valued at $8.12 billion, into the new company, and provide $1.73 billion in cash.

2) Blizzard will enjoy the same independence as always.

3)World of Warcaft's revenues are absolutely staggering: Vivendi's key game has 9.3 million subscribers worldwide who pay a monthly subscription on top of the original purchase price.

4) Vivendi's non-Blizzard assets are downplayed.

5) Electronic Arts is still bigger than the new company, and is probably worried. Activision Blizzard, with its have estimated revenue of $3.8 billion for 2007, rivals Electronic Arts Inc.'s full-year forecast revenue of up to $3.65 billion.

6) Chairman of Vivendi Games, Rene Penisson, will serve as chairman of the new company, and Activision co-chairman Brian Kelly will be Activision Blizzard's co-chairman.

In the end, companies come and go, and for all its immaturity, you can tell the videogame industry is getting on in years. The first large wave of mergers and acquisitions struck back in the mid 90's, when amplified development costs, the downfall of the American arcade, and the move from 2D development left dozens of small and mid-sized developers, from Toaplan to Technos, out in the cold.

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