EA proposes buyout of Take-Two

[ScoopBrady]

Uh, EA has been trying to buy Ubisoft for about two years now. If that's uncovering something then let me tell you that Britney Spears will grow up to be a crazy drug addict.

As far as EA is concerned I don't see how people can see what they are doing as wrong. I can understand being pissed about it but the simple truth is companies that want to grow oftentimes acquire new companies.

One thing I've learned about myself over the past 5 years is that there is way more important stuff to me than complete realism in my sports games. I think I would definitely have given up this hobby if that's what I was hoping for because it's never going to happen unless I strap on the pads. I am more than content to play games that don't have major bugs (like the ball placement bug in the PSP version of NCAA football for exampled) and are fun to play. I've enjoyed Madden on the next gen because there's nothing majorly wrong with it, IMO, and I have fun playing it.

I have to agree with Dan on this one. There's nothing going on here that would cause me to get upset.

[webdanzer]

Interesting read about 'monopoly' thoughts from an Ex-FTC lawyer:

http://blog.newsweek.com/blogs/levelup/ ... e-two.aspx

As mentioned in this thread already, it comes down to market definition, and the guy doubts that the FTC would step in. Sounds like it may be possible that it gets looked at, though, and perhaps EA will need to argue its case.

I still can't believe that the market will be defined that narrowly, but I suppose stranger things have happened.

[GTHobbes]

Interesting read about 'monopoly' thoughts from an Ex-FTC lawyer:

http://blog.newsweek.com/blogs/levelup/ ... e-two.aspx

As mentioned in this thread already, it comes down to market definition, and the guy doubts that the FTC would step in. Sounds like it may be possible that it gets looked at, though, and perhaps EA will need to argue its case.

I still can't believe that the market will be defined that narrowly, but I suppose stranger things have happened.

Thank you!!

[GTHobbes]

I'd be happy with this:

"Do I think this is a deal that the government would sue to block? Not really. But I wouldn't be at all surprised if they required EA to divest its license agreements with certain sports leagues, and maybe spin off some of the talent behind those games to a competitor. And if that happens, does this deal still have the appeal to EA? Not if what Mr. Pachter said was true and EA's offer is based on the realization of monopoly profits from its sports division. Furthermore, if you see the government give this deal a hard look--beyond the normal 30 days normally allocated--you could possibly see the deal delayed long enough by the review process to adversely affect financing arrangements, potentially derailing the whole affair.

In other words, I wouldn't consider this deal inevitable quite yet. Although you've yet to see antitrust law rear its head in a videogame merger, this is the best case I've seen where it could happen. Don't be surprised if this gets more interesting than anyone expects."

[webdanzer]

This is what surprised me:

If a government agency has problems with a merger, it's likely because it believes the economic data supports a narrowly defined market (e.g., licensed professional hockey videogames or hockey videogames). The parties to the merger will argue to define the market more broadly (e.g., videogames as a whole, or sports videogames as a whole). Under a broad market definition of all videogames, the merger poses no problems, because the loss of one product in a market of thousands of competitors is a ripple in the sea. However, under a narrow market definition, no other third party can make a licensed professional hockey game (with real player names, team names, stats, etc.) other than EA/Take-Two, granting it an effective monopoly.

The concept of market definition turns on economic evidence, which I'm not privy to, but if Mr. Pachter's comments are accurate, EA and Take-Two's sports games are price constrained by one another. In other words, vigorous competition between their respective basketball and hockey games is what causes the prices of those games to decrease more rapidly--much more so than competition from other videogames in the market. In that case, it's entirely probable that government regulators could define a narrow submarket of "NHL-licensed hockey games," "NCAA-licensed basketball games," and "NBA-licensed basketball games." If so, what you're effectively seeing here is almost a complete elimination of competition in those narrow submarkets.


I thought a market definition of something like 'NHL-licensed hockey games' would be a very improbable verdict, but this guy says it could even be 'probable' if evidence proves the merger eliminates price constraint.

[Danimal]

When I read this yesterday I wondered how long it would take to make it to this thread.

If they are going to waste time looking into things like this (which they won't) I'd much rather they spend it looking into the Season Ticket deal then this.

I mean seriously the XM merger is more an issue then this and that went through.

[webdanzer]

When I read this yesterday I wondered how long it would take to make it to this thread.

I believe in spreading happiness, and I thought this would make GTH's day.

[JRod]

When I read this yesterday I wondered how long it would take to make it to this thread.

If they are going to waste time looking into things like this (which they won't) I'd much rather they spend it looking into the Season Ticket deal then this.

I mean seriously the XM merger is more an issue then this and that went through.

I'm not up on that merger but I thought only the FCC has approved this and not the FTC. So that might not go through.


If the government can't look at both, then we need to be worried.

[GTHobbes]

Of course, I don't see it as a waste of time at all. Videogames, and sports videogames in particular, have been my biggest hobby for more than 30 years. I never have understood why more of you aren't upset that your choice in games is being completely taken away, while EA takes over the world. Hopefully there are more of these like-minded thinkers still working at the FTC.

It is kind've nice to be able to say I told you so on this one, though, that it's at least arguable that the monopoly laws apply.

Edit: And JRod's right...the XM/Sirius merger isn't out of the water yet.

[Danimal]

I never have understood why more of you aren't upset that your choice in games is being completely taken away, while EA takes over the world. Hopefully there are more of these like-minded thinkers still working at the FTC.

I can't answer for anyone else but I have more important things in life, simple enough reason. I have 2 kids, a job and other hobbies. On my list of important things in life video games don't even crack the top 50.

Video games aren't the end of the world for me, there one of my hobbies. If they went away tomorrow I would find something to replace them with.

It is kind've nice to be able to say I told you so on this one, though, that it's at least arguable that the monopoly laws apply.

I agree it's arguable at this point. I'll assume for a minute that Level up checked out there voluntary source of information and he did work there and in the department he claims.

How do we know he was competent? He hasn't worked there in 4 years by his claim, are all the laws the same? Perhaps he is just a 2K fan who is pissed off at EA?

My point is I don't know the credibility of their source IMO if you want to do an article like that you contact someone at the FTC who you know is competent and can provide you with answers. Maybe they did do all this and I am out of line, I only read highlights of the article.

So again assuming his claims of job and knowledge are true someone could certainly take what he says at face value. I just see too many variables for me to do that, in this current world of unchecked journalism I'm a cynic.[/b]

[kevinpars]

It's a sports video game site, and we are talking about one big company who makes sports video games taking over the only other big sports video game company that makes sports games and then shutting them down simply to avoid competition. And we are not supposed to feel in any way emotional about it?

I should hope most people here have more important things to do than play video games, but so what?? I don't come here to chat about line dancing or trends in modern poetry.

I guess I haven't responded to this thread because the sports games that have come out since the 360/PS3 have been so mediocre and lacking in imagination or creativity that I have almost stopped playing. Last night my wife even asked me why I spend so little time gaming. The truth is that there are a lot more interesting books out these days than games. And sadly, the games that I am looking forward to this year are not sports games. EA taking over all of the major sports will pretty much seal the deal for me. At this point I am more sad than angry.

[JRod]

And sadly, the games that I am looking forward to this year are not sports games. EA taking over all of the major sports will pretty much seal the deal for me. At this point I am more sad than angry.

I think you touch on something that isn't being talked about.

The emergence of EA has the lone sports dominant sports game producer might have an adverse effect on the entire genre. So much so that it lead to EA's undoing.

This isn't like an oil monopoly, a commodity that the entire country needs, this is a luxurious item that is used solely for entertainment purposes.

I think the consumer, knowing what Madden, NHL, Live, bring to the table are much more reluctant to buy these games. I've said this in the past, when there was 2K v EA in baseball, and football, I think a lot of people approached it to buy or try both games and pick one. Now the stakes are much higher, in that, the consumer knows what they are getting in Madden. If they don't like it they won't spend any money.

It's a lot like Pepsi versus Coke, except there's no coke and you hate Pepsi. You don't drink Pepsi you find something else to spend your dollars on.

Here, I think, many will spend their money on non-sports games or a 3rd party will raise to fill the void with generic, gameplay centric offerings. To EA, they will see a small increase of sales in the initial years of this deal, after that and once there's only one "sim" game per sport, many consumers will know what they are buying and even more will not like what EA is offering.

[ScoopBrady]

I think a lot of you fail to realize that the average consumer doesn't give a rats ass about the death of 2k sports titles. The hardcore sports gamers make up maybe 10% of the market and even within that small percentage 2k doesn't have a 100% share. It's hard to think outside of what you know and how you feel but you have to realize that places like DSP and OS are in the minority when it comes to sports gamers.

[GTHobbes]

I think a lot of you fail to realize that the average consumer doesn't give a rats ass about the death of 2k sports titles. The hardcore sports gamers make up maybe 10% of the market and even within that small percentage 2k doesn't have a 100% share. It's hard to think outside of what you know and how you feel but you have to realize that places like DSP and OS are in the minority when it comes to sports gamers.

I'll bite. If we, the DSP and OS community were the only ones affected by EA's business dealings, then I agree the whole situation would probably go unnoticed. But we're talking about an industry that generates many Billions of dollars ($7.1B is the figure I was able to find quickly from 2005, and I know the number has increased significantly since then, even with the lousy economy). When one company stands to bring in much of that total, people notice...particularly when exclusive licenses that shut down all of the competition are involved. Like I've said, it seems to me to be the situation this country's monopoly/antitrust laws were designed to prevent. It's just odd that it arose in the context of an industry that got its start as a niche, kids' market (videogames).

[pk500]

I'll bite. If we, the DSP and OS community were the only ones affected by EA's business dealings, then I agree the whole situation would probably go unnoticed. But we're talking about an industry that generates many Billions of dollars ($7.1B is the figure I was able to find quickly from 2005, and I know the number has increased significantly since then, even with the lousy economy). When one company stands to bring in much of that total, people notice...particularly when exclusive licenses that shut down all of the competition are involved. Like I've said, it seems to me to be the situation this country's monopoly/antitrust laws were designed to prevent. It's just odd that it arose in the context of an industry that got its start as a niche, kids' market (videogames).

If the entire videogame industry's 2005 revenues were $7.1 billion, and that seems like a low figure, then it wouldn't even come close to cracking the top 100 companies from the 2005 Fortune 500 of American firms.

http://money.cnn.com/magazines/fortune/ ... full/2005/

Yes, $7.1 billion seems like a ton of dough to us proletarians. It isn't squat in the world of the Federal Trade Commission and the Justice Department.

Scoop and Dan are right: Let's have a bit of perspective here.

Take care,
PK

[XXXIV]

Sports videogame site...that is the perspective.

[dougb]

Sports videogame site...that is the perspective.

Yep, if we stop playing sports games we can alway spend our time on this site writing about politics

Best wishes,

Doug

[Danimal]

But we're talking about an industry that generates many Billions of dollars ($7.1B is the figure I was able to find quickly from 2005, and I know the number has increased significantly since then, even with the lousy economy). When one company stands to bring in much of that total, people notice...particularly when exclusive licenses that shut down all of the competition are involved.

Now were back on exclusive licenses...awesome.

How much money do you think DTV brings in with the Sunday Ticket, I would bet it's a hell of a lot more then video games. You think Dish, Comcast and insert cable company name here like that deal. Whats the FTC say on that....<cricket chirping>

Let say for a minute that the FTC thinks because of exclusive licensing EA has some kind of unfair advantage, which is an absurd notion but since were not dealing in reality we'll ignore that fact, the FTC says "hey EA you have to divest your exclusive license in football."

Here is why that will never happen:

As far as I know the FTC can't prohibit an entity from selling their property rights. If anything in the above scenario they would need to go after the NFL. If they told EA to get rid of those rights EA would turn right around and say well then tell DTV to open up the Sunday Ticket rights. If the FTC told the NFL you need to open up your IP's to anyone and not sell exclusive licenses the NFL would tell them to f*** off.

Ok well maybe the FTC says "hey you can't merge with Take Two":

Forget that, they are not going to stop the sale, merger of take over of TT by EA. On what grounds because with it comes the 3rd party rights to baseball? Because EA would own too much s***? "hey you know what EA you own too much s***, so no merger for you. Hey Ubisoft no one seems to have any issues with you step right up and buy them up"

Why would TT a company in financial ruin be the catalyst to cause such an action? Why not Bioware / Pandemic? I guarantee Bioware titles have moved more copies then TT, that company is actually profitable. Yet nothing from the FTC.

Yeah but exclusive licensing and the merger would raise the FTC watchdogs from their slumber because EA would own sports gaming:

First, EA does own sports gaming already, so not sure hwo this merger would make them own it more.

Second, I'm not sure how many times people have to say this but an exclusive license is not preventing anyone from making a sports game, so it is not closing down the market.

If you're a sports gamer for 30 years you should remember the days when there was nothing but generic players and their were countless football, baseball and other sports titles. I recall playing Tom Landry football with generic teams and players or gridiron which was nothing but X's and O's. There were licensed games available like Xor's product, but I played what was better.

Now we live in a world where organizations like the NFL and MLB have grown their brands and want to charge people to be associated with, Fantasy football, baseball, official jerseys, official t-shirts, hats, streaming web video. It's all exclusive and there is always someone willing to pay.

Her is my point, if something was going to happen it would have already. Apparel, TV and Sat. Rights just to name a few are far more lucrative and nothing was done. EA and other companies have gobbled up far better companies then Take Two and nothing was done.

[Inuyasha]

All I know is that the last few years games have started to suck. there is not much innovation (I don't own wii) anymore and since sequels and sports games with the only changes being yearly updated rosters making tons of money, it won't matter if it's EA, 2k, whoever.

[GTHobbes]

Dan, you raise some good questions. All I know, and it's admittedly not much, is that the MLB/directv exclusive got shut down last year, for whatever reason, when Sen. Kerry (a RedSox fan) got involved in the story. I seriously doubt that MLB and Directv just decided to give up on the deal because they didn't want to keep Kerry from tuning in to watch the ballgames every night. Humbly speaking, I also know that many people were calling me crazy a couple of weeks ago for even mentioning the "M" word in connection with EA, and now a former FTC attorney knowledgeable about such matters (from all appearances) has weighed in with his 2 cents, and now it doesn't seem so crazy. Again, I could be wrong about all of this, and since it's videogames I guess it shouldn't matter, but to me it does. I'd like to see our choices in sports videogames preserved, just as others might want to see bald eagles saved from extinction, but I respect your differing opinion.

Hopefully, one of these days we'll get a football game we both enjoy (regardless of who makes it) and we can get a game in online. When that day comes, I got the Stillers.

[Danimal]

The MLB / DTV deal was never really a deal that was finalized and it's end really had nothing to do with the FTC or John Kerry. In fact from everything I read the FTC never even looked into it.

It was more a bargaining ploy from MLB because they want their own network in 2009 and DTV was willing to give it to all their subscribers, while cable and Dish network originally didn't like the idea.

You can still find a lot of good link via Google if you wade through the hundreds of MLB doesn't care about you postings.

Here is a nice link: http://sports.aol.com/fanhouse/category ... ing-apart/

I'd also like to say that I am not arguing with points made about sports gaming not being innovative, or EA games really being weak (NHL and Fifa aside) for a while now. I agree with all that and I also agree that having several choices would be good.

I'm just stating my opinion that I don't think anything will come of this regardless of the Level up article.

[JRod]

Madden relative drop in sales says one of three things about exclusive licensing.

Either EA Sports missed the boat and the expected influx of new customers weren't there because sports gamers bought both. And that number of customers that only bought ESPN NFL, that EA had hoped would switch to madden, was so small that it wasn't really enough to offset the costs for the licensing.

Or two, the sports game market is in decline. One could argue that the lack of competition allows consumer to rent, buy used, or skip certain sports games. Since there isn't true ground break innovations, gamers can be more selective, when getting the "roster updates with a few selling point features."

Three, EA buying 2K wasn't even about sports. In a world where EA executives are shrewd, intelligent businessmen, they hurt T2/2K in their sports division, their 2nd most successful division, by snapping up the licenses. Without that product line, 2K stocks suffer, letting EA get 2K/T2 for their real prize, the GTA line.

EA Sports executives have said numerous times that they have hit the ceiling in terms of their sports games. I wonder if the company as a whole is trying to find new product lines because they aren't growing like they want.

I don't know what's going to happen with this license. Bush's administration has been extremely corporation friendly, so you would think, EA Sports wants this to go through before the next president gets in.

I think we'll see a gradual decline in the EA Sports line over the next five years. EA Sports will not fail, now will EA go under. But I think in their sports division we'll see lower than expected growth with one caveat, if they make quality games. So far it's hit or miss, with them.

[Jared]

How much money do you think DTV brings in with the Sunday Ticket, I would bet it's a hell of a lot more then video games. You think Dish, Comcast and insert cable company name here like that deal. Whats the FTC say on that....<cricket chirping>

Figures I've seen for Direct Ticket are that there are 1.4-1.6 million subscribers. That puts their revenues around $440 million or so.

That'd be about equivalent to 8 million sports games a year. According to EA, Madden 07 sold seven million copies itself...and my guess that the rest of the sports video games have sold more than a million copies.

As for the rest of the argument, I would be surprised if the gov't got involved in this, especially by way of defining certain markets as "licensed sports games" or something similar. TI don't remember the lawyer in the Level Up post stating any examples of other sub-markets so narrowly defined (e.g. cases where they said a group had a monopoly not on movies, but kung-fu movies or something like that). But who knows...maybe there are cases like that.

[Brando70]

I think a lot of you fail to realize that the average consumer doesn't give a rats ass about the death of 2k sports titles. The hardcore sports gamers make up maybe 10% of the market and even within that small percentage 2k doesn't have a 100% share. It's hard to think outside of what you know and how you feel but you have to realize that places like DSP and OS are in the minority when it comes to sports gamers.

NFL 2k5 did healthy numbers on the XBox. That was partly because of its price drop, but I think if 2k6 had appeared, it would have still done okay. Not close to Madden, but decent for a #2 title.

And NBA 2k has matched or outsold Live for years if I remember correctly.

As a gamer, I wish the exclusive deal would go away. But I doubt anything will happen. It's too bad, too, because MLB: The Show has demonstrated how nice it is when a sports gaming company gives a s*** about creating a good product instead of just pushing units.

[Danimal]

Figures I've seen for Direct Ticket are that there are 1.4-1.6 million subscribers. That puts their revenues around $440 million or so.

According to Google in 2007 revenue from Sunday ticket was roughly 770 million.

EDIT: Actually I guess it depends on how you determine it. According to some it was $400 million, but one article states $770 million but take into account establishments (I guess bars) and I guess they pay more? I don't know. Either way I get your point.