Consolidation Companiesscope of consolidation
Vivendi's purchase of a controlling interest in Gameloft was only a sensible move to begin the full takeover of Guillemot's gaming empire; Reuters now reported that this is expected to happen in 2017, with only a few percent points remaining on the board before Vivendi achieves the 30% share that would trigger a takeover offer under France-laws.
Whilst it is unavoidable that Vivendi will have some expertise in the management of creativity companies and give them enough leeway to keep putting gold balls in, it is unavoidable that Ubisoft's capacity to produce genuine IPs will be restricted. Under the Vivendi roof, however, it would probably be all right.
"I hypothesise that we are currently in the inhalation stage of a decade-long industrial economicycle. With over ten years of hectic action and experimentation at all stages of the business.... things are now at an unusual fixed place". The point why the Vivendi / Soft dramatics is of interest, I would say, is that it doesn't happen in an isolated way.
It is part of a wider consolidation process that has gripped the sector in recent years and shows no signs of deceleration. The by far largest actor in this consolidation is Tencent, the China Big, which has silently acquired, if not fully acquired, significant interests in many of the largest and most exciting companies in the sector.
Tencent is already, by some standards, the largest gaming brand; an eye brows survey, considering that the overwhelming majorities of consumer of their product may never have even owned the name "Tencent". Vivendis' stake in Ubisoft marked a move back to videogames for a business that was the mother of Activision Blizzard until 2013.
Today a huge corporate group, it began as a provider of drinking services (back in the 18th century!) and continued to be built on a strong foundation of business infrastructures until the early 70s; it's not the kind of business customers associate with as they do with Blizzard or Ubisoft. Like Tencent, for the most part it is a business that is in existence to own other businesses.
To a certain extent, other large acquisition projects within the sector have developed similarly. The Softbank is recognizable to Japan's consumer as a cellular phone net, but its shares in gaming are kept at a distance by this mark (although it has declined somewhat after selling its share in Supercell to, yup, Tencent).
Blizzard is one of the best-known gaming brands in the world, but the high-quality takeover of the King brand was completely clear to the company's clients. What makes Vivendi so interested in getting back into the game now? What is Tencent doing in this area to build such an exceptional business pipeline?
What are other companies doing with such high quality consolidation? I hypothesise that we are currently in the "inhalation phase" of a decade-long industrial economicycle. With over ten years of hectic action and innovations at all stages of the sector that have never touched a soul - whether it' technological, commercial, public, editorial or whatever - things are now in an exceptionally fixed place.
Companies that were unable to adjust to technological and commercial transition have broken down. Foam of new companies created with Mobil and G2P has largely disappeared and the scenery of large and small actors has moved into the spotlight. However, the risks factor has slowed down to the point where larger, of course more careful companies are beginning to deal with very high-quality mergers and changes in the strategy of the company portfolios.
A decade ago, I was looking to make major outside purchases of games manufacturers, because who knew what the gaming environment would look like in five years? And now the environment is more balanced; the risk of acquiring has slowed down and has become just the default risk rate when you buy a business in any local business, and huge companies are very, very good at dealing with those risk.
"Square, always the disappointed would-be studios and not a foreigner of precious intellectual property.... would be a really interesting place to dive into the Disney fabric alongside Marvel, Lucasfilm, Pixar et al." That's why we get such guys as Tencent, Vivendi and Softbank looking at matches in a way no one really could ten years ago, as a way to fill theirtfolios.
Up to the point when a new shake-up is due, large, traditional consumer companies with large content fleets will be putting the gaming industry to the test, especially against the background that competition is taking important steps strategically. Consequently, there will probably be several more billion-dollar takeovers and fusions in the gaming industry in the next few years.
For example, it is not far-fetched to think that Nintendo will increase its share in DENNA if the relationship with the company continues to pay off - a commitment that DENNA, whose other companies are white compared to its Nintendo transaction, would probably welcome. But if you want longer ratings, look at Disney.
While The House of Mouse is no unknown to gamers, it has never really succeeded in penetrating the big game leagues with its own effort - and it currently has two of the world's most precious (and game-friendly) IP library in the shape of the IP Universe Marvel and Lucasfilm.
If Disney could consider a really big deal, in a market where Disney could consider a really big deal, it would make perfect sense to invest a billion or a few billion for a really big company that could act both as an autonomous company under Disney's roof and as an in-house affiliate for all the company's strategically important IP investments.
It' probably the first thing that comes to my minds in that capacity (especially given the hugely successful Star Wars Battlefront), but I've been saying quotas for a long time, so the player in me puts a few pounds on a Disney offer for Square Enix in the years to come. Square, the disappointed would-be film studios and no foreigner of precious intellectual property (or even meticulously crafted alliances with Disney), would be a really interesting place to dive into the Disney fabric alongside Marvel, Lucasfilm, Pixar et al, and probably fit in much more properly than any other business in the game.
On the other hand, there will of course be a step towards "exhaling", where part of the billion that has gone into the industrial sector in these dealings will go into financing a whole new harvest of companies that want to disturb the technology, creativity and economic state of the art, and the circle will turn again.
However, at this stage, the sector that will disturb them will be a sector that is very different from the one we are in now, especially in relation to property relations.