Friday, September 10, 2004

Big media shopping for game producers

By Michael McCarthy
USA Today

With computer and console games such as John Madden Football and Grand Theft Auto stealing viewers from broadcast and cable TV, media giants such as Viacom and Time Warner are eyeing the $14 billion video game industry for expansion and acquisitions.

But media giants won't find an easy path into Joystick Nation. The cyclical industry has been turned upside down every five years or so by new game consoles that make existing game software, and companies, obsolete.

Viacom, owner of MTV, Nickelodeon and Comedy Central, has formed a board committee to evaluate possible acquisition targets, including Midway Games, maker of Mortal Kombat.

Time Warner's Warner Bros. Interactive Entertainment unit recently acquired Monolith, publisher of games such as Aliens vs. Predator, to beef up its in-house operation. The deal closes Oct. 1.

Eidos, publisher of the Lara Croft Tomb Raider franchise, says it's in "preliminary discussions with a small number of parties."

There's even talk on Wall Street that a big player will try to buy Electronic Arts, the No. 1 U.S. video game company, according to Edward Williams, analyst for Harris Nesbitt Gerard.

Studies indicate video games pose a direct threat to TV and Hollywood, particularly in the fight for young male consumers. In a consumer poll by Ziff Davis, 26 percent of respondents said they watched less TV in the last year partly because of increased video game usage. An additional 20 percent plan to do so over the next year.

The money spent by consumers on video games now rivals that of the box office for feature films. Gamers spent $13.9 billion on consoles and console or PC games in 2003, a 4.8 percent increase, according to market research firm IDC. That's more than the $9.2 billion in U.S. ticket revenue collected by movie studios last year.

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