Warner Bros. Interactive Entertainment selling could cause ripples leading to more mergers and acquisitions.
Stephens Inc. analyst, Jeff Cohen, has commented on the rumored sale of Warner Bros. Interactive Entertainment (WBIE), saying it could set off a wave of mergers and acquisitions ahead of the new console generation. Cohen also commented on companies he views as likely to be acquired in the event of this wave.
In his comments, Cohen said that as publishers have focused on the development and release of live service games, the number of titles to market has decreased. Live service games have contributed to an increase in profits, but the reduced output of titles has led to longer gaps in publishing and sales revenue. The acquisition of new studios by major publishers like EA would allow them to round out their catalogs and keep a more consistent pace of releases.
“We are not expecting publishers to start putting out 20+ SKUs again, but we do think the pendulum could swing more towards the center in the next generation. Video game publishing is a business where scale is an advantage.”
Cohen referenced several companies that could be up for acquisition in the near future, mentioning Bungie, ZeniMax, and Gearbox as potential candidates. The three companies rumored to be interested in WBIE, EA, Take-Two, and Activision-Blizzard would, presumably, be the most interested in acquiring these smaller studios and publishers, but console manufacturers and other major publishers like Ubisoft may also look to expand their catalog.
Commenting specifically on the WBIE sale, Cohen said that either of the three candidates would benefit from the acquisition, but he believes EA would be the best served by the purchase.
“In our view, Electronic Arts would be the best fit given their ability to work with third-party IP and the need for a boost in their mobile business.”
It is possible that we are about to see a major shift in the games industry. The consolidation of IP and studios by major publishers would bring a significant increase in revenue, though the impact on consumers could go either way. It is no secret that some consumers have reservations about, or sometimes contempt for, publishers like EA, and the acquisition of fan-favorite IPs could be unpopular news.
Regardless of how this story develops, we will keep you updated on any new information or shifts in the industry going forward.
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