Warner and SCi: Another twist in the tale

Warner has made it known that it wants to expand in the game business and they have shown a definite interest in SCi. SCi has also said that they have been approached with offers. So a takeover bid would not be surprising.

However, I think it all depends on negotiations. I think a year ago Warner would have liked to buy much more than 10 per cent. The price needs to be right for both parties.

I don’t think Warner would look to do a hostile takeover so it becomes more about what price SCi is willing to sell for. Their goal would clearly be to sell to the highest bidder so a lot could depend on whether someone else steps up to the plate. A bidding war could drive the price much higher.

It is always tough for outside companies to integrate medium size game publishers. The challenge Warner faces is how will they able to grow SCi anymore than they would grow as being independent. It would basically be similar to Midway’s situation with an investment from Viacom head Sumner Redstone. It didn’t really help Midway grow market share or revenue.

I think buying up small developers like Traveller’s Tales is a solid strategy for Warner. However, if Warner wants to really increase its position as a leading publisher it needs a distribution presence. That can only be provided by a fairly large size publisher, like what Vivendi did with Activision.

Of course, there are only a handful of those companies out there and most of those would be billion dollar-plus deals. It depends on how badly Warner wants into the game business.

The history of combining two medium size publishers in the game industry is simply not good. Most successful recent deals have involved a larger company buying up a much smaller company that specializes in a specific area like game development. Of course, Viacom also wants to increase its investment in the game space and Sumner Redstone controls Midway, so who knows…