Friday, March 14, 2008

“Friendly Takeover” is an Oxymoron

Maybe you've heard already that EA is interested in purchasing Take Two. Essentially, EA offered to purchase Take Two for about two billion dollars about a month ago in what has humorously been called an attempt at a friendly takeover. Hey, that's a nice term, and it certainly seems to fit, right? EA is just thinking about Take Two's stock holders and saving them from the uncertainty of a non-monopolistic industry, how selfless of them.

Now I try to be mature and unbiased and not reflexively jump on the “Evil Empire” bandwagon whenever some news comes up involving EA, but—man, just read that article if you have time and see if there isn't something subcutaneously chilling about it, like an otherwise calm movie scene utilizing infrasound for effect, or a porcelain doll that looks so perfect it's eerie—or like this. You will find little explaining how this acquisition can help the quality of games or the gamers that buy them, and much talk about shareholder benefits. What is going to happen to GTA if EA gains ownership of the franchise and Rockstar walks out? If competition forces franchises to strengthen to avoid extinction, what is going to happen to EA's sports and racing games when they own Midnight Club and 2K Sports, cutting off one of the most major competition channels in each genre?

Our strong preference is to conduct a private negotiation. If you are unwilling to proceed on that basis, however, we may pursue other means, including the public disclosure of this letter, to bring our offer and the compelling value it represents to the attention of Take-Two’s shareholders. - John Riccitiello, letter to Take Two's Executive Chairman on Feb. 19, 2008, made public shortly thereafter, copied from Gamasutra (http://www.gamasutra.com/php-bin/news_index.php?story=17596)


Along with the above letter, a summary of Riccitiello's stance on the matter can be found here.

But Wait, There's More!


So on Februrary 19th, EA made an offer to buy out Take Two. Strauss Zelnick, Executive Chairman of Take Two's board of directors, turned down the offer, wanting to wait until after GTA IV shipped to continue discussions. John Riccitiello, CEO of EA, made good on his promise to publicize the offer in an attempt to stir up the shareholder hivemind and add internal pressure to the external pressure in hopes that Zelnick would be rushed into making a poor decision. I call this “bullying”. Come on John, GTA IV is set to ship on April fucking 29th. I think that it is reasonable to expect a company valued in the nine digit range to take a couple of months to decide if they want to be on the dying end of a corporate merge.

If that was all, I might not have found it worth my time to blog about this. There is indeed more, but before continuing our little story, I want to take an aside to point to this article in which a representative of Wedbush Morgan explains his opinions. I think, intentionally or not (hint: not), he hits on the main problem of this acquisation, as well as the main problem with the game industry, with this quote at the end: “Ultimately, we think that Take-Two shareholders will embrace a deal, as virtually all of them will profit immensely and immediately.” The video game industry is not run by designers, programmers, artists, producers, or anyone who loves video games. It is run by executives, business majors, and ignorant, reactionary stock holders who care nothing of the art and everything for the stock game: entering at the low price of a company during risk and development of a title, and leaving at the high end after a game sells well, profiting off of the risk and hard work of those who actually design and implement said games, an underpaid industry majority, in a relatively risk-free manner without having to get their own hands dirty. Tell me why, left and right, I see analysts and representatives of both companies discussing stockholder benefits, yet not once have I heard an appeal to the benefits of the employees or the gaming populace. Because we don't matter, because we're just an annoying causal bump in this money-making game that is the stock market? This needs to change. This needs to fucking change.

As another aside, it becomes clear that EA is trying to eliminate competition in the sports genre from this acquisition. It is speculated that, failing to buy Take Two, EA will cut the price of its sports titles, taking temporary losses to hurt Take Two's profits this year. This is also known as predatory pricing, which, subjective as it is, is generally illegal. I like how much effort EA is putting into hostile takeover attempts (let's not kid ourselves here) and price adjustment instead of putting that focus toward improving the quality and ingenuity of their games. This needs to change too.

Moving on.

So a couple of weeks have passed, and Take Two has maintained its stance that the initial offer undervalues its worth. I hope that they are also considering the ramifications of this decision on the quality of games produced as well as the quality of work for their employees when making this decision, though either way I believe it is the right decision. In any case, the publicity of this offer has already started to affect Take Two's stock, as stockholders are fickle, greedy, and reactionary beasts (I know, it's the nature of the game and all…). Shortly after the public announcement, stock prices actually began to rise. However, according to this March 11th article on Gamasutra, Take Two's two largest shareholders have already begun selling a large portion of their stocks. And the big bomb is this, from March 13th: that EA has begun offering to purchase Take Two stocks directly from shareholders at an inflated price in what is officially viewed as a hostile attempt (because it hasn't been hostile from the very beginning; right…). Take Two has replied encouraging stockholders to give them two weeks to make a decision, much sooner than the original intention to wait until after GTA IV ships.

Conclusion


I believe that this incident shines a magnificently bright spotlight on the main problem with the video game industry: that it is an industry at all. The creative efforts of thousands of marginalized and nameless designers, programmers, artists, and sound engineers are funneled into the Wall Street machine. The industry has become a dark place, and it is clotting the otherwise healthy blood flow of the art form. Games are designed by a committee of untalented (game design wise) marketers listening to the chattering of the even less educated stock holders, with designers only given the ability to decide at the micro level how the next unnecessary sequel is going to be shoveled out the door in time for Christmas. Yes, in a very real sense, game design is dictated by an ignorant, nebulous public mass of people whose stakes are short term as well as their interest in the company. Innovative titles are shot down constantly to keep all hands on deck for making the next stale FPS, RTS, or RPG. The main questions that drive game design are “How can we fatten the wallets of our CEO and stock holders even more?”, not “How can we make the world a better place by advancing the art of game design?” or “What genres have we yet to explore?”.

We low-level members of the industry are the prime group responsible for combating this, and corporations see this. They resist; they combat us back. We need to communicate with each other to come up with a solution, yet NDAs seal our lips, hindering our ability to fully communicate details and examples of common issues. We complain about being forced to work on a movie-based title or seventh sequel in a dying series or unnecessary port, but when we try to work on something creative in our spare time (perhaps as a jumping board to start our own, creatively-driven private company) we are shot down by non-compete clauses, nasty little corporate snipers placed to allegedly protect the company from, heaven forbid, employees adding competition to the market without asking why an employee would want to do so in the first place. And guess which side gets to decide if your game “competes” with theirs? Yes, video game companies own you and have a say over what you can or can't do in your own personal time. And if you try to start your own game company while unemployed, or working at another job so as to avoid this non compete bullshit, you still have to walk through the patent minefield. So even if you can escape the stockholder leeches that suck the creativity from your blood, you still have to watch out for the lawyer vultures that give even less of a fuck about the pursuit of the art.

I hate spending too much time pointing out problems and too little time providing solutions, but I really need to think about this one. It's time for things to change. I've had insomnia lately (hence my writing this post from 2am to 6am when I have to get up at 9:30am); Maybe I can come up with something after some rest, but probably not on my own. Stay tuned, as this will not be the last I talk of this issue.

3 comments:

Eric said...

Awesome post.

I put up a link to it on my own post today, and tried to pass it around work, because some of my co-workers are fellow game lovers and I think you point out the blunt realities of the industry that either most people aren't aware, or simply don't want to believe is true.

Not being in the game industry myself, I struggle to think of anything I can do to help, besides get the message out that gamers--in the most revered sense--have lost practically all control of the empire they've created. It reminds me of television: Heather wanted to watch that show "The Moment of Truth" one night, which I think is an absolutely fucking awful piece of shit. I tried to explain that by watching the show she's supporting horrible television. I feel the same sentiments swell up whenever I see people buying Madden like blind sheep. True consumer education could have a great impact on the industry.

eiyukabe said...

It seems like a really hard, circular problem. As much as I would like to just blame corporate executives, they can easily jump back by saying "we're just trying to make the games that sell". And gamers, as much as the vocal few complain about redundant titles, as a group they are more likely to buy a sequel to a game they like or a game tied to a movie they know about than an innovative, under-marketed title. It seems like most of us want more innovative games yet collectively those desires fail to scale up. It's hard knowing where to break this cycle, and it might just be a slow iterative process that we'll have to ride out (the Wii has given me hope lately, though).

With that said, I have no tolerance for the CEOs that seem to be exploiting the art upon which the industry is made, as if the employees below them as well as the customers are just pieces in the stock game. This seems like a more straightforward problem to solve, but still not easy: form unions/guilds in the industry ala Hollywood, do away with massive publicly traded corporations that own IP and replace them with small private independent companies that publish games through one title contracts (without being fully owned by publishers) and keep the rights to the franchise they work on. Also, a one-console future with less of a barrier to entry (less licensing fees, less arbitrary guidelines such as achievement points) can only help the independent companies.

Shaun said...

And I agree with all that jazz.

and Funny Games is a great fucking flick.