Activision And Vivendi Games Unite To Conquer

Activision to get

Posted by Staff
Guitar Hero to get larger music catalogue?
Guitar Hero to get larger music catalogue?
In a huge but confusing deal, French mega-corp Vivendi is merging its games wing (boringly called Vivendi Games) with Activision to form a new publishers called Activision Blizzard.

Yes, that's the name for what we're being told will be the world's biggest third-party games publisher. Not Vivendi-Vision, or Activivendi but Activision Blizzard. If you've been living under the equivalent of a gaming rock for the last few years, you won't realise that Blizzard is the developer of Vivendi Games' prime asset - World of Warcraft - 9.3-million subscribers world-wide!

The move will also put franchises such as Activision's Guitar Hero, Call of Duty and Tony Hawk under the same umbrella as Vivendi Games/Sierra's Crash Bandicoot and Spyro; Diablo and Starcraft. The new monster publisher will be valued at $18.9 billion (9.2 billion) according to the announcement.

Let's look at this a little more closely. Let's get some perspective here. Vivendi Games is a subsidiary of France-based Vivendi. Now, Vivendi also owns the Canal+ group of subscription-based TV channels (10-million subscribers as we write this). Oh, it also owns Universal Music (U2 and Kanye West to name but two enormously huge artists). It also has telecommunications interests...

So, why would a hugely lucrative mega-corp apparently flog of a vastly, hugely, enormously successful property such as World of Warcraft to a competitor? The simple answer is that it hasn't. At the end of the deal, Vivendi (the parent company) could own up to 68% of Activision Blizzard. This means that it retains revenues from its existing properties while also benefiting from such Activision properties as Tony Hawk, Guitar Hero and Call of Duty.

Okay, so why would a successful games publisher such as Activision want to get into bed with a competitor the size of Vivendi?

Well, Activision with all its mega-successful Tony Hawk, Guitar Hero and Call of Duty properties does not have any of the online PC-based brand impact that World of Warcraft offers. A slice of the projected $1.1-biliion (600m) revenue stream to be generated by Activision Blizzard might also factor into the equation.

The advantages gained by the move for Activision are highlighted in the words of its Chairman and CEO Robert Kotick, "By joining forces with Vivendi Games, we will become the immediate leader in the highly profitable online games business and gain a large footprint in the rapidly growing Asian markets, including China and Korea, while maintaining our leading operating performance across North America and Europe", he said.

Vivendi's CEO and Chairman of the Management Board, Jean-Bernard Levy, meanwhile, said, ?We believe this transaction will create significant value for Activision Blizzard and Vivendi stockholders. In Activision, we have found a partner with a highly complementary business and strong operating team. Bobby Kotick and Brian Kelly are industry pioneers, well known for creating shareholder value. The combined strength of the existing management teams at both companies will set the stage for further profitable growth of Activision Blizzard. We look forward to being an active and supportive majority stockholder in a company that is poised to lead the worldwide interactive entertainment industry in the years ahead."

Kotick has also indicated that we may see Activision franchises pushed more deeply into the world of online gaming, saying, "Vivendi Games provides Activision with unique strategic and financial benefits and will allow us to leverage our franchises into emerging online opportunities as Blizzard has done so successfully. Activision has been very focused on margin expansion, and this transaction will meaningfully increase our overall operating margins as we expand our franchises online and in new geographies.?

He also pointed to the possible advantages to be gained from Vivendi's ownership of Universal Music for Guitar Hero, stating, ?This transaction also provides a unique relationship with Universal Music Group - the world's largest music company - which will benefit Guitar Hero and further extend our sizable leadership position in music-based games."

Activision Blizzard will be directed by key executives from both companies. Kotick and Bruce Hack, current CEO of Vivendi Games, will serve as vice-chairman and chief corporate officer. Rene Penisson, member of the Vivendi's Management Board and current Chairman of Vivendi Games will serve as chairman of Activision Blizzard.


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