Song of The Day: Future Shock - Artist: Herbie Hancock



So most have probably heard or read the reports about the Activision-Blizzard merger controlled by Vivendi. Since it appears that Morhaime describes the merge as a merger of equals (below), really an investor term, still leaves a bad taste for me regardless.

The structure is like a merger of equals. The corporate name “Activision Blizzard” is not a replacement for the publishing labels Activision or Blizzard Entertainment. Individual products will continue to be developed and marketed under the appropriate Activision or Blizzard Entertainment brands. The name “Activision Blizzard” will also be used by centralized services within the organization like sales, distribution and finance, which would service both brands.

AOL Time Warner’s merger was a merger of equals. Two assets that looked good on paper, but ultimately failed because of culture clashes, power struggles, and broken promises. Needless to say, I’m not as enamored by mergers of equals when it comes to intellectual property involving software and services.

It would be interesting to hear from other folks on this, via comments or whatever, but software is part plumbing and part craft IMHO. With gaming I would say it’s 75% craft, resembling art techniques and creativity. So merging these two to me seems like saying we’re going to merge Van Gogh and Monet, call it Van Gogh Monet and create an impressionist colossus. Okay. Maybe that’s stretching it, but I think it’s a better analogy than saying we’re merging something like oil pipelines, or plumbing, to create Exxon Mobile, or some telecommunication concern.

All too many times business rationales–or more like balance sheet ones–supersede other important aspects within software companies: culture, management structure, true evaluation of merger assets.

Although there are some similarities (e.g., media companies) between the AOL Time Warner merger and Activision Blizzard’s merger, there are, granted, a lot of differences. This merger may be more like AOL of old merging as an equal with Road Runner or Time Warner Cable. Or maybe the Netscape, AOL merger is a better example of software merging going awry. Maybe a more gaming-centric company…. I won’t get into all that now with a brief blog entry, but why my cautious outlook? In a nutshell this synopsis and comment, comment by the respectable Robert Kotick, seems to get at my concern:

Even as Activision was enjoying success with its top console games, the firm’s Chief Executive Robert Kotick said the success of World of Warcraft made him eager to get into online games. But he couldn’t figure out how Activision could do it on its own. “It has always been my aspiration to be the No. 1 videogame company,” Mr. Kotick said. “This gets us to be No. 1 in revenue, profitability and position.”

– WSJ Article

AOL couldn’t figure out how to get a successful broadband play in 2000 and merging with Time Warner didn’t help that. IMHO if one cannot gain limited success alone, before a merger of equals, then there is not much reason to believe that bringing them together, under the leader that didn’t have success, will ultimately improve the probability. Interestingly, if AOL had stopped obsessing about broadband pipes and obsessed more about delivering quality software services over existing “unowned” pipes, there may have been a different story today.

Perhaps Mr. Kotick was just being coy and the article too high-level, but it made me wonder: would some other arrangement have been better? Sure you can put the puzzle pieces of the MMO capability of World of Warcraft together with Tony Hawk, or something and it may work. However, with a software craft should Activision have licensed the tech, and revenue shared, before deciding a merger was appropriate? The lure of #1 too much? Perhaps there is some of this in the history that I’m unaware, but don’t know if it would change my pessimistic inclinations.

However, time is always the best judge of these things; we’ll leave it to the pundits. As a consumer, as long as they continue to produce great games, I will buy them; revenue will continue to climb and shareholders will be happy as a result.

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