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The bride andgroom, a guitar-wielding rock vixen and a muscle-rippling dragon-slayer, makean odd couple-so it is hardly surprising that nobody expected their marriage.But on December 2nd the video-game companies behind "Guitar Hero" and"World of Warcraft", Activision and Vivendi Games respectively,announced plans for an elaborate merger. Vivendi, a French media group, willpool its games unit, plus $1.7 billion in cash, with Activision; the combinedentity will then offer to buy back shares from Activision shareholders, raisingVivendi’s stake in the resulting firm to as much as 68%.
Activision’s boss, Bobby Kotick, will remainat the helm of the new company, to be known as Activision Blizzard inrecognition of Vivendi’s main gaming asset: its subsidiary Blizzard Entertainment, the firmbehind "World of Warcraft", an online swords-and-sorcery game with9.3m subscribers. The deal was unexpected, but makes excellent strategic sense,says Piers Harding-Rolls of Screen Digest, a consultancy. Activision has longcoveted "World of Warcraft", and Vivendi gets a bigger games divisionand Activision’s talented management team to run it. As well as making sense for bothparties, the $18.9 billion deal-the biggest ever in the video-gamesindustry-says a lot about the trends now shaping the business.
The first isa push into new markets, especially online multiplayer games, which areparticularly popular in Asia, and "casual" games that appeal topeople who do not regard themselves as gamers. "World of Warcraft" isthe world’s most popular online subscription-based game and is hugely lucrative.Blizzard will have revenues of $1.1 billion this year and operating profits of$520m. "World of Warcraft" is really "a social network with manyentertainment components," says Mr Kotick.
Similarly, heargues, "Guitar Hero" and other games that use new kinds ofcontroller, rather than the usual buttons and joysticks, are broadening theappeal of gaming by emphasising its social aspects, since they are easy to pickup and can be played with friends. Social gaming, says Mr Kotick, is "themost powerful trend" building new audiences for the industry. He isclearly excited at the prospect of using Blizzard’s expertise to launch an onlineversion of "Guitar Hero" for Asian markets. Online music games suchas "Audition Online", which started in South Korea, are "massivein Asia," says Mr Harding-Rolls.
A secondtrend is media groups’ increasing interest in gaming. Vivendi owns Universal Music, one of the"big four" record labels. As the record industry’s sales decline, it makes sense tomove into gaming, a younger, faster-growing medium with plenty ofcross-marketing opportunities. (Activision might raid Universal’s back catalogue for material forits music games, for example, which might in turn boost music sales.) Othermedia groups are going the same way. Last year Viacom, an American media giant,acquired Harmonix, the company that originally created "Guitar Hero".It has been promoting its new game, "Rock Band", using its MTV musicchannel. Viacom has also created online virtual worlds that tie in with severalof its television programmes, such as "Laguna Beach" and "PimpMy Ride". Disney bought Club Penguin, a virtual world for children, inAugust. And Time Warner is involved in gaming via its Warner Bros Home Entertainmentdivision, which publishes its own titles and last month bought TT Games, theBritish firm behind the "Lego Star Wars" games.
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