Rumour: Nexon offered to buy EA

I've just seen this flying around, although there's a lack of concrete sources. I guess for this kind of thing there will be a lack of concrete announcements until it happens, if it did go ahead.

http://www.reddit.com/r/Games/commen...
which links to
http://segmentnext.com/2012/04/26/ja...
which links to
http://www.neogaf.com/forum/showthre...
which links to
http://finance.yahoo.com/news/nexon-...

Japanese online game company Nexon reportedly contacted Electronic Arts (EA) about making an offer, according to Bloomberg, citing a South Korean newspaper.

I definitely find the idea interesting, especially given EA's financial results over the past few years and the directions they've pursued with their games.

Bonus: I saw this while poking around looking for sources - Vivendi (Activision-Blizzard parent) considering break-up of music and video games divisions: http://www.bloomberg.com/news/2012-0...

That would be amusing if it happened. EA's push toward freemium models on their recent games makes it an interesting acquisition target.

EDIT: The Yahoo article cites Bloomberg. Here's what I found over there: http://www.bloomberg.com/video/91450...

Haha, EA trading up 6%. So that's what... 30 cents more than normal?

I didn't know Vivendi had a music division O_o

shoptroll wrote:

I didn't know Vivendi had a music division O_o

Yeah, a little thing called Universal Music Group.

Nexon, what a blast from the past. I played their Dark Ages MMO as a kid, as well as its Eastern Fantasy clone.

I wonder what happens to BioWare at that point.

Squee9 wrote:

I wonder what happens to BioWare at that point.

More Datapad?

EDIT: Oh wait, that's what happens if Zynga buys EA. My bad.

Podunk wrote:
shoptroll wrote:

I didn't know Vivendi had a music division O_o

Yeah, a little thing called Universal Music Group. :)

Only the largest in the entire world...

(not #1 in publishing, though; that's EMI)

Does EA actually have enough accumulated debt to actually consider a buyout at this point? I know that a buyout can occur without debt, but I can't imagine EA would sell without an incredibly dismal long-term projection. And, from my casual knowledge I don't believe EA is at that point yet.

Michael Pachter: Why the deal cannot happen

Pachter is like most analysts and usually just talks out of his ass for a living but he's probably right here. The math just doesn't add up and given the way Nexon's structured, this would be a very hard deal to pull off and EA's business is so different from theirs that they probably wouldn't know what to do with it anyway. And I mean, I don't know why a company in a market that's currently printing money would want to take over a company that's very heavily invested in the super high risk and generally low reward AAA space. I wouldn't be surprised if EA and Nexon talked (this happens all the time) but I think this is a BS rumour.

Parallax Abstraction wrote:

Pachter is like most analysts and usually just talks out of his ass for a living

This is funny:

4) Nexon would be the acquirer, and would attempt to run a company with $6 billion in revenues that is in mobile, social, MMO and packaged goods, all things Nexon has never done before, at a size 4x their current size

It's probably just how the writeup arranged the words, but if you go to Nexon's website.... Mobile, social, and MMO are their bread n' butter. Not sure if they're to the same size/scale as EA though.

Actually, looking at the Wikipedia article on MapleStory indicates that MapleStory was pretty big back in 2006 but has dropped off significantly since then.

For what it's worth, in 2011 MapleStory had 4x the subscribers than The Old Repbulic currently has (estimates are around 2 million?). So that's something.

I agree this rumor doesn't really hold much water, but it's an interesting thought experiment. I just don't see EA going willingly into the night. They've got plenty of IP and studios they could sell off to stay afloat.

Parallax Abstraction wrote:

Pachter is like most analysts and usually just talks out of his ass for a living but he's probably right here. The math just doesn't add up and given the way Nexon's structured, this would be a very hard deal to pull off and EA's business is so different from theirs that they probably wouldn't know what to do with it anyway. And I mean, I don't know why a company in a market that's currently printing money would want to take over a company that's very heavily invested in the super high risk and generally low reward AAA space. I wouldn't be surprised if EA and Nexon talked (this happens all the time) but I think this is a BS rumour.

Agreed, but Pachter is right about this, not because of the scale of the deal (it could get done), but because of Nexon's loss of control of the business once they integrate EA.

I was shocked that Nexon was big enough to even consider an acquisition. They have a market cap of around $8bn, with a credit/cash float of $1.5bn? WTF? Off Freemium? No wonder most MMOs are shifting to that model! There's gold in them thar hills!

I was thinking...just because EA isn't a likely target, with that sort of financial structure, there could be other targets for Nexon. Let's assume that Turbine is out of the running for an acquisition, since Warner owns them. Aeria? GPotato? Funcom? A little Freemium platform consolidation is surely coming.

mateo wrote:

A little Freemium platform consolidation is surely coming.

Truth. I'm imagining a Nexon hub where you buy a bunch of Nexon points that you spend on any number of micropurchases across a bunch of their different products.

Free to play with microtransactions is still a rising tide. In the gamer consumer scale from rabid fan to pirate, microtransactions win at every level. Rabid fans who buy everything will most likely spend more money than what you could have gotten from a one time collector's edition sale, and pirates at the mimimum swell your player base.

I predict that this deal does not happen, and that Nexon continues to make a bunch of money.

Scratched wrote:

"partnership"

So it's the same as Blizzard and that Chinese company I can't remember right now for WoW. Nexion will just be the distributor and Asian publisher of FIFA.

How are these companies doing so poorly financially despite having massive hits left and right? How poorly managed are these corporations? You just absolutely have to be throwing money away to be doing poorly.

ZaneRockfist wrote:

How are these companies doing so poorly financially despite having massive hits left and right? How poorly managed are these corporations? You just absolutely have to be throwing money away to be doing poorly.

Sort of. They spend ridiculous amounts of money making these games and possibly even more promoting them. You could argue they can't have these massive hits without doing that, although I'm not totally sure. It's possible this is proof that the $60 AAA game business model is just not a good one.

It's possible this is proof that the $60 AAA game business model is just not a good one.

It has been flawed from the get go. You have the devs on one end and the consumer on the other. Lets play a game where we can see how many middle men we can cram in between before the ship sinks!

SixteenBlue wrote:
ZaneRockfist wrote:

How are these companies doing so poorly financially despite having massive hits left and right? How poorly managed are these corporations? You just absolutely have to be throwing money away to be doing poorly.

Sort of. They spend ridiculous amounts of money making these games and possibly even more promoting them. You could argue they can't have these massive hits without doing that, although I'm not totally sure. It's possible this is proof that the $60 AAA game business model is just not a good one.

It's not anymore. For every 1 Call of Duty, there's 15 more titles that lose buckets of money and erase all the gains. I've been writing a blog post forever about this that I'm still not done but yeah, I love AAA games but the industry has to think about how they're made and marketed or they're going to kill them off.

shoptroll wrote:

* You know something is broken when you need a dedicated team member to render chairs for your game. Fun fact: Bulletstorm isn't getting a sequel because it wasn't profitable after over 1 million sales.

Hi I’m Krzysztof Dolas (‘Hatred’), an Environment Artist here at People Can Fly. I work with Level Artists from the Art Pit on all the things you see around our characters. This can be any object from a rock to a bridge.

?

Maybe it's not a single person working on chairs (sorry I'll revise the link text), but read through that blog entry and see the amount of effort they need for an environmental object. Contrast that with something out of the 90s and you see why budgets have blown up spectacularly this generation.

This is going way off the topic now, but something I'm wondering. How many people would really care if the 'set decoration' office chair you run straight past was the same as or a slightly modified version of a chair in another game? Does every game really need to be 100% hand crafted from original pixels? This kind of thing seems to be just one facet of the games industry's obsession with reinventing the wheel for every game, instead of just pulling the unimportant stuff from a library, such as the moving picture industry would just grab a prop from a warehouse.

Parallax Abstraction wrote:

It's not anymore. For every 1 Call of Duty, there's 15 more titles that lose buckets of money and erase all the gains. I've been writing a blog post forever about this that I'm still not done but yeah, I love AAA games but the industry has to think about how they're made and marketed or they're going to kill them off.

Nintendo seems to be doing ok, but that's probably because they have plenty of titles that will sell tens of millions of copies throughout a system's lifespan, and they stayed out of the HD so their art asset pipelines are probably less expensive. But the basic problem is that costs went up a lot*, MSRP went up 20%, and the audience hasn't expanded (or shrank in the case of some genres like JRPGs) this generation. AAA has pretty much run into a giant brick wall in terms of maximizing retail sales (hence why there's a big push towards subscription models and DLC) because they can't convert those sweet sweet millions of Angry Birds addicts to pay $60 and play something like Shadows of the Damned.

Likewise, this is why "indie", free to play, and mobile are exploding right now. $15 is the upper limit meaning there's less risk for consumers. You have smaller teams meaning smaller budgets. Therefore it's not hard for them to hit the "break even" point for many of these games because they only need to sell thousands of copies, not millions. Plus there's more variety because indie developers can take more risks, and yeah.

* You know something is broken when you need two artists to design and render a chair for your game. Fun fact: Bulletstorm isn't getting a sequel because it wasn't profitable after over 1 million sales

shoptroll wrote:
Parallax Abstraction wrote:

It's not anymore. For every 1 Call of Duty, there's 15 more titles that lose buckets of money and erase all the gains. I've been writing a blog post forever about this that I'm still not done but yeah, I love AAA games but the industry has to think about how they're made and marketed or they're going to kill them off.

Nintendo seems to be doing ok, but that's probably because they have plenty of titles that will sell tens of millions of copies throughout a system's lifespan, and they stayed out of the HD so their art asset pipelines are probably less expensive. But the basic problem is that costs went up a lot*, MSRP went up 20%, and the audience hasn't expanded (or shrank in the case of some genres like JRPGs) this generation. AAA has pretty much run into a giant brick wall in terms of maximizing retail sales (hence why there's a big push towards subscription models and DLC) because they can't convert those sweet sweet millions of Angry Birds addicts to pay $60 and play something like Shadows of the Damned.

Likewise, this is why "indie", free to play, and mobile are exploding right now. $15 is the upper limit meaning there's less risk for consumers. You have smaller teams meaning smaller budgets. Therefore it's not hard for them to hit the "break even" point for many of these games because they only need to sell thousands of copies, not millions. Plus there's more variety because indie developers can take more risks, and yeah.

* You know something is broken when you need a dedicated team member to render chairs for your game. Fun fact: Bulletstorm isn't getting a sequel because it wasn't profitable after over 1 million sales.

Unlike Nintendo, Valve, and Blizzard the other publishers want to keep players buying a new game every year. Nintendo, Valve, and Blizzard learned that they want players to keep buying one game year after year. I hope one day publishers get that online passes, DLC, retailer exclusive bonuses just make consumers more likely to trade your game in they should be trying to keep people holding onto their games.

shoptroll wrote:

Maybe it's not a single person working on chairs (sorry I'll revise the link text), but read through that blog entry and see the amount of effort they need for an environmental object. Contrast that with something out of the 90s and you see why budgets have blown up spectacularly this generation.

Oh most definitely. The art budget is astronomical.

Japanese online game company Nexon...

Wait, I thought they were a Korean company?

SixteenBlue wrote:

The art budget is astronomical.

Yup. Which was part of the motivation behind Spore's crowd-sourced asset system

demonbox wrote:

Does EA actually have enough accumulated debt to actually consider a buyout at this point? I know that a buyout can occur without debt, but I can't imagine EA would sell without an incredibly dismal long-term projection. And, from my casual knowledge I don't believe EA is at that point yet.

Guess I was wrong to speak only to debt. http://www.gamasutra.com/view/news/1...

"In the past 5 years EA shares have lost nearly 70 percent of their value."

http://www.google.com/finance?client...

Looks like 1999 is when they started to climb up with the peak coming around 2005. From what I've read, Riccitiello was brought on board to try and save a sinking ship. If the slide continues it's pretty much expected he'll be replaced by Peter Moore who came aboard in 2007 and was promoted to COO last summer.

Curiously, EA's stock price is $2 higher than Activision right now. I guess the difference in market cap is what keeps them out of takeover danger?

EDIT: It's also interesting to notice that EA's stock has pretty much moved in lockstep with the NASDAQ index, however since 2009 the index has been going up while EA's price is basically treading water. I think?

Two months ago it was Activision, now it's back to EA: http://www.nypost.com/p/news/busines...

Electronic Arts — the force behind such popular video games as “SimCity” and “Madden NFL” — is quietly exploring a sale, The Post has learned.

While the discussions are at an early stage, the gamemaker has been approached by private-equity giants KKR and Providence Equity Partners about a potential transaction, according to sources.

“It’s early days,” said one source.

It's the New York Post so take with a mountain of salt but yeah. Cause we all know private equity firms always do what's right by consumers and employees...right?