NOOOOOO!!! "EA Proposes to Acquire Take-Two Interactive"

[Coder]

I don't know all the rules and laws and whatnots, but if this goes through, wouldn't EA have a monopoly, and isn't that illegal?

[Eaglesfan27]

Take Two's stock shot up almost 9 dollars today. While this news is horrible for me as a fan, it's not bad for me as a stock owner.

[Mizzou B-ball fan]

Originally Posted by Eaglesfan27

Some analysts are predicting that Sid would love to work with EA's marketing as he has always wanted more exposure for the Civ series. Hard to say what he would do.

That would work until EA started telling Sid how to make his game (as they do with most franchises). I'm sure our friend Jim G. could help out with the pros/cons of that discussion.

[Eaglesfan27]

Originally Posted by Mizzou B-ball fan

That would work until EA started telling Sid how to make his game (as they do with most franchises). I'm sure our friend Jim G. could help out with the pros/cons of that discussion.

Well, some analysts think that Sid has enough influence that EA would give him resources and leave him alone to do his thing, and I think they might be right. Shrug.

[cartman]

Since Sid >>> Will, and Mr. Wright has had pretty much free reign to develop unconstrained, I'm sure that Mr. Meier would be given wide latitude as well.

[Mizzou B-ball fan]

Originally Posted by Eaglesfan27

Well, some analysts think that Sid has enough influence that EA would give him resources and leave him alone to do his thing, and I think they might be right. Shrug.

We can hope that's the case if he does end up at EA. We'd have to organize a FOF militia to take over EA headquarters if they managed to f-up the Civ franchise.

[Wolfy]

Originally Posted by Mizzou B-ball fan

We can hope that's the case if he does end up at EA. We'd have to organize a FOF militia to take over EA headquarters if they managed to f-up the Civ franchise.

Too late, Civ Lite is already on the way. Might as well sell the corpse to EA and move on.

[Honolulu_Blue]

Originally Posted by Coder

I don't know all the rules and laws and whatnots, but if this goes through, wouldn't EA have a monopoly, and isn't that illegal?

A monopoly in what exactly? The key question in determining whether a company has a monopoly is market definition. I don't think even after the acquisition EA would be said to have a monopoly over any discernable antitrust market. I doubt regulators would define a market as narrow as, say, professional sports video games for consoles.

[Big Fo]

PC/console flame wars are so boring, both of them rock. Save your vitriol for EA.

[Malificent]

Originally Posted by cartman

Since Sid >>> Will, and Mr. Wright has had pretty much free reign to develop unconstrained, I'm sure that Mr. Meier would be given wide latitude as well.

I'm actually pretty sure Will > Sid, at least for EA. The Sims alone pretty much dominated the PC game market for a while, whereas Civ, in the later years, is successful, but not Sims sort of successful. I still think it is possible they would give free reign to Sid. Just think that Will Wright is probably the biggest individual money maker they have (in terms of developers).

[Mizzou B-ball fan]

Oh dear. This thing is going to get nasty. Looks like the Take Two people are trying to rob the shareholders blind via this deal.............

http://blogs.marketwatch.com/greenbe...-of-rejection/

[Passacaglia]

Originally Posted by Eaglesfan27

Take Two's stock shot up almost 9 dollars today. While this news is horrible for me as a fan, it's not bad for me as a stock owner.

I guess that's what happens when I wait three days (until a few moments ago) to think, "hey, wouldn't that make their stock a good buy?"

[BrianD]

Originally Posted by Mizzou B-ball fan

Oh dear. This thing is going to get nasty. Looks like the Take Two people are trying to rob the shareholders blind via this deal.............

http://blogs.marketwatch.com/greenbe...-of-rejection/

I'm confused by all the outrage here (not just by you Mizzou). Isn't this a pretty standard takeover defense? Companies structure contracts and bonuses to coincide with takeover offers. This both protects the highest levels of management and it devalues the company such that the takeover becomes much more costly. I would think that most public companies would have these measures in place.

[BrianD]

Originally Posted by Eaglesfan27

Take Two's stock shot up almost 9 dollars today. While this news is horrible for me as a fan, it's not bad for me as a stock owner.

This isn't terribly surprising. If EA is going to value the stock at $26 with their offer, buying stock at any level below that will be an instant win if the deal does go through. Stocks generally rise to the takeover offered price and then slowly drop down if the takeover doesn't take place. If you do own stock already, I'd give serious thought to selling around $26 as it probably won't go higher...unless you really want the EA stock it may become.

[Kodos]

I read somewhere that Take 2 probably wants an offer of around $33.

[Logan]

You also have people out there who have shorted the stock who are buying back to cover.

[CraigSca]

Shoot me for this because this is a direct cut and paste from Bill Harris' blog, but man is this interesting:

According to an 8-K filing with the SEC, on February 14 (coincidentally the day before rejecting EA’s first offer, which had been made on February 6) Take-Two proposed several changes to its management deal with ZelnickMedia, whose top execs run Take-Two.

They include:
–Boosting ZelnickMedia’s monthly pay to $208,333 from $62,500 per month.
–Boosting the annual bonus to $2.5 million from $750,000.
–A grant of 600,000 shares of restricted stock that will vest over three years unless the company is acquired, in which case they’ll vest immediately.

This is where it gets good, and I’m somewhat paraphrasing from the filings:
The shares won’t vest immediately if, prior to the company’s annual meeting, which is expected to be before April 1, the Company received a bona fide indication of interest in, or offer to enter into, a business combination (which it did); the offer specifies, with some degree of particularity, the material terms (which it may have) and (my favorite) the offer’s existence hasn’t been publicly disclosed or confirmed by either company before Take-Two’s annual meeting. (Oops, definitely happened.)

That’s right: Take-Two received a rich and serious offer from a substantial company. It didn’t disclose the offer, and hoped to keep it secret until at least after the annual meeting, when investors might have challenged the compensation package and attempts by the company to block the deal. Then, in a public filing, Take-Two in effect threatened EA not to make the offer public by giving ZelnickMedia a chance to enrich itself, at the expense of shareholders, by granting restricted stock that will vest immediately if EA made the deal public.

Maybe I'm crazy, but I don't see how paying a 60% premium over the current stock price for Take-Two "undervalues" anything. And beyond that, EA accountants will have to wear hazmat suits when they look at the books.

[Eaglesfan27]

Originally Posted by BrianD

This isn't terribly surprising. If EA is going to value the stock at $26 with their offer, buying stock at any level below that will be an instant win if the deal does go through. Stocks generally rise to the takeover offered price and then slowly drop down if the takeover doesn't take place. If you do own stock already, I'd give serious thought to selling around $26 as it probably won't go higher...unless you really want the EA stock it may become.

It's now gone up well over 9 dollars today, up to 26.46 this afternoon. I'm usually a long term sort of guy, but this is a very interesting decision. I bought these shares back when it was around 15 dollars/share.

Edit: It is now 26.89. Hmm.

[Kodos]

Sell!

[sabotai]

Bulls make money! Bears make money! Pigs get SLAUGHTERED!

[Kodos]

Panic! Do something -- ANYTHING!!!

[Buccaneer]

Originally Posted by Kodos

Panic! Do something -- ANYTHING!!!

Oh, oh, I know, let's get the federal government involved.

[Atocep]

Originally Posted by Buccaneer

Oh, oh, I know, let's get the federal government involved.

Has there been steroid accusations?

[Galaxy]

Did make me go Jim Kramer on your ass!

[Mota]

Letter from EA to T2 on Feb 19th...

"Thank you for your letter of February 15, 2008. While I appreciate its courteous tone and value our ongoing dialogue, I am disappointed that you have rejected Electronic Arts Inc.’s (“EA’s”) $25 per share cash offer to acquire Take-Two Interactive Software, Inc. (“Take-Two”) and declined to engage in the friendly negotiations we proposed."

I like how he throws around the word FRIENDLY. That doesn't sound very friendly to me. Sounds more like a bully in the playground.

[Groundhog]

"Playground Bully" sums up EA nicely IMO.

[kingnebwsu]

And how many school officials ever stopped the "playground bully"?

That's why EA will continue to gobble up companies until they own pretty much everything.

David Hayter would say, "E-A-Sucks. If it's not for sale, they'll buy it anyway... (rated T for Terrible)."

[Mizzou B-ball fan]

In a shocking development (sarcasm off), Michael Pachter confirms that EA's main purpose is to secure the 2K Sports franchises and remove them from play. Pachter statest that GTAIV is only gravy on top and is not EA's main target in the acquisition.

http://kotaku.com/360452/pachter-ea-...gtaiv-is-gravy

[Kodos]

It'd be great if some deep-pockets company like Microsoft bought Take Two to compete with EA. But then they're probably afraid EA will stop putting games on the 360 if they do that...

[rkmsuf]

Take the two billion fools. Who cares about the stupid 2k franchise. You are rich, beotches.

[SackAttack]

Originally Posted by Kodos

It'd be great if some deep-pockets company like Microsoft bought Take Two to compete with EA. But then they're probably afraid EA will stop putting games on the 360 if they do that...

Microsoft essentially killed their sports division for that very reason - to keep EA happy. Couple of the franchises, such as Top Spin, wound up joining the 2K label. So did Links Golf, I thought, but 2K never did anything with it.

The others just...blew away like dust in a desert wind.

[Mizzou B-ball fan]

Interesting development that had been mentioned as a possibilities. The FTC is now investigating the possible merger between EA and Take Two. Some are wondering the FTC will even allow the merger to take place even if a deal is reached.........

http://gamepolitics.com/2008/04/17/f...-takeover-bid/

[SFL Cat]

I wouldn't be so quick to poo-poo anti-trust dangers for EA.

[Honolulu_Blue]

Originally Posted by Mizzou B-ball fan

Interesting development that had been mentioned as a possibilities. The FCC is now investigating the possible merger between EA and Take Two. Some are wondering the FCC will even allow the merger to take place even if a deal is reached.........

http://gamepolitics.com/2008/04/17/f...-takeover-bid/

That's the FTC, not FCC.

These types of document/data requests (called "Second Requests") occur in about 5% of all mergers. It doesn't mean the deal will get blocked by the FTC, but just that they will be taking a closer look at things.

The big question in all of this will be market definition. If the FTC determines that there is a separate market for "pro football" games for consoles or "pro basketball' or "pro hockey", then the merger could potentially be blocked.

EA will, of course, argue that such a market definition is far too narrow and that games like Madden football compete with all other video games, console and PC, and they will probably even make the argument that they compete with DVDs and the like for consumer's dollars.

I haven't followed Take Two's sports titles all that closely, but I know EA has an exclusive licenese with the NFL (and maybe MLB? Or any other pro sports leagues?). Has there been any years were Madden was the only "pro football" game released for consoles? If so, that would be a very good natural experiment for market definition. If there was a year (or years) where Madden was it, the FTC could compare prices in those years against prices in years were Take Two published a competing game. If the prices were considerably different (5-10% or so) in the years where Madden was the only game in town, the FTC could likely determine that it is a separate market. If Madden's price was still the same, EA will argue that it was because it competes with all other video games and if they raised prices, consumers would just go buy something.

There are a number of other arguments, but as an antitrust lawyer and a video game fan, this would be pretty interesting to see how it all plays out.

[Mizzou B-ball fan]

Originally Posted by Honolulu_Blue

That's the FTC, not FCC.

Thanks for the correction. Posted that AWFULLY early.

FYI......here's the article concerning the details in case you're interested.......

http://blog.newsweek.com/blogs/level...-take-two.aspx

[flere-imsaho]

I'm still trying to wrap my head around the idea that Take Two is worth $2 billion while Facebook is worth $15 billion.

[Logan]

Short and simple...Take Two's customers buy video games, Facebook's customers buy everything.

[SackAttack]

Originally Posted by Honolulu_Blue

I haven't followed Take Two's sports titles all that closely, but I know EA has an exclusive licenese with the NFL (and maybe MLB? Or any other pro sports leagues?). Has there been any years were Madden was the only "pro football" game released for consoles? If so, that would be a very good natural experiment for market definition. If there was a year (or years) where Madden was it, the FTC could compare prices in those years against prices in years were Take Two published a competing game. If the prices were considerably different (5-10% or so) in the years where Madden was the only game in town, the FTC could likely determine that it is a separate market. If Madden's price was still the same, EA will argue that it was because it competes with all other video games and if they raised prices, consumers would just go buy something.

EA holds the exclusive rights to the NFL. Take-Two has "exclusive third-party" MLB rights.

What you see with Madden in terms of pricing, though, isn't higher prices once they held exclusivity, but almost certainly prices that don't drop as quickly because there's no competition to hold their feet to the fire.

[BrianD]

What kind of price drops do we expect out of a football game? Don't all football games enter the market at about the same price and drop at a similar point post-release? I know that the 2k football game was released at about half-price one year, but that seemed to be a one-time market grab.

[spleen1015]

Originally Posted by BrianD

What kind of price drops do we expect out of a football game? Don't all football games enter the market at about the same price and drop at a similar point post-release? I know that the 2k football game was released at about half-price one year, but that seemed to be a one-time market grab.

It was Take-Two's way of trying to gain market share. EA was threatened, so they bought exclusivity.

They probably would have continued with the low prices had EA not done that.

[Honolulu_Blue]

Originally Posted by Mizzou B-ball fan

Thanks for the correction. Posted that AWFULLY early.

FYI......here's the article concerning the details in case you're interested.......

http://blog.newsweek.com/blogs/level...-take-two.aspx

Thanks for the link. I agree with what the former FTC guy said (since it's pretty much what I said above. )

I think divestiture of a license or two could be possible (Though the FTC/DOJ haven't been too receptive of conglomerate type arguments). The question then, of course, is who buys it? You would need a developer and publisher talented enough and big enough to put out a game in 1-2 years that would be competitive with EA. Given all the consolidation going on the industry, that list is very, very small...

[SackAttack]

Originally Posted by BrianD

What kind of price drops do we expect out of a football game? Don't all football games enter the market at about the same price and drop at a similar point post-release? I know that the 2k football game was released at about half-price one year, but that seemed to be a one-time market grab.

They actually did that for two or three years, if I'm not mistaken. Certainly on the PS2 they did.

Madden followed suit right up until the time that EA bought exclusivity, at which point the price went right back up again. Not to a full $49.99, but certainly from $29.99 (or even $19.99 if they fully matched Take-Two's move) up to $39.99 or so.

[BrianD]

Originally Posted by SackAttack

They actually did that for two or three years, if I'm not mistaken. Certainly on the PS2 they did.

Madden followed suit right up until the time that EA bought exclusivity, at which point the price went right back up again. Not to a full $49.99, but certainly from $29.99 (or even $19.99 if they fully matched Take-Two's move) up to $39.99 or so.

I'd like to disagree with this, but I'm not sure if I'm right. I recall buying NFL 2k4 at full price for myself and then buying NFL 2k5 for $19.99 for my Dad. Wasn't the whole point to not charge full price for "basically a roster update" as a further jab at EA?

[Eaglesfan27]

I'm almost 100% sure that it was a 1 year deal as well. I never tried ESPN 2k Football until 2k5, but they went with the 19.99 price and that was too good to pass up. Maybe they did a slightly reduced price in previous years, but nothing close to what they did with 2k5.

[SackAttack]

Originally Posted by BrianD

I'd like to disagree with this, but I'm not sure if I'm right. I recall buying NFL 2k4 at full price for myself and then buying NFL 2k5 for $19.99 for my Dad. Wasn't the whole point to not charge full price for "basically a roster update" as a further jab at EA?

It wasn't a "jab at EA." It was an attempt to steal market share from them after having the higher-rated game for 2 or 3 straight years and getting pummeled in sales.

Pretty sure 2k5 was the first one to do the $19.99 thing, 2k6 did the same thing (or possibly went to $29.99 instead), and then EA bought the exclusive licenses.

In either event, that was Xbox/PS2. I don't believe the 2K football series ever came even to Xbox 360.

[BrianD]

You don't think them saying that they were charging half price because it was mainly a roster update wasn't a jab at EA? That doesn't mean the main purpose wasn't to steal market share, but it sure seemed at the time like they were getting an extra jab as well.

[Buccaneer]

Originally Posted by Logan

Short and simple...Take Two's customers buy video games, Facebook's customers buy everything.

Are you sure? I mean, just because you get lots of ads and lots of eyeballs doesn't necessarily mean that everything is being bought (i.e., real monies in exchanged for goods).

[stevew]

Madden used to drop to about 20 bucks once the season ended. Now it's still at 50 msrp.

[Logan]

Originally Posted by Buccaneer

Are you sure? I mean, just because you get lots of ads and lots of eyeballs doesn't necessarily mean that everything is being bought (i.e., real monies in exchanged for goods).

That's why I said it was simple . For one, Take Two presumably has a ton of infrastructure that's costly. It also has major expenses that come with achieving their levels of revenue. Facebook probably doesn't have anything close to that. It also offers a user base that is heavily, heavily dominated by the demographics advertisers want to cater to, and also adds the benefit of being able to target ads to certain users based on the information that Facebook knows about the user.

[SackAttack]

Originally Posted by BrianD

You don't think them saying that they were charging half price because it was mainly a roster update wasn't a jab at EA? That doesn't mean the main purpose wasn't to steal market share, but it sure seemed at the time like they were getting an extra jab as well.

It's irrelevant. I guarantee you that, EA's game being a roster update or not, if the 2K series had been enjoying financial success in line with its critical merit, they never would have dropped the price.

If I exercise my rotator cuffs and my hand hits you in the face in the process, that doesn't mean I punched you.