Blizzard Watch: Activision, Vivendi Create New Videogame Unit

Tony Hawk Videogames To Be Produced By New Vivendi-Activision Unit

Vivendi has agreed to pay $9.8B to merge its Vivendi Games unit with Activision and “take a controlling stake in the new firm, which will be called Activision Blizzard [AB],” according to Georg Szalai of the HOLLYWOOD REPORTER. The new division, which produces the Tony Hawk line of videogames, will “match or overtake market leader Electronic Arts in key performance measures.” The deal values AB at $18.9B, compared to EA’s market capitalization of $17.7B. Also, the combined ’07 revenue for Vivendi and Activision is expected to reach $3.8B; EA's projected revenue for its fiscal year ending March 31 is $3.35-3.65B. AB will "continue to spend time and money on the important game-development process, which has become increasingly expensive,” but it will be “less reliant on Hollywood licenses than Activision currently is.” Activision Chair & CEO Robert Kotick will serve as AB President & CEO, and Vivendi Games Chair Rene Penisson will be Chair. Activision co-Chair Brian Kelly will keep the same role with AB, while Vivendi Games CEO Bruce Hack will serve as Vice Chair and CCO (HOLLYWOOD REPORTER, 12/3). The WALL STREET JOURNAL’s Abboud & Wingfield report the deal “shows how game companies are jockeying for position at a pivotal time in the fastest-growing sector of the entertainment business.” The global videogame industry is expected to increase in revenue by 18.5% to $37.47B in ’07. Activision and Vivendi said that the goal for AB “is to have $1.1[B] in operating income" by the end of '09. Analysts said that EA “could face greater competition from Activision in deals to secure licenses of movie and other entertainment brands.” Wedbush Morgan Securities analyst Michael Pachter said of EA, “If they want to hold these guys off, they’re going to have to get more active in online” (WALL STREET JOURNAL, 12/3).