EA Finding Take-Two a Tough Ride to Steal

EA’s founding tag line is “we see farther.” Well, in this case, that couldn’t be closer to the truth. EA sees where Take-Two Interactive is headed and wants a piece of the action. With Grand Theft Auto IV’s record-breaking first week sales of $500 million and Universal Pictures shooting a BioShock film, it’s no wonder Take-Two considers EA’s offer of $25.74 per share “grand theft.”

Despite the fact that EA is a much, much larger company, it knows that Take-Two can innovate, something that EA has had problems doing since the turn of the century. While EA has caught a nasty case of “sequel-itis,” Take-Two’s Rockstar Games is making a killing thanks to edgier titles, like Grand Theft Auto IV and Manhunt.

Even EA’s CEO John Riccitiello admits they’re not the most creative bunch. “We’re boring people to death and making games that are harder and harder to play. For the most part, the industry has been rinse-and-repeat. There’s been lots of products that looked like last year’s product, that looked a lot like the year before.” This is precisely why Take-Two is making EA salivate, and precisely why Take-Two should not back down from their stance. Not only is EA undervaluing Take-Two’s worth by their recent bid, but I fear Take-Two’s games post-buy would become watered down. Strauss Zellnick, Executive Chairman of the Board of Take-Two, seems to feel similarly, claiming that the acquisition would be “intrusive and distracting” to the “creative artists at the core of our business.”

Mike Hickey, a Janco Partner analyst, recently predicted “extremely weak fiscal Q109 earnings” for EA, saying that this could potentially push back the release of several titles. Buying Take-Two would give EA a nice revenue bump, as well as combat the sequelization problems that analysts have gone after EA for in the past. For these reasons, it seems likely that EA is not going to walk away from the negotiating table.

Riccitiello is trying to persuade Zellnick by saying there’s “little margin for error” with the independent studios these days, but why would Zellnick worry when Take-Two’s virtually doing everything right? Audiences are clearly receptive to Take-Two’s delightfully controversial games, so the biggest mistake Take-Two could make right now would be shaking hands with a more “mainstream” company that seems hesitant to take risks. EA’s management team is salivating at the opportunity to put together sequels for the gold mine of intellectual property at its rivals. With its resources, it could radically reduce the time to market of GTA and company.

Whenever faced with the option of going to either a Starbuck’s or an independently owned coffee shop, I always go for the latter, and you know what? I usually end up liking their coffee better, and I feel like I’m doing my part to combat the evil empire. This is no different. Take-Two has more personality than many of its larger competitors, and gamers appreciate that about them. By shunning EA’s sweet talk, Take-Two’s titles run less risk of going to sequel regurgitation hell, ultimately allowing them to keep their dignity and putting their popularity into overdrive.