Looking out for No. 2: Warner eyes next levelWhen it comes to big media companies playing in the video game sector, the two most aggressive contenders clearly are Disney at No. 1 and Warner Bros. at No. 2. Both are spending a lot of money and moving quickly.
But because Disney has been in the business longer and Warner is a relative newcomer, having built its first game in-house just three years ago, well, as they say in the car rental business, No. 2 has to try harder.
Just last month, Warner Bros. Home Entertainment Group acquired its second external developer, U.K.-based TT Games. Three years ago, it purchased its first, Monolith Prods., but it won't be another three years before it buys its third and fourth.
Warner has a shopping list, and even if Samantha Ryan won't let anyone peek at it, she won't deny that it is a big part of her strategy for success. Ryan is senior vp development and production at Warner Bros. Interactive Entertainment, overseeing the development and production of all of the company's video games. She was president and CEO of Monolith (she is still its CEO) and came to WBIE when Warner bought her firm.
"I'm a firm believer that internal production gives you, as the publisher, more control and greater insight into the production process," she says. "I would like to see Warner Bros. acquire more internal studios over time, just as we did TT Games, and I'd like to see a nice diverse set of studios."
Indeed, Kevin Tsujihara, president of Warner Bros. Home Entertainment, underscores the importance of having what he calls "tentpole games," such big franchises as Electronic Arts' "Madden Football" series, RedOctane's "Guitar Hero" and Activision's "Call of Duty."
"It's just like in the movie industry," Tsujihara says. "Tentpole games are becoming more and more valuable in the space because people get out of the way of them. We looked at TT Games' incredibly successful 'Lego Star Wars,' and we said that this is the kind of game we need to be associated with. So we acquired the company, and we'll be doing 'Lego Batman: The Videogame' in the spring and 'Lego Indiana Jones' later in 2008."
That kind of talk leads Wedbush Morgan Securities analyst Michael Pachter to believe that Warner might have its eye on at least one if not two other developers: Codemasters and SCi Eidos. Warner signed an agreement last year to distribute and sell Codemasters games, but Pachter believes that SCi Eidos is the more likely takeover target, especially because Warner already owns 10.3% of SCi, the result of a deal signed in December 2006.
"Eidos has a few impressive franchises, like its 'Hitman' series with its four hit games, which 20th Century Fox recently turned into a movie, and its 'Tomb Raider' series, which Paramount turned into two films," he says.
It recently has been reported that Warner also has a $500 million fund to develop games, and Tsujihara says he would "like to make sure that Warner Bros. has a pipeline of 20-25 games each year."
WBIE released three games in 2007 and expects to release another three in 2008: "Speed Racer" in May day-and-date with the Wachowski brothers movie; "Lego Batman" in the spring; and "Project Origin," the sequel to Monolith's game "F.E.A.R." The company has 12 games in production at 11 outside developers.
"We are in this space to play for good," Ryan says. "I need to deliver a good, wide array of products that keep the channels fed, that keep our sales people going and that give as much reach as possible to the widest number of consumers to take full advantage of all the Warner Bros. IP."