With Warner Bros. Interactive Entertainment Reportedly Up For Sale, It's Time For Fantasy Game Industry Acquisitions

With Warner Bros. Interactive Entertainment Reportedly Up For Sale, It's Time For Fantasy Game Industry Acquisitions

THIS WEEK IN BUSINESS | WBIE is reportedly up for sale, so who should buy the publisher behind NetherRealm and the Batman Arkham series?

Warner Bros. Interactive Entertainment reportedly going up for sale means it's time to play one of my favorite hobbies: Industry Watcher Fan Fiction!

It's kind of like when people who watch pro wrestling come up with their own storylines about what should happen with their favorite wrestlers, only instead of involving bitter tag-team break-ups and stolen finishing moves, it has a lot more business terminology.

But business terminology can still be cool, what with all the poison pills, stalking horse offers, creeping takeovers... there's even a Pac-Man Defense! (Note to self: Pitch WWE on a stable of white collar criminal villains called the Vulture Capitalists...)

Anyway, it was reported last week that AT&T is interested in selling off WBIE, which makes games like the Batman: Arkham franchise, Mortal Kombat, the Lego games, Harry Potter, and the Lord of the Rings Mordor titles. The three companies mentioned in the original report as potential acquirers were Electronic Arts, Activision Blizzard, and Take-Two Interactive.

Now, the big issue here for any acquiring party is just what they get by buying WBIE. Mortal Kombat is the big franchise, but almost every other big WBIE title is based on a license (or multiple licenses in the case of the Lego games). In some of those cases (Batman, Harry Potter), the franchises are owned by current parent company AT&T, so if they were to continue, any acquiring company would need to reach a licensing deal as well, which would impact the profitability of those games.

However, even without the licenses, WBIE still owns an impressive lineup of proven development studios like NetherRealm, Rocksteady, Monolith Productions, TT Games, WB Games Montreal, and more.

So who would benefit most from having an injection of quality triple-A developers, Mortal Kombat, and potentially a few new licensed franchises? Of the three companies reportedly interested, I'm most inclined to dismiss Activision Blizzard from the running.

While I think the Activision side of the business desperately needs to extend its catalog beyond Call of Duty, it has been so deliberate in recent years trimming its offerings down to just Call of Duty and the odd nostalgia play (Crash Bandicoot or Tony Hawk, for example), and has turned profits regardless that I don't see it making a $4 billion impulse purchase because it suddenly has an option to pick up Mortal Kombat and a slew of studios it wouldn't really know what to do with.

It could try to secure licenses to continue on with all of WBIE's established franchises, but Activision Blizzard as a company has grown very reluctant over the last decade to rely on licenses, dropping Guitar Hero, Spider-Man, the X-Men, Transformers, and James Bond from its roster.

Stephens analyst Jeff Cohen noted that less than 5% of Activision's revenue comes from externally owned intellectual property, compared to 35% for Take-Two (NBA and WWE games) and 67% for Electronic Arts (Star Wars, licensed sports games, etc.).

Take-Two is an interesting option because it is somewhat desperate to extend its pipeline of triple-A releases. This is the second time in the last four years that Take-Two is looking at a light release slate anchored by its annualized sports games, and management has been clear it wants to avoid that situation in the future. It also is more comfortable with licensed titles, and has a strong enough track record of original intellectual property that it could go ahead with an acquisition even if the licenses for Batman and the rest weren't going to come on favorable terms.

EA is Cohen's pick because it has the most experience working with other people's IP, it would love to add WBIE's handful of mobile hits to its stagnant mobile business, and it has already shown itself to be a bit chummier with Warner Bros. because of WBIE's games being rare third-party titles on the EA Origin service.

EA makes sense to me, but it's not the most exciting pick, right?

And because it's not my money at stake here, I'll prioritize excitement over fiscal sensibility and pick Microsoft.

Microsoft got hammered by Sony this generation for a number of reasons, one of which was the lineup of first-party exclusives. The PS4 had Bloodborne, Horizon Zero Dawn, Uncharted 4, God of War, Spider-Man, and so on.

Xbox One had the Forza series, arguably past-their-prime franchises not being handled by the original developers like Halo and Gears of War, and a smattering of games that weren't ever going to move the needle (Ori and the Blind Forest, Sea of Thieves, Sunset Overdrive). Microsoft's first-party studio system was clearly in need of an overhaul, and the company addressed that in recent years by buying up a number of second-tier developers like Obsidian and Double Fine, well-respected studios that have fanbases for a reason but aren't exactly known for making system sellers.

Mortal Kombat would be a natural konsole exclusive, giving the Xbox Series X a best-selling fighting franchise that it could also refresh by crossing over with Killer Instinct. (Or by FINALLY making a sequel to Shaolin Monks, I don't know, just spitballing, not like people have been waiting 15 years for this or anything.)

WBIE going on the auction block gives Microsoft an opportunity to give its studio system something that could get gamers excited in the same way they got excited by the new God of War or Spider-Man. I also like the symmetry of having Batman and Spider-Man fronting rival console lineups in the same way they front rival comic publishers and rival super hero movie franchises. (Although I recognize that leads to all kinds of harmful factional stuff that makes modern fandom such a poisonous influence in the world as is. Look, this is my fan fiction; don't bring me down with all that.)

Sony really doesn't need the first-party help, and buying something just to keep it away from a competitor is more of an EA move. And as much as my Industry Watcher Fan Fiction approach highly values bizarre nonsense, I just don't see Nintendo acquiring pretty much anybody, least of all the people behind Mortal Kombat.

So you see, clearly the thing that needs to happen is Microsoft buying WBIE. At least, until someone suggests a better alternative in the comments. (But as always, don't read the comments.)

QUOTE | "In our view, this could set off a wave of M&A as publishers look to gain scale and round out their catalogues ahead of the next console generation" - In a note to investors, Stephens analyst Jeff Cohen says a rumored sale of Warner Bros. Interactive Entertainment could be followed by acquisitions of ZeniMax, Gearbox, Nexon, and/or Bungie as large publishers who spent the past decade narrowing their release slates look to increase their number of frontline releases.

QUOTE | "Games are going to feel different, better and more visceral." - Electronic Arts Chief Studios Officer Laura Miele simultaneously describing the PlayStation 5 and Xbox Series X generation of games and reminding me that the next generation will actually be less Visceral, objectively speaking.

QUOTE | "'Ready when it's done' is not just a phrase we say because it sounds right, it's something we live by even when we know we'll take the heat for it. At the same time, we are fully aware that making such a decision costs us your trust and trading trust for additional time is one of the hardest decisions a game developer can make." - CD Projekt Red, announcing a two-month delay to Cyberpunk 2077 and beseeching The Gamers for mercy at having committed such a transgression.

QUOTE | "So today, we are proud to introduce the Positive Play Charter - an updated set of community guidelines with clear consequences for players who engage in racist, sexist, homophobic, and abusive acts in our games and channels. If we see someone being offensive or abusive, we're going to hold them responsible for their actions." - Electronic Arts pledging to do more to clean up its online communities.

QUOTE | "Definitely what I did was not right. I'm not going to deny that. There will be no denial of anything of what I did was right. Right or wrong, sorry. I don't think what I did was racist at all. I really believe that." - Former Ultimate Marvel vs. Capcom 3 EVO champion Ryan "FChamp" Ramirez apologizes for a tweet that got him indefinitely banned from official Capcom events.

QUOTE | "Just from people being tired—of having to fight for their voice, of being spoken over, of being overlooked for promotions, of their perspective not being valued... All of those things, and you just think: You know what? I'll go work somewhere else that does value me and my talents." - POC in Play co-founder Chella Ramanan says the industry has a troubling habit of pushing away the relatively few non-white developers it employs in the first place.

QUOTE | "It's clearer than ever that the owners of [Steam] feel beholden to a base of angry white male gamers. This makes me especially sad because I feel that some of these people are the people who most need to hear the message of Black Lives Matter." - Art Sqool developer Julian Glander criticizes Valve's lack of any kind of statement on Black Lives Matter while pulling his game from Steam and asking other devs to do the same.

QUOTE | "Please keep in mind that the game is listed as an Early Access game. That means that the name and the content of the game are not a finished product and are subject to change at any given time without notice." - A Steam support response to a user's complaint that the game they purchased, Aiball: Drunks, received an update that swapped it out with an entirely different game, Penguin Cretins.

QUOTE | "Apple engages in predatory practices enticing consumers, including children to engage in gambling and similar addictive conduct in violation of this and other laws designed to protect consumers and to prohibit such practices" - A newly filed class action lawsuit accusing Apple of predatory practices involving loot boxes on the App Store.

QUOTE | "The biggest difference that I have now with my new team versus Human Head is that whenever we come up with an idea or a question the answer is, 'Yes we can do that.'" - In an interview about forming Studio 369 to continue work on Rune 2 after original developer Human Head surprisingly disbanded the day after the game launched, Ragnarok Games manager Matt Candler has no problem throwing shade at his old partners.

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Brendan Sinclair

Managing Editor

Brendan joined GamesIndustry International in 2012. Based in Toronto, Ontario, he was previously senior news editor at CBS-owned GameSpot in the US.

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