The biggest news to hit the gaming industry this week is that Electronic Arts has given up on its bid to acquire Take-Two Interactive. The publisher did not explain why it left the negotiating table, saying only that it did so after careful consideration, and that it would not be making another offer.
Wedbush Morgan Securities analyst Michael Pachter speculated that part of the reason for the deal's collapse was concern over Grand Theft Auto creators Sam and Dan Houser. Pachter said that the pair signed a three-year contract in February 2006, which would be in keeping with Take-Two's announcement the following month of a three-year incentive agreement with key Rockstar Games creative talent.
"The brothers are the driving force behind the Grand Theft Auto series, and are intimately involved in game decisions," Pachter told investors in a note this morning. "While neither writes game code, we believe that they are analogous to the director of a Hollywood film, instrumental in determining the final shape of the ultimate games released. We expect a bidding war for the Housers' services in February 2009, and remain convinced that Take-Two faces two equally unpalatable options: either lose the Housers to another bidder, or pay more to retain them."
Pachter compared the effect of the Housers' potential departure to the Medal of Honor series losing key creative staff in 2002. More than 20 developers from Medal of Honor: Allied Assault formed Infinity Ward and went on to create the Call of Duty series for Activision. Since then, the Call of Duty series has surpassed the Medal of Honor franchise in both critical acclaim and commercial success.
The uncertainty surrounding the Housers' employment status is so great that Pachter believes it will actually keep other publishers from making offers to acquire Take-Two until after February, when their status with the company is more solidified.