Q&A: EA CEO speaks on proposed Take-Two deal

John Riccitiello admits this isn't the first time he has sized up Take-Two for acquisition, calls one of publisher's reasons for declining deal a red herring.

Consolidation continues to be a major theme in the gaming industry, as Electronic Arts today made its intentions to acquire Take-Two Interactive public. Coming off last year's big acquisitions of BioWare and Pandemic, EA offered to take over Take-Two for nearly $2 billion in cash, a 64 percent premium over the Grand Theft Auto publisher's aggregate stock price. Take-Two's board of directors flatly turned the offer down, saying the price was too low and the timing wasn't right with Grand Theft Auto IV ready to hit retailers in just a couple months.

With the publishers releasing dueling press releases about the proposed deal today, Electronic Arts CEO John Riccitiello took some time to answer a handful of questions for GameSpot about why the publisher wants Take-Two, concerns over corporate culture clashes, and why this deal didn't happen a year ago.

GameSpot: This news spooks a lot of EA and Take-Two employees who probably feel that they're about to become redundant, in the various sports divisions especially. If this proposal were to be accepted, what level of employee cuts and consolidation would you expect?

John Riccitiello: I think it's way too early to tell, but I will tell you that our attraction to the asset of Take-Two is because we love their studios--Rockstar, Visual Concepts, Irrational [2K Boston and 2K Australia], Firaxis--and we like their intellectual properties. This transaction as we're proposing it is not about synergies at the studio level.

GS: Are you aware of any change-of-control clauses that would possibly prevent Take-Two's various licenses or studios from becoming part of EA if the buyout were accepted?

JR: Nothing that we can talk to you about because we're not in the business of disclosing confidential Take-Two information, but we're very confident in this transaction. We think it's a great deal for their shareholders, it's at a huge premium. And as a stand-alone company, Take-Two has a series of operational and scale issues, legal issues, financial issues... We think their shareholders win in a huge way.

For us, it's all about their studios and their intellectual properties, which we very strongly desire to have as part of EA. And we project it to be accretive for us, so it's a win for EA. We think we would make a great home for their studios. Our decentralized label model is in many ways inspired by conversations I've had over the years with Sam Houser, who runs Rockstar. We think it's that simple. It's great for their shareholders, it's great for our shareholders, and great for their studios.

GS: There were rumors and speculation about a buyout last year, and one analyst said the corporate culture of a company that produces games like GTA and Manhunt wouldn't mesh well with that of EA...

JR: There was speculation last year and I will admit that in fact EA was looking at these guys a year ago. The reason we didn't conclude that with an offer is that I was just coming into EA at the time and I knew there were changes I was going to make at Electronic Arts and I wanted EA to be in a position to feel like its own house was in order. We've now got that in place and the organization feels strong and is working well. Really what I was waiting for was to affect those changes, which I think have been well communicated in the market.

GS: EA has released M-for-Mature-rated games like The Godfather before, but one notorious example, Thrill Kill, was never released after EA acquired its original publisher, Virgin Interactive. If EA controlled Take-Two, would we ever see a game like Manhunt come out of EA?

JR: Well, first off, we're in a different time with a different management team. I was the guy who got us into The Godfather business, who got us into the Def Jam business. I'm personally a huge fan of BioShock, one of my favorite games of last year, and I'm very much looking forward to playing GTA IV. I'm going to buy it on April 29.

Frankly, my view is that I'm a real believer in the Entertainment Software Association and their analogous organizations around the world, and I don't have an issue with M-rated content. Neither me nor the company nor the board. Times were different in the mid- and late '90s. As an industry we were just coming to grips with M-rated content.

I never saw Thrill Kill, and I applaud you for digging up that little piece of history. I'm not sure if I would have liked it or not. I'm guessing I might have liked it, but I have no idea.

GS: What do you think of the job Take-Two's new leadership has been doing in trying to turn the company around over the last year?

JR: I happen to think that [Take-Two chairman] Strauss Zelnick, [CEO] Ben Feder, and the rest of the team are really smart guys. I think the moves they made are positive and it's been reflected in the share price. This is a tough industry, and I think they've done a fine job.

GS: Take-Two has issued its own press release today, and it characterizes EA's offer as an attempt to get on the Grand Theft Auto IV bandwagon just before the game's hugely anticipated launch.

JR: That's sort of interesting, but I would offer a couple of thoughts. I think the value of GTA is already "baked in" in many ways. The analysts that are forecasting Take-Two for just their fiscal year have between 8 million and 12 million units of GTA IV forecast. Frankly, the question is what comes after GTA, because that's already in the value of the stock. Realistically, we don't anticipate closing the deal before GTA ships. We're anticipating a transaction that would close certainly not before the GTA launch, so that feels very much like a red herring to me.

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Discussion

255 comments
Smoolander
Smoolander

Quick, EA executives need to top up there money baths. Take2 shareholders should sell immediately to EA to provide the money for them. How can all you shareholders be so selfish to deny the few EA execs. Shame.

360luver4ever
360luver4ever

This is BS those clowns over at EA just to dissolve the 2k sports series, and muck up the GTA series

jazilla
jazilla

Wow, EA just bought Wal-Mart! (Sarcasm)

Ghost_702
Ghost_702

I think that EA is trying to monopolize the gaming industry. They could care less about the quality of the games they produce, so long as they rake in money.

Nicolas00-0g
Nicolas00-0g

EA should start making more "mature" games. I'm tired with their childish games and make an M rated Medal of Honor, T rated Need for Speed and a M (or T) rated Burnout and make better sport games (NASCAR 08 is the worse in series)

MidniteShadow
MidniteShadow

Hopefully EA is not buying out Take Two for their own agenda and to monopolize the sports gaming industry like they did with the NFL Liscense, because for the past few years 2k Sports titles have been better then EA Sports titles on the simulation side and Innovation.

J_G_Pliskin
J_G_Pliskin

Oh yes....another case of "If u cant beat em, buy em." This is where M$ needs to step in and put up the bank to acquire T2. And what really grinds my gears is that EA buys up these great devs and then take the credit for their creative efforts! Its like, Critereon made Burnout Paradise but EA gets all the accolades. It will be the same for Mass Effect 2 when it comes out and willi continue to GTA V-XX if this takeover is approved. I F@#%ING HATE EA!!!!!!!!!

shydre
shydre

Do not pass go...Do not collect $200.00!!

mjswooosh
mjswooosh

Side Note: I haven't bought Madden since Madden 2004 and have not bought NBA Live since '99 on the PC. I still play NFL 2K5 on my Xbox and with updated rosters and schedules along with some in depth slider tweaks it actually plays MUCH better than Madden 2008 on the Xbox or Xbox 360.

mjswooosh
mjswooosh

As a consumer, my primary concern here is the 2K Sports line of games for obvious reasons. If this deal goes through and the new EA management are truly smart they will use the dev studios responsible for and the IP behind NBA 2K, College Hoops 2K and even perhaps NFL 2K while retaining their own sports games in name ONLY. If, for example, EA were to publish Madden Football 2K9 or 2K10 using the underlying animation and AI framework for NFL 2K then we might really have something. Certainly, they would be absolutely stupid to just buy up the 2K Sports IP and then fire the people and shelve the technology, especially when it comes to basketball. There is simply NO comparison between the competing products...EA's basketball games are HORRIBLE by comparison. Peter Moore and John Riccitiello HAVE to know this. Anyone with a brain can see in 1 minute or less that 2K's basketball is simply on another level. So, we shall see. If this deal goes through and EA simply trashes 2K's sports IP while we are force-fed their crap year after year I may just give up on sports gaming altogether.

odd1989
odd1989

ACTIVISION and Blizzard are going to form the biggest gaming co know !!!!!!!!!!!

king_bobo
king_bobo

I truly hope that everything turns out well for both companies in the end, however that may be...

Import2Ner
Import2Ner

EA is buying all the developers up and if there's no one to have competetion, who's to say there won't be higher prices for games? Stop buying out everyone EA and focus on putting out solid titles. I sure as #%@! do not want to see a monopolized gaming industry.

usedtype
usedtype

EA releases good games and bad games. Buy the good ones, don't buy the bad ones. That's how to stop the gaming industry from dying. It's that simple. It's in EA's benefit to release a product people want to buy. If it's clear that such a product will only be bought if it's good, then the quality of games will improve. You have only yourself to blame if a large publisher continues to release mediocre games. Stop hating on EA just because they've been so successful as a business.

maztatrev
maztatrev

Just like any empire, when people are brought together under one banner, they become even more powerful. The create things they could never have done alone. The drawback is that eventually, they lose sight of those they are benefiting, and only seek to benefit themselves. They begin to eat away at themselves from within until eventually it becomes a shell of what it once was. My opinion: With a few major conglomerations of producers, we may very well see some great things happen for video entertainment, but in the end, will it be worth it?

DJKrayz_basic
DJKrayz_basic

they can buy all the developers they want, doesnt make their games better.. as this guy says, he wanted EA's house in order, but quite frankly, i dont see it from a gamers standpoint.. the games are still the same stuff theyve put out there the last 10 years.. the quality still isnt that great.. and the whole BS issue of paying for additional content appalls me, as it should most of us regular gamers who can't sit there and afford to shell out money every time one of these companies drops something that should've been part of the game to begin with, as well as the $60 for the game in the first place... and EA, make a console.. im not buying it.. these acquisitions are bad for gamers.. who else is going to make a good football game? basketball..? racing..? come on...!!!

Montrealien
Montrealien

gsell said.. prediction: ea annouces new console at e3 2010 Trip Hawkins and EA attempted to launch the 3DO many many moons ago EA knows where the money is at. They can make more money publishing for multiple consoles, why would they put all there eggs in one basket? All I can say is that 85% of the comments are immature and moronic. Our industry is growing kids, stop singing the same EA songs people where singing 10 years ago. it is getting very very old. If you think EA is killing the industry all I got to say is that you are wrong. If kids where saying the same things as you guys about EA over 10 years ago and they where clearly over reacting, who is to say you guys are not over reacting? oh and major probs to Jakob 187, could not of said it better.

nickelarcade
nickelarcade

[This message was deleted at the request of the original poster]

gshell
gshell

prediction: ea annouces new console at e3 2010

Gen007
Gen007

Its getting to the point where games will be made by ea and only ea its sad

Limonadi
Limonadi

Why we hate EA? We want blood!!!!!! AO rating! Not teen rated gta rip-off. :(

MACMALLEON
MACMALLEON

Why does everyone hate EA. Cant you see... JR is doing better things for them. Yall act like your favorite titles will be gone, or ruined.

RaiKageRyu
RaiKageRyu

Pretty soon games are either coming from EA or ActivisionBlizzard.

ChuckNorris82
ChuckNorris82

I totally agree with GeneralXiahou!!! EA BETTER stop and calm down on this stuff because there looking like a monopoly right now....Everyone is watching them and if they don't stop, its going to go to court like what happened to M$ back in the day.............................

Disciple_Gamer
Disciple_Gamer

To teamfear....EA renewed the nfl licence until 2013. I am jusr tired ot how EA is trying to have everyone under the money loving thumb

Nishua
Nishua

Not once did he mention how this affects the consumer. His overall concerns is money and nothing else. I don't see how anyone with condone this. EA has already monopoliized the industry and unless we want rewashed games like most of EAs titles we should stop buying EA products.

jyoung312
jyoung312

Someone needs to stop this it hurts the consumer by eliminating competition thus hurting the quality of products. The game industry is following the trends established by other mass media corporations. Look what it's done to the movies, gasp. EA wants to monopolize this industry and it has to stop. Fewer companies in gaming means less innovation. Sure it might be good for profits but it's not good for gamers. How long before Time Warner, News Corp, NBC Universal, or Viacomm try to dominate this medium as well? I know Sony is also a huge multimedia conglomerate but I wouldn't want them taking over the industry to the point that they own so that there was no competition.

desolation00
desolation00

Personally, I think 3-4 umbrella mega-studios won't hurt the industry, as long as the artists at the bottom are left unfettered. One thing big mergers do, allow people who previously refused to share tech to do so more openly. There is less risk to letting another studio use your new toy when you are both working for the same corporation, with the same stock options, in the end. That said, as soon as somebody or some group decides to shut his company off from the rest of the industry, that group may well implode from lack of innovation. I'm personally just wondering what's going to happen in the Engine war as a result of all this. Unreal vs Source vs Cry vs Id. It's kind of surprising to me that Epic, Valve, and Id have thus far remained pretty independant, though that may owe to their unique positions in the industry.

Devvy01
Devvy01

yawn, any decent news around?

teamfear
teamfear

plain and simple, this would be very bad for sports gamers. EA already monopolized the NFL License which will expire in 09 and they are afraid of the upcoming competition. Thats all we get now is an updated version of Madden every year with very little innovation and more a less a face lift. They don't even include full team rosters and how hard is that. If their is no competition thats all we'll get is updated partial rosters every year. Awesome....

gnbfd
gnbfd

What the ****! Jakob_187 presents one of the BEST non-fanboyish comments on this board and no one clicks thumbs up. You people are just pissed because EA knows how to run a business. I bet half the people bagging on EA actually likes them >_>

Vodoo
Vodoo

Where's Microsoft when you need them?

daveyf03
daveyf03

"For us, it's all about their studios and their intellectual properties, which we very strongly desire to have as part of EA.....It's great for their shareholders, it's great for our shareholders, and great for their studios." What about the people who actually purchase and play games? Is it good for them? I certainly don't think so. Seriously though its nice that this news has caused the console wars nerds to put there differences aside for a moment and collectively spit on EA.

DanC1989
DanC1989

I can't see this not happening I'm afraid.. Unless some other party were to wade in and rival them.

gnbfd
gnbfd

If this works out the way ActivisionBlizzard did, it may not be bad. 2k can do their stuff EA can do their stuff They both make a combined profit Chances are that won't happen though

SegArgyle
SegArgyle

none of u know whats really gonna be good or bad, if it happens it happens deal with it, plus look at it this way now maybe ea sports will finally be good with VC doing it, or however they set it up, and what megagood stated is true, if ea is so bad why was last year so profitable and good? get over it negatories, gaming will still be here and good

jakob_187
jakob_187

I gotta say...I love how you are all retaliating against the idea of John and EA taking over Take-Two. I mean, this is the guy that was willing to greenlight projects like Crysis, Deadspace, and so many more original IPs that are coming out of EA. John has single-handedly changed most of my opinion about EA. He's got Bioware and Pandemic working on new installments in their classic franchises, as well as working on original content galore! If they were to acquire Take-Two, it could only mean a few great things, like: -- Improvements made in their sports games departments, as you would easily see the 2K Sports divisions assimilated into the Madden and definitely-needing-it NBA Live studios -- More daring FPS experiences with guys like Levine and Irrational jumping on board...ESPECIALLY when EA owns the rights to SYSTEM SHOCK!!! -- Grand Theft Auto getting (hopefully) an improved graphics engine above what the pathetic RAGE engine can spew out for the game, as well as a bigger budget than it already has...plus it would solidify EA's place in the open-world market that they still haven't broken into Honestly, this deal would be a GREAT thing for EA and Take-Two, especially with how much T2 is hurting lately from financial and legal drama.

martinmanning
martinmanning

hellknight8619 can someone explain why take two is also known as 2K? After Take Two acquired the 2K sports license from Sega, they decided to re-brand themselves as 2K Games since they figured it was a more recognizable identity. So basically, Take Two = official name, 2K = trading name.

GeneralXiahou
GeneralXiahou

At this rate the entire industry will be EA controlled and a monopoly would not be good for the industry

karnis
karnis

f u ea you just cant buy competition cause you suck

anobleloss
anobleloss

why is EA trying to take over everything?!?!! I swear if they f*ck up any of the 2ksport games....

FourtyCal
FourtyCal

2K is a subsidiary of Take Two

neonblueshadow
neonblueshadow

I don't see Ubisoft falling to EA anytime soon. They're defended by the Eu,a nd european governments. French government stepped started investigating when Ea bought 12% of them... it'll have to be a hostile takeover, and that needs a lot of support and leaves their image on the line. And their image is something they're trying to fix...

hellknight8619
hellknight8619

can someone explain why take two is also known as 2K?

megagood
megagood

If EA and consolidation are killing the industry, why was last year widely considered to be the best ever?