Consolidation inevitable, says Take-Two CEO

Take-Two Interactive CEO Ben Feder told a business conference that consolidation in the videogame industry is inevitable as growth continues.

"I do believe that consolidation ultimately is inevitable," Feder told Reuters.

"Video-game development is not getting any cheaper. It's a capital-intensive business, and I don't see that going away. That will drive some of the smaller competitors out."

Feder noted that the cost to develop a game was very close to the outlay for production and marketing of a Hollywood film in the early 1990s. New gaming hardware with high-definition graphics and online capabilities has sent game production costs soaring in recent years, with top titles thought to cost USD 30 million or more.

Shares in Take-Two rose 8.7 per cent to USD 16.28 on the first day of trading following news of the Activision/Vivendi merger, amid investor speculation that other publishers could be takeover targets.

However, Take-Two's chairman Strauss Zelnick recently dismissed rumours that he might sell the company, saying instead that he was looking for growth in the next five to seven years.

Take-Two's current market value stands at USD 1.08 billion.

"[The Activision/Vivendi merger] probably isn't the news you want to hear if you are a publisher having a market capitalisation under USD 5 billion," simExchange analyst Jesse Divnich told GamesIndustry.biz.

"There is no doubt in my mind that these recent buyouts and mergers are just the first of many to come.

"What concerns me is that a company like Take-Two may be last on that list as they can be a media/PR headache with some of their titles—making them unattractive to media conglomerates," he said.