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Focus: EA sets the Criterion

On the face of it, "publisher acquires developer" isn't the biggest news in the world. It's something that happens at least once a month in the games industry - a publisher decides it likes a game so much that it buys the company, a plucky independent studio becomes part of a wider corporate machine, and some creative minds - hopefully - get some creative sums deposited into their wallets. It's a natural, ongoing process of industry consolidation and growth.

When the name of the publisher is EA, and the name of the developer is Criterion, however, that's a different story - and following the surprise announcement this morning that Criterion is to be bought by the publishing behemoth, much of the games industry is still trying to come to terms with the ramifications of what could be one of the most important business deals in the industry this decade.

Criterion is, after all, no ordinary development studio. While the company is certainly one of Britain's premier game developers - with both the stunning racer Burnout 3 and the highly anticipated first person shooter Black being crafted in the firm's riverside offices in Guildford, along with a number of other rumoured projects such as Burnout PSP - that's only one part of the story. The other part is RenderWare - a middleware platform and development solution which Criterion, funded by (now former) parent company Canon, has developed to the point where it is effectively the de facto technology solution for many of the industry's biggest publishers and developers.

And now it belongs to Electronic Arts.

The implications are enormous. EA, the world's largest independent publisher, is now in charge of the technology used by many of its rivals; Criterion, the creator of that technology, now has access to the enviable resources of the Electronic Arts machine, and will no doubt continue to develop and enhance RenderWare far beyond its current state. This is an acquisition that could change the landscape of the market - not only for publishers, but for the platform holders themselves.

Everyone's a Winner

According to Criterion boss David Lau-Kee, however, this deal is a natural progression - it's not just Criterion and EA who stand to benefit. "We've been very focused as you know with our mission with technology, with middleware. We've believed for the last 10 years that the games industry needs middleware technology for people working on content, and we've been executing and executing and this is just the natural progression of the position we've found ourselves in," he told us this afternoon.

"One of the really interesting thing is looking at the overlapping synergies with EA: we've got 20-25% market share in terms of external games using RenderWare technology. If you look at the size of the internal middleware within EA, it's phenomenal, it's huge. Think what happens when we put those two pieces of technology together and produce a best of breed. It's a win for everybody who chooses to use it," he continues.

The strong implication is that EA and Criterion will continue to supply and support RenderWare for third party companies - and Lau-Kee is adamant on that point. "Absolutely, yes," he confirms. "It's our belief at Criterion and one that's shared at EA, that, especially when you're leading up to future generations of platforms, the challenges that developers around the world are going to face will be immense, much, much greater than anything the industry's been through before hand. What we're doing with this is devising a method so developers can concentrate on producing content."

While those are certainly reassuring words for any third party company using RenderWare, the prospect of having the core technology your games rely on being controlled and supplied by your most dangerous competitor can't be a heartening one for other publishers, we suggest.

"I can't speculate how [other publishers] might view this," Lau-Kee says, "but what I do have is an observation, and that observation is that when you look at the challenges that we all face within the industry in terms of producing content for next generation platforms, it's a phenomenal challenge. And the question is, who has the capability to step up today and say to the entire industry, you know, 'We'll help you out?' And if you look at what we have at Criterion with RenderWare, it's a tremendous solution that the industry has embraced, and if you look at what EA are doing you see the same thing."

"I've got to say that the way I'm thinking about it is, if you're a really small player how on earth are you going to stand a chance of competing in the next generation?" he continues. "Regardless of anything else, the costs in terms of tooling up, in terms of infrastructure and in terms of production processes are immense. You have to have that , somehow, somewhere. We're making that available to them."

Match made in Heaven

"We bought the company for three reasons," EA executive vice president for worldwide studios Bruce McMillan explains to us. "One, because it's a studio full of great people. We've been working with them already on Burnout 3, we've been working on Black specifically, and other titles. That's the first reason. Secondly, the IP itself. Burnout 3 is a strong title. It's going to go out gangbusters. We're very excited about it. The third reason is the middleware technology and business and the opportunity to combine it with our EA technology. That's the reason why we did this."

EA's reasoning for buying Criterion aside, though, McMillan also believes that this move is one which will be good for the games industry as a whole - not just for Electronic Arts. "At the end of the day," he says, "consumers buy content and they buy the experience. They really don't buy the infrastructure underneath the game or the middleware or the pipeline. What developers have seen with the current generation of middleware is that it's a really cost effective and timely way to get their content to market. The next generation is going to be more difficult, that's why EA has so much infrastructure in place internally. We're bringing these two businesses together, but our intention is not to stifle the rest of the industry. Our intention is to help the industry be robust and healthy. No one will win if the industry flattens out and declines because great games aren't making it to market."

That's a perspective that ties in perfectly with Lau-Kee's vision of Criterion's place in the market. "I've had this vision for 10 years now, that we're producing a technology infrastructure that everybody can use to make great games," Lau-Kee explains. "And that's it. You know, I see this as an opportunity to fulfil that dream, that vision. This is nothing more than a gilt edged validation, and endorsement of the RenderWare technology, but also the process and methodology. I've always believed, from day one, that it's about the content. It's as simple as that. And is we can take away some of the issues that transpire when you develop content, I see that as a win."

Of course, there's no doubt that having Criterion in the fold will strengthen EA's position in the market - McMillan describes the prospect of a next-generation cross platform toolset which combines the best of EA's technology with Criterion's and makes it available to others as a "great opportunity," intriguingly juxtaposing the comment with a mention of Microsoft's status as an EA competitor in the games industry. However, the company seems to be genuinely interested in using the acquisition to deliver growth for the industry as a whole.

"I think we grow the industry," McMillan says of EA's position. "Every transition has been about more consumers and having consoles in your home. I hope the industry grows as a result of this so more companies can reach a broader audience. We all lose if we have strong hardware with no software on it. Without ease of software development, it's going to be really challenging to grow the market."

And he's not afraid to let some of EA's efforts be used by other companies to that end. "We're not afraid to provide a game develop platform for the next generation so people can focus on delivering content," he says. "There's a lot of technology that we have internally that is going to help other people build great games and we're not afraid of that. It's fine."

Talkin' Bout Next Generation

Of course, one of the major and immediate benefits for Electronic Arts from this acquisition - aside from consummating its relationship with one of the best-regarded development studios in Europe - is that it gives the publisher a massive advantage in the race to develop next-generation technology and tools. Criterion is one of the most advanced companies in the world in that particular field, and the next version of RenderWare, RenderWare4, has been designed specifically to exploit the possibilities - and handle the difficulties - of the next-generation console platforms.

For EA investors and market watchers, then, this purchase could easily be viewed as an exceptionally clever way for the company to avoid the immense effort and expense of next-generation R&D - and then to profit from selling its solution to its competitors. In other words, the company has effectively secured its growth through the next transition period, just as CEO Larry Probst has repeatedly promised that it would.

"I believe, rather bullishly, that two companies will make the transition to the next generation strongly," confirms McMillan when we ask if this is another reason for the acquisition. "One is Criterion and the other in Electronics Arts. When we've seen transitions in the past you had pretty predictable outcomes. That's why the synergy works."

While both McMillan and Lau-Kee are absolutely committed to keeping Criterion's core business intact - "I would not have agreed to this acquisition unless I believed completely that there was 100% commitment towards the goals and objectives we had at Criterion," according to Lau-Kee - there will be some changes for the company. "What we are going to do with this business, is invest in it," says McMillan. "We're a growth company. I would expect in the next two years we're going to hire 100 people into this space. We want to grow this business. We're going into the RenderWare business as well as the studio business over here."

For now, however, little will change in Criterion's day to day operations. "Right now, it's business as usual," confirms Lau-Kee. "Our intention is to continue exactly as we have before. The way to think about it from the RenderWare side of things, is that previously we had a parent company, and that was Canon, and now we have a new parent company and that's EA. In terms of how we operate and in terms of what we're doing, you know, business as usual."

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