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Comment: Publisher romance? They're only after one thing

This week's acquisitions of Sports Interactive and Lionhead by Sega and Microsoft respectively couldn't be more different, as business deals and situations go - but both firms have one key thing in common, says <i>Rob Fahey</i>.

It's been a pretty big week for developer acquisitions in Britain, with both Guildford-based Lionhead and London-based Sports Interactive being sold off in deals which will see Microsoft and Sega respectively bolstering their portfolio of internal development studios.

On the face of it, these deals have a lot in common. Aside from the obvious geographic factor of being located in the south of England, both companies are being bought by publishers with whom they have had quite lengthy relationships. Sega has published Sports Interactive's hugely popular sports management titles since the developer went through a well-publicised break-up with Championship Manager publisher Eidos, while Microsoft worked with Lionhead on Xbox title Fable, which has now sold over two million units and has become the most successful RPG on the Xbox platform.

Both purchasers have a history of buying prominent UK developers, too. Few will have forgotten Microsoft's famous acquisition of Rare in 2002, when the nascent platform holder paid an astonishing $375 million for the former Nintendo second-party developer; while Sega made a rather more modest, but arguably more sensible, investment in British development with the acquisition of Total War creators Creative Assembly last year.

There are plenty of ways in which this week's acquisitions differ from one another, however - and we hasten to point this out, since we suspect that there are several people who would find the comparison of Lionhead and Sports Interactive's buyout deals to be unflattering, to say the least.

Sports Interactive has consistently been one of the UK's most successful developers. Entirely owned by its founders, the Collyer brothers, and its staff, the studio has grown organically throughout its existence and has single-handedly not only created one of the UK's most popular game franchises, Championship Manager, but went on to survive and grow past the loss of that franchise and built another amazingly strong brand to replace it, in the form of Football Manager.

Its acquisition comes at a time of huge success for the company; it is the consummation of a courtship between the developer and its publisher, Sega, which has lasted for several years and a number of hugely successful products. Sega is buying a growing company, and it paid a growth company's price tag - the deal, Sports Interactive boss Miles Jacobson told us this week, is worth around GBP 30 million.

Lionhead's situation is different. Despite the fame of the studio and its brands - due in no small part to the headline-grabbing nature of its founder, Peter Molyneux, who basks in the media limelight and is as good a self-publicist as he is a game developer - the company is hardly thriving. Two key products - The Movies and Black & White 2 - have underperformed commercially, to the extent that publisher Activision cancelled the console ports of The Movies, while even the critically acclaimed and multi-million selling Fable might not have helped the studio's bottom line much, given how long it had been delayed and how far over budget it had run. Last month, fifty staff were laid off and an entire project team was cut out of the studio.

In other words, Lionhead needed to be bought, and was actively seeking a buyer - a situation quite different from Sports Interactive's far more favourable position. It's telling that while Jacobson was happy to reveal the value of the SI deal, nobody is talking about the Lionhead purchase price; if it was a really big price tag, it's certain that the amount would be in the public domain by now.

However, this doesn't detract from the fact that both studios have done well. Both have found homes in large, secure, stable publishers who are gearing up for next-gen growth, and that's something that everyone in the UK industry should celebrate. Before popping the corks, however, it's worth asking why it is that these two firms, so different in terms of their situation, should both have been interesting acquisition targets for the firms who have opened their purses in order to bring them into the fold.

The answer is perhaps the final and most important factor which they have in common - intellectual property. Lionhead owns its IP, as does Sports Interactive - and even though Sports Interactive has already proved once that it's nigh-on impossible for anyone to outdo them in their own niche, even with the strength of a former SI brand behind them, owning their own brand is a very important string to the company's bow. For Lionhead, too, owning the Fable IP was almost certainly a key deciding factor for Microsoft, almost as much as having the talented team who created that IP in house.

For developers, quality and even product success are no insurance against some of the risks in the marketplace; studios which have made million-selling games have gone bust in the past and will go bust in the future. But owning IP can make all the difference between a studio that shuts its doors and one that thrives - and this week's events prove that theory in the real world, more persuasively that a hundred successful businessmen discussing it at conferences ever could. What it doesn't explain, however, is how to hold on to that IP if you're neither Peter Molyneux nor the creators of Championship Manager. That question is one that can only be answered by a fundamental shake-up of how much of our industry works - and the real message, perhaps, is to be vigilant always for ways in which that kind of change can be effected.

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Rob Fahey avatar

Rob Fahey

Contributing Editor

Rob Fahey is a former editor of GamesIndustry.biz who spent several years living in Japan and probably still has a mint condition Dreamcast Samba de Amigo set.