GlobalMedia-Ghosts of Atari haunt gaming sector dealmakers

December 1, 2010

MEDIA-SUMMIT/The video game sector is often seen as being particularly ripe for consolidation, with some expecting old line media giants such as Time Warner to swoop in and scoop up a publisher to diversify their entertainment rosters.

But Strauss Zelnick, chairman of “Grand Theft Auto” publisher Take-Two Interactive, remains surprised by the lack of action on the consolidation front. “I think the legacy media companies have not been especially aggressive about interactive entertainment,” he said at the Reuters Global Media Summit in New York on Wednesday. His company, of course, fought off Electronic Arts’ hostile takeover bid in 2008.

“I have to admit there are times when I’m surprised they’re not more exposed.”

He said media world executives have long memories, which may explain in part their reluctance to buy a video game outfit. He said one name in particular, Atari, remains a cautionary tale. Warner Communications bought the iconic video game name in 1976 in what turned out to be a disastrous deal.

“The people who have run companies have all been around long enough to remember the Atari debacle that almost destroyed Warner Communications, and they just can’t get it out of their minds. Never mind that we’re not in the cartridge business anymore, never mind that was a licensed product, never mind that that it was badly managed situation. They just can’t forget that it almost tanked Warner Communications and actually changed the balance sheet of the company.”

That kind of skittishness isn’t warranted, he argued, maintaining the video game industry is “less volatile and less risky than their motion picture businesses.”

“If I were managing  one of the old media business, heaven forbid, I would be integrating heavily into interactive entertainment because it’s a growth business.”

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