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Bandai Namco Chairman and Director Kyushiro Takagi (left) and President and Representative Director Takeo Takasu |
It would be hard not to notice the sudden gold rush that has embraced the remaining amusement scene – a mad dash to grab land and stake out property. For amusement, the idea that we are worth anything is unusual and slightly disconcerting; many of the new investors are looking at consolidation.
For financial observers, this mass rush to merger is seen as the symptom of a seriously undervalued market; a land grab prior to what astute investors see as prime real estate, needing much renovation and clearance, but located at a prime site when the market shifts.
This opportunity has been seen by a number of related and unrelated corporations, the only common denominator being disposable capital and an interest in a prominent location to dictate to a changed amusement scene.
The catalysis was set by Sega Enterprises. The amusement, operations and consumer publisher had cast a vast shadow over the industry, but bad policy and failed projects left a cash-poor superstructure. The vulnerable powerhouse was circled by prominent Japanese and American suitors: Microsoft, Electronic Arts, Namco, Bandai and Sammy.
A 2003 attempt to merge with Bandai failed due to a clash of cultures, and the first advances of Sammy were torpedoed, but with investment pressure from CSK, Sammy won out. In control of the Sega brand, Sammy’s name has been relegated to Pachinko only. Now, the combined Sega-Sammy Holdings is seeing increased investment and a plan to reclaim market control after the bloodletting of an ageing executive.
Two failed suitors for Sega found some salvation. Namco had actually shared confidential material, going up to the wire before being unceremoniously dumped by the Sega board. Likewise, toy giant Bandai had gone all the way until an eleventh-hour collapse. The two firms found each other and, for Bandai, the availability of Namco more than made up for its loss of Sega and, with an already established rapport, an acquisition was executed.
A great amount of pruning of corporate structure has been undertaken – in all mergers a pointer to the dominant force – Namco America’s remaining team (as with Sega America) upping sticks from San Jose, CA for the Bensenville, IL offices. Likewise, in Japan, the Bandai amusement interests represented by Banpresto were merged into the Bandai Namco Holding amusement division represented under the new Namco Bandai Gaming group.
How much of the valuable high-level information garnered through the failed merger agreements will come into play in either Bandai or Sammy holding groups is impossible to factor, but the success of owning core brand recognition (be it Sega or Namco) is vital.
The value of a recognised brand, and subsequent back catalogue, is best illustrated by the clamour that surrounded the venerable developer SNK – one of the true veterans of the JAMMA heyday of amusement, a strong international fan base following its every move. Poor financial decisions had decimated the company’s capital and a saviour was desperately needed.
So, Pachinko giant Azure stepped up to the plate and assimilated the brand, but a worrying tendency to strip SNK properties started alarm bells ringing and would result in a split and legal row. A second suitor would soon appear. Personal links to Sammy would prove useful, and a sharp increase in development would keep the fans from storming the gates. Currently, SNK-Playmore languishes in amusement focused on consumer gold, using its vast backcatalogue prestige.
The ability to move in on an extreme opportunity has seen some unusual bedfellows. One of most singular examples is the acquisition of Taito. The veteran arcade giant has an international reach and investment across the amusement, operation, gaming, publishing and licensing sectors. Its diversity is a legend, with a back catalogue hard to equal.
A quick and surprising move saw the consumer game developer Square-Enix line up for attack, and swiftly and precisely consume the arcade and consumer developer. With Taito acquired, Square has consolidated its position, looking at the wider amusement position offering a wealth of opportunity. Whether Square’s new amusement interests will expand beyond Taito is as yet unknown, but there is speculation that a possible consolidation of amusement investment could materialise with a second merger, such as with Capcom.
While in Japan, targets for acquisition remain. Konami Digital Amusement shows a strong revenue stream and hunger for future opportunity, while Capcom is seen as a prime opportunity for acquisition – a vast back catalogue supporting amusement aspirations. Many Asian sources have linked Taito/Square as a possible suitor. But it is not only the amusement scene in the Asian free-for-all: the toy sector has seen Takara and Tomy merge to create Takaratomy Group, these respective operations having IP relationships with Capcom and Taito (fuelling much of the speculation).
Asia is not alone in seeing a scramble for control of the chessboard. Previously the US was dominated by the influence of the larger Japanese subsidiaries, whose arrogance was a result of over-inflated influence. The situation has changed, however, with the holders of the most popular products being the winners, no matter what the branding.
The North American market has been seen by many as a lost cause, with a spiral of diminishing revenue. But the sudden resurgence in amusement sales in the face of changing audiences has led to a re-evaluation of market opportunities – suddenly, amusement has become hot property, talking directly to a maturing player base. Hot property to control.
Deep in the middle of these changes, the name of Global VR is causing a stir. The American manufacturer has expanded its suite of titles with the acquisition of properties and technology to build a strong foundation in the changing market. Most recently, it has added the properties of UltraCade Technologies to its list; the company is looking at a bigger picture, with discussions under way to represent properties from Tsunami Visuals and the European developer Gaelco.
It is the unification of properties and technologies under an all-unifying flag that appeals to investors looking to build the out-of-home leisure entertainment sector.
While GVR looks to amass its stable, the studio sector is under change in America. Amusement’s legendary studio Raw Thrills, having agreed a powerful partnership with amusement distributor Betson Enterprises, is in the process of bringing like-minded developers to the fold and is in discussion with Play Mechanix to agree a joint relationship after sharing skills on the development of its highly successful Big Bug Hunter Pro sports shooter.
As Betson gathers a strong stable of products and financing to support this, the distribution element is sustained by the parts business. Happ Control is another company that has seen time for consolidation of opportunities, having acquired Suzo in Europe and most recently taken ProSource Group into the fold, the new Suzo Happ Group looking to be the suppliers for the emerging market.
Further mergers are inevitable, and it is expected that the surrounding services that support the amusement sector, such as exhibitions and publications, will see their fair share of change.
One constant among all this, however, is that change is good for the health of the market.
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