What’s the Cost of Failure?
Let’s reminisce for a bit, shall we?
Let’s talk about the days before the credit crisis and the near crash of the stock market; before the world was plunged into a severe recession and gaming companies could sit on piles of money and tease lesser developers with it, extending buyout deadlines ad nauseam.
Those were the days.
The most glaring example of such pre-recession haughtiness had to be Electronic Arts’s constant wooing of Take Two Interactive last year. Eventually, the talks broke off, and EA reported a loss eclipsing $300 million, but now the company has revealed in its annual report exactly how much money it spent to woo T2 to join the dark side.
According to GamePolitics, the cost of cutting off the negotiations was $21 million. That money was spread, according to the report, among “legal, banking and other consulting fees.”
When the bid failed, both companies’ stock prices plunged, EA reported the huge loss, and engaged in a drastic workforce reduction.
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I think you missed the real story here – EA was going to need to trim some fat regardless of the recession; I think the real haughtiness was Take Two walking away from the table. EA will live to fight on and probably quadruple in stock price by the time consumers get over the shell shock, whereas I’ll be surprised to see Take Two survive another year – unless they end up getting acquired anyway.