This excerpt taken from the ATVI DEFA14A filed Mar 5, 2008.
Lets just jump like maybe three to five years out. Is this an industry that has two dominant players? Do we see further consolidation or do you think we still see some of the smaller players in the market?
I think people forget, we compete against four big, very well financed, well capitalized companies. We compete against Nintendo, against Sony, against Microsoft, and Electronic Arts. And then when you look at the math and you look at the total size of the market, 45% of the rest of the market is still very fragmented.
If you look at the global market, you look at Japan, for example, where theres no Western penetration. Youve got a whole host of companies that operate there, none of whom weve had any opportunity to really meaningfully participate with. So it is already today there is a number of competitors with scale.
I dont think that there is any special thing that is going on today, other than I would say this. If you are a sub billion dollar publisher today, you cant be competitive because, whether it is EA, Sony, Microsoft, Nintendo or us, we can pay developers a higher participation because we have a global reach. We can afford intellectual property rights that other people cant. We can afford the development expense.
You know, when you look at where development expense is today. When you look at what marketing dollars are today. You need scale to compete. You need a balance sheet. And we are competing against Microsoft with a $50 billion balance sheet, Electronic Arts with $3 soon-to-be a lot less billion. Nintendo, you look at their cash balances, they are like the Federal Reserve.
But I guess independent publishers, does that mean it is almost pretty much there already but it could be two big platforms in the end. Unless you get eaten up by one of the big console makers, which actually Activision Blizzard, you wouldnt expect that. But my point being is that it seems like the publishing industry is really one that is kind moving that extra 45% could become a lot less in the next three to five years.