Microsoft is paying a high price for UK games firm Rare, and won’t get key titles such as Donkey Kong; the short-term impact on sales of Microsoft’s Xbox console will be limited. Unless the move starts a round of acquisitions now (which is possible but not likely), the real impact is likely to come in the next console battle – Xbox 2 versus Sony’s PlayStation 3.
Microsoft has bought UK computer games developer Rare for around half a billion dollars.
Microsoft’s long-awaited acquisition of UK computer games firm Rare has been confirmed. Although Redmond has not yet commented, former Rare shareholder Nintendo says the entire company has been sold to Microsoft. The price tag is estimated at $400-540 million.
In the past, Rare has been a key developer for Nintendo – the second most significant rival to Microsoft. While its major focus has been on ‘family friendly’ games such as Banjo-Kazooie and Donkey Kong, it has also produced highly acclaimed action/adventure titles including Goldeneye and Perfect Dark.
The deal is unlikely to have an impact for some time, given the length of computer game development cycles. What’s more, Nintendo retains the rights to some of Rare’s most valuable games, including the Donkey Kong and Starfox series. These will now revert to Japan.
The major short-term effect is to highlight how much Microsoft is willing to pay to secure the Xbox’s position, boosting the number of games available to attract more customers. Looking at this move alongside the recent Xbox price cut, it seems that short-term console profitability simply isn’t a consideration.
What does it mean for the future? Sony has already recouped development revenues from the PlayStation 2, and Microsoft knows that the PS2 is too entrenched for the Xbox to catch up in this generation. But the battle between the PS3 and the Xbox 2 will be a different matter – and this is where Rare’s long-term efforts to develop new and exclusive titles will be particularly useful.
Effectively, the move strengthens the Xbox 2 against the PS3, but at a high price. Whether it has a knock-on effect will depend on Sony’s reaction: a round of acquisitions to guarantee exclusive content would prove extremely expensive for both companies. However, it is possible – and would come as welcome news to cash-strapped publishers.
Related research: Datamonitor, Global Electronic Games (DMTC0833)
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