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Fair warning: This video game post may appeal more to game fans than it does to business people in games or in venture investors. It is like a bridge between this blog and my old one at the San Jose Mercury News. You’re catching it mid-story. It involves a controversy that started when I reviewed “Mass Effect” at the Merc. But this discussion is relevant here in a different way. Please indulge me in sharing it with you. I look forward to your feedback. I hope it is relevant for game fans and game industry watchers.

I caught up with Ray Muzyka (left) and Greg Zeschuk, the top executives and founders of BioWare, the well-known role-playing game developer in Edmonton, Canada. Electronic Arts bought their company along with Pandemic Studios for $800 million. That purchase price was double the investment put into BioWare/Pandemic by Elevation Partners just a couple of years earlier. I can’t think of any game developer who scored better.

Muzyka and Zeschuk, two Canadian doctors who chucked their careers in medicine in favor of taking up games, are mild-mannered craftsmen. They care deeply about their games and have pioneered titles that have deep storylines and nuanced characters.

I thought they might be out for my head. In December, I messed up a review of their big holiday game, which I called “Mass Defect.” It took a team of more than 100 people working for more than three years to make the game, which depicted realistic human and alien facial animations. As the characters staged conversations with each other, you as the player could chose what your character said. Then the action played out like a standard role-playing game. I played the sci-fi adventure game for eight hours but I played it without taking advantage of some cool features, like freezing the game and giving directions to my companions. I didn’t even realize they were there. Other critics chimed in and said it was BioWare’s fault for not making it obvious to players like me. Readers in the know thought I was a bozo. They were right. During subsequent weeks, I played through to the finish and rewrote my game review (here and here) , apologizing in the process. In spite of my words the game had sold more than 1.6 million copies as of January and is expected to cross 2 million in sales, generating an estimated $120 million at retail. When I caught up with the BioWare duo, they were quite gracious. This interview completes the mea culpa that began back in December.

Takahashi: Thank you for talking with me.
Muzyka: I mentioned this to you already. The second blog post was gratifying.
Zeschuk: Everyone was very impressed with that. Sometimes those things happen. We’ve always had respect for you and that reinforced it.
Takahashi: It didn’t transpire as I hoped. It was a good learning experience for me. Particularly on the idea of whether you have to finish a game before you review it.
Muzyka: It’s pretty tough to finish games. Especially massively multiplayer online games.
Takahashi: That’s why I never reviewed MMOs.
Zeschuk: Our games take a long time. Read the rest of this entry »

It’s a little late from the point of view of its rivals, but Paramount Pictures has finally decided to take a plunge into video games.

The Hollywood studio is expanding its video game division with a slate of games that will start coming out later this year, according to Variety.

Most movie studios have seen why this makes financial sense. A movie might cost $90 million to make and gross $100 million. But a video game costs $30 million at the most and can still generate $100 million. For a few years now, video game console hardware and software sales have trumped movie box office receipts. (Yes, we know that games cost $50 or $60, and movies about $10).

Warner Bros. has expanded its presence in games under well-known developer Jason Hall and Disney is spending hundreds of millions of dollars on its own video game expansion. Sony, of course, has had both a motion picture and video game business for years.

Variety says that Paramount wants to invest in all types of games but is particularly interested in casual, handheld and mobile games. As we’ve reported, these are some of the hottest areas for start-ups these days. The rest of Viacom, which owns Paramount, is also active in video games. The MTV division owns Harmonix, creator of the hit game Rock Band. MTV also has a deal with famous Hollywood producer Jerry Bruckheimer to make a series of video games. Viacom chief Sumner Redstone has also had an investment in Midway Games, which recently named a new CEO, for some time.

What else could Paramount be working on? Well, this reminds me of Star Trek Online, a massively multiplayer online game that has been in the works for a while. Read the rest of this entry »

It’s not wise to go without a consigliere in a mob war. That’s why Electronic Arts appointed Eric Brown as chief financial officer today. The Godfather himself, EA CEO John Riccitiello, needs Brown to run the numbers on taking over Take-Two Interactive. Yesterday, Take-Two’s board rejected EA’s $2 billion hostile tender offer as inadequate.

Brown, 42, worked in the late 1990s as chief operating officer and CFO for EA’s Redwood Shores studio. Before his latest appointment. Brown was CFO and chief operating officer at McAfee. He replaces Warren Jenson, 51, who wasn’t up for the gang war (our coverage). McAfee has said it has started its own search for a consigliere.

You know that saying. Jerry Sanders, former CEO of Advanced Micro Devices, once said to me, “Old men for counsel. Young men for war.”

Here’s the latest action (updated):

Struggling cell phone manufacturer Motorola announced it would split itself into two different companies. Under pressure from activist investor Carl Icahn, the company will divide itself into a cell phone company and a company with broadband and mobility equipment operations. The latter firm would create infrastructure equipment for wireless networks as well as build television set-top boxes. The company had said in January that it would consider a breakup, mainly since its stock has plunged in the past year amid loss of cell phone market share to Nokia, Samsung and Apple.

Comcast and Time Warner are talking about a joint venture in WiMax wireless Internet technology. The Wall Street Journal reported that the cable operators would diversify their business by setting up a WiMax company operated by Sprint Nextel and Clearwire. Under the plan, Comcast would invest as much as $1 billion in the venture while Time Warner Cable would contribute $500 million. Bright House Networks, the sixth-largest cable operator, would contribute $100 million. Gigaom called it the $3 billion WiMax Rescue Act. They’re plowing forward in spite of questions about the technology, including a failed trial in Australia.

Take-Two formally rejected an offer from Electronic Arts. As expected, the beseiged video game maker rejected EA’s $26 a share, or $2 billion, tender offer. Take-Two, the maker of the upcoming game Grand Theft Auto IV arriving in stores April 29, also amended its proxy statement to adopt anti-takeover measures such as a stockholder rights plan.That sets the stage for a grueling battle with EA, which could nominate its own slate for Take-Two’s board.

Yahoo! joins Open Social Alliance led by Google. The Internet company said that the move will make it easier for programmers to write software that can run on the pages of many social networks and other web sites. Meanwhile, David Morin, senior platform manager at Facebook, reiterated at the Snap Summit 2.0 conference that his company isn’t joining Open Social now but isn’t against it in principle. Google said Tuesday it would give up control over the alliance and turn it over to the nonprofit OpenSocial Foundation.

Facebook confirmed it lured away another Google executive. Ethan Beard, former director of social media at Google, will join Facebook. He’s the second high-profile executive to leave Google this month. Facebook now has more than 500 employees.

$19 billion deal to privitize Clear Channel Communications nears collapse. The Wall Street Journal reported that the private equity deal is a victim of the credit market crunch. The leveraged buyout apparently is imploding as private equity firms and banks failed to work out differences over financing terms.

Imeem, the playlist company, opens up its platform — The company has opened to third-party developers, giving them tools to integrate their applications into Imeem. Imeem says calls itself the third largest social network, with more than 24 million unique visitors a month, though its users are mostly checking out each other’s music, and its not considered by most to be a full-fledged social network. The API lets developers access its users’ music tracks, which is a powerful thing because Imeem lets users run complete tracks for free (it got rights to do this from labels, after Imeem said it wanted to try an ad-based model). Developers can also access any videos and photos on imeem, access the social graph of users, modify the metadata for the content and customize the imeem video player.

After a year of review, The Department of Justice has approved the merger of satellite radio companies Sirius Satellite Radio and XM Satellite Radio Holdings.

The deal also requires the approval of the Federal Communications Commission. But the ruling is sure to be controversial and is likely be a sign of things to come for other industries.

The deal raised antitrust concerns because it combined the only two major players in satellite radio. But the two sides made some interesting arguments that allowed the deal to get the approval. The DOJ’s rationale is here.

They argued, for instance, that both were losing money. Despite heavy investments, mostly for putting up satellites in the sky to enable subscription radio, neither has turned a profit.

They also argued that, outside of satellite radio, they had a lot of competition. They noted that the free AM/FM radio stations supported by advertising are competitors. There are also HD radio competitors. And there are other sources of music/talk show competition, such as downloading podcasts onto iPods or mobile phones.

Lastly, they had argued that consumers wouldn’t suffer because of the combination. They said, for instance, that they wouldn’t raise prices or get rid of channels. Rather, they said they would offer a la carte pricing plans for cheaper rates than the $12.99 per month rates that are now currently available. That would enable consumers to mix and match offerings from XM and Sirius. Some of those offerings would not require consumers to buy a new combo radio.

In its own statement, the DOJ said that next-generation wireless networks would likely provide alternatives to satellite radio. It also said that the parties are likely to achieve significant cost savings through a merger and those would be passed on to consumers.

Other companies have been watching this case closely. It could be relevant, for instance, to Electronic Arts as it makes a hostile $2 billion bid for Take-Two Interactive. That merger would create a giant in sports video games, combining the Take-Two 2K Sports brands with EA’s EA Sports brands. In sports, EA would have a virtual monopoly. But it could argue that it doesn’t have a monopoly on the overall video game space, where it has just a 20 percent market share or so. (Note, EA’s chief financial officer resigned today. Our coverage).

Apple itself could also argue that its iPod business isn’t a monopoly because iPods compete with satellite radios, mobile phones, and other sources of mobile entertainment.

Films based on games have had a long and sorry history. But hope springs eternal as Electronic Arts announced today that it has a partner to produce an animated version of the upcoming horror game Dead Space.

EA will partner with Starz Media, which will produce an animated film for TV and DVDs that will appear at the same time that Dead Space launches this Halloween. The game is akin a third-person shooting game where a crew aboard a mining ship has to deal with the discovery of a strange artifact and the aliens that come with it.

This move is part of a clear strategy by Electronic Arts to turn its video games into cross-media entertainment franchises. EA realizes that movie and book licenses are becoming increasingly expensive. It also sees that Hollywood studios such as Warner Bros. are investing heavily in their own video game divisions.

That’s why it has moved to creating more original games. EA is also jumping on a trend where game-based entertainment is starting to become pervasive throughout mass media. Game-based movies in the works include id Software’s “Wolfenstein” and director Uwe Boll’s movie version of the berzerk killer game “Postal.” The film “Hitman,” based on an Eidos Interactive series, did well at the box office, and Angelina Jolie scored some true blockbusters in her “Tomb Raider” films.

Many of the films, such as “Doom,” which starred The Rock, have been critically disappointing. But EA’s move seems like a measured bet. It’s not a full-on first-run movie and so isn’t as risky as some of the other titles. And I’m not sure Dead Space, whose plot and look seem to closely resemble “Doom 3,” will be a mega hit. Nevertheless, it’s worth noting that EA is betting on franchising to create “transmedia” properties.

Last month, EA said that it was thinking about some of its properties, such as “Spore,” (our coverage) as franchises from the initial game planning. Spore will feature, among other things, Facebook applications and 3-D plastic custom toys. Film Roman will work on the film with Korea’s Digital Tetra studio.

John Riccitiello was an interesting personnel experiment when he came from outside the video game industry to become the No. 2 executive at Electronic Arts a decade ago. He is now the company’s CEO and one of the industry’s most respected executives.

Now Riccitiello is replaying that same experiment: He announced today that he’s hired John Pleasants (pictured left), a non-video game executive to be EA’s new No. 2. I’m not convinced it’s going to work again. EA has a lot of issues right now, including the challenge of its new rival, Activision Blizzard, which is in the midst of merging the game assets of Vivendi and Activsion. EA is also in the middle of a takeover battle with Take-Two Interactive and will need to revive its hit-making operation. So Pleasants is going to have to learn fast. And there won’t be a lot of time for on-the-job training.

EA announced this morning that Pleasants will be president of global publishing and chief operating officer at the Redwood City, Calif. company, which, alongside rival Activision Blizzard, is one of the two biggest independent video game publishers. Pleasants will be in charge of the company’s global publishing organization, corporate communications, government affairs, online operations and central development and technology teams. He will report to Riccitiello. In a statement, Riccitiello cited Pleasants’ expertise as a business operator, knowledge of online consumer relationships and an ability to lead big teams. Read the rest of this entry »