Acquisition Happy

It all started when EGM published an assumptive rumor stating Microsoft’s intentions of acquiring one of the videogames most coveted development houses -- Capcom, even before the news of Microsoft’s acquisition of Rare came about. Not only will MS have the exclusive rights to franchises such as Onimusha, Megaman, Street Fighter and Resident Evil but also have a respectful foothold on the Japanese software market.

The rumor never died, hitherto, numerous forums discuss the possibilities and somewhat an Xbox fanboy’s wet dream of having Capcom on the Redmond giant’s side. Personally, MS should pursue such a deal, it would benefit them on a financial standpoint though initial costs for acquisition would be high and the question for allocation of cash reserves is questionable due to the planned acquisition of Yahoo!.

It’s estimated that Capcom’s market value stands at nearly 2.5 billion dollars. I strongly believe that in able to survive within the gaming industry, Microsoft has to enrich, diversify, and strengthen its first party developers. They’ve lost Bungie and second party partnerships -- Bioware and Bizarre, both snatched up by bigger gaming publishers. And the current lineup of first party developers (Lionhead, Rare, etc.) is insufficient to sustain a consistent release of triple A titles year after year.

Since 2008 started, Xbox 360 has been cannon fodder for failure rates and a weak software lineup. To re-inject interest and hype for the system, I propose a 6 Billion dollar ‘Content Expansion Plan’. To commit such an amount from Microsoft’s coffers would be a gargantuan task for Xbox executives, but if they do seriously consider on winning the content front, this would simply be one of the best options. 5 Billion goes into acquiring two development houses - determinately Capcom and Epic Games. Both have seen growing partnerships with MS and are highly profitable but affordable within the 5 Billion dollar range.

Epic rakes in profits from licensing its propriety engine - Unreal Engine 3 to countless developers and publishers throughout the industry. Moreover, it owns the Gears of War and Unreal Tournament IP. As for the remaining Billion, it would be utilized in acquiring excessive amount of exclusives from third party developers may it be downloadable content or full fledged games.

It’s time Microsoft sees the value these companies would bring to their overall strategy in taking the lead within the gaming industry.

It’s all about content. Content is king.