How Will Activision Blizzard Change Games Sector?

It’s not entirely clear yet how Vivendi’s plan to take a controlling stake in Activision, unveiled Sunday, will shake up the games industry. But the $18.9 billion deal will not only merge the maker of World of Warcraft with the owner of Guitar Hero, but will create a video game company, Activision Blizzard, that surpasses Electronic Arts in terms of revenue.

It certainly gives EA (ERTS) something to think about, and some analysts are wondering if EA will look for a buyout from a large media company. What’s more likely is that EA will look for other acquisitions. Raph Koster, who started a company that bridges the web with virtual worlds, notes that EA seems to be moving towards global media concerns while Activision (ATVI) has been “doubling down on traditional gaming.” It will be interesting to see if EA starts eyeing music, TV, film, and other entertainment options.

Also affected is The9 (NCTY), which operates World of Warcraft for Blizzard in China. Shares of the Chinese gaming operator, in which EA holds a 15 percent stake, slumped in Monday trading as analysts worried that the deal may delay contract renewal negotiations next year.

Activision CEO Kotick said in one interview that he’s counting on Blizzard’s strength overseas to help carry other Activision brands — such as Guitar Hero — to Asia. Blizzard is also working on Starcraft II, a brand that remains very popular in South Korea.

With Vivendi (V), Activision also gets the support of its music division, Universal, to potentially bolster licensing deals for Guitar Hero. Harmonix benefited greatly from its partnership with MTV in this regard for their competing music game, Rock Band.

Kotick — who will be CEO of Activision Blizzard — is quite open about his ambition to lead the world’s largest game company. It could all be very good news for the smaller studios. It gives them some breathing room and opens up the possibility of being acquired by the new company, or by EA. And it may attract new investors, those who have cooled on the rising share prices of the soon-to-be even bigger big guns.

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