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Cryptic's Future Unclear

Richard Aihoshi Posted:
Columns The Free Zone 0

The CA-based studio’s name seemed particularly appropriate last week when parent Atari let it be known that the division is to be divested.  The most common interpretation of this is that it will be sold to another publisher, witness Bill Murphy’s column wondering about possible buyers.  However, I think he took a rather North American view when it came to identifying leading candidates.  I’m of the opinion there are other potential suitors that might be well worth considering in the mix.

As I’ve noted within the past few months, Chinese giant Tencent has already signalled its interest in this hemisphere by laying out over $400 million to complete its acquisition of Riot Games, in which it previously held a small share.  It’s still far too early to gauge whether that constituted over-paying, and if so, by how much.  However, we do know the company still has a substantial war chest.  Although I have little more than gut feel to go on, I’d have to suspect Atari would be willing to accept substantially less.  So affordability probably isn’t an issue.

Assuming Star Trek Online and Champions Online would be included in any deal, purchasing Cryptic would give Tencent a much more visible presence in this part of the world than Riot Games alone.  Neither title is a big money-spinner or an obvious candidate to strike it rich in the Chinese market.  However, they still have decent awareness among MMO fans and the game media – more so than a number of imports that might well be a good deal more popular and profitable.  

I’m also not ruling out the pre-emption factor.  Acquiring Cryptic would mean other companies can’t.  In this respect, the first two possibilities that pop to mind are the other huge Chinese publishers, Shanda and Netease.  Notably, they’re both flush with cash as well.   In terms of financial clout, I wouldn’t automatically count out the major Koreans either, although I tend to think the mixed results achieved by those that have gotten into development in the west might reduce their eagerness.

For all of these companies, the question arises as to what else would make the studio valuable to them.  This isn’t as easy to answer as you might think since quite a few factors can be highly situational in nature.  Consider that Atari went from buyer to seller in a relatively short span, not much more than of a couple of years.  For no special reason, I can’t help but think tangentially that this is less time than we expect one of Cryptic’s MMOGs to take.

So, what would a purchaser receive?  In addition to the properties mentioned before, both with presumably limited potential, there’s Neverwinter Nights.  It could turn out to be a winner, but if Atari thinks it will, wouldn’t it try to hang on to as much of the rights and revenue as possible?  If not, I’d certainly be suspicious.

What about key people?  Obviously, Jack Emmert’s name springs to mind.  But his is the only one, so while I may be overlooking someone, Cryptic doesn’t immediately look like a studio anyone would acquire for its senior core leadership group.  A case can definitely be made for the advantages of obtaining a full team whose members are used to working with each other compared to building one from scratch.  However, the degree of benefit can vary from considerable to negligible depending on the mix of talents, cohesiveness, etc.

Technology is another possibility.  I’m not knowledgeable enough to assess and compare the quality of Cryptic’s.  That said, my general impression is that technological advantages tend to be less significant than they’re often made out to be.  In addition, if I use Tencent as an example, I expect that because its primary focus is the huge Chinese market, it’s mainly interested in tech that will be useful and advantageous there.  I have no idea how well or poorly Cryptic fits in this regard. 

So, what do I think will happen?  At this point, my guess really isn’t any better than yours since I’m not in possession of any widely unknown information or insights I’d consider relevant.  But here’s my best shot anyway.  First, a few potential buyers will go kick the tires.  If one of China’s big three has real interest, it will become the new owner by outbidding any western companies, which may basically only be bargain-hunting to begin with, and so won’t go very high.  Atari would undoubtedly love for a bidding war to happen, but even if one does, I can’t bring myself to think it will go anywhere near $400 million.

Just for a bit of fun, I’ll set the over-under as $125 million.  Which way would you like to bet?


Richard Aihoshi

Richard Aihoshi / Richard Aihoshi has been writing about the MMOG industry since the mid-1990s, always with a global perspective. He has observed the emergence and growth of the free to play business model from its early days in both hemispheres.