When massively multiplayer online game publisher Outspark hired Owen Mahoney as
chief executive, we wondered whether the company was preparing to shop itself around. Mahoney is, after all, a seasoned M&A executive, who joined venture-backed Outspark from game publisher Electronic Arts Inc. (NASDAQ:ERST), where he led business and corporate development. And deal activity in the video game industry is brisk. So we asked Mahoney: Is Outspark looking for a buyer?
"No. If you're thinking about what your exit is before you start, then you're not thinking about operations."
Fair enough. However, Mahoney, who by Thursday was three days into his new job, is well aware of the rapid consolidation underway in the video game industry. During his tenure with EA, the game publisher completed a number of acquisitions, though perhaps the best known deal is the one that didn't happen. EA in September
withdrew its $2 billion bid for Take-Two Interactive Software Inc. after a months-long hostile pursuit.
EA itself has been named as
a possible target for, among others, Walt Disney Co. (NYSE:DIS), which
on Sept. 8 acquired Wideload Games for an undisclosed amount. And video game publishers, including THQ Inc., and media giants, such as Time Warner Inc. (NYSE:TWX), have in recent months picked up assets from
bankrupt Midway Games Inc.
While Mahoney is clear that he can't speak for EA, he does expect the game publisher and two of its closest rivals, Activision Publishing Inc. (NASDAQ:ATV) and Ubisoft Entertainment SA, to be prime players in the industry consolidation, through partnerships and M&A.
They see changes going on and they know that those changes are affecting their businesses radically and quickly. They will be aggressive as they address those strategic opportunities and challenges. One way to do that is through M&A. Anytime you get in an industry this dynamic, consolidation through M&A and capital investment of all types will be ongoing.
Which brings us back to Outspark. If not planning for an exit, what is Mahoney's strategy to keep the revenue-generating startup growing? "There are a million great ideas. My job is to be very selective about what we do."
Founded in 2007, Outspark operates in the free-to-play online game space, where gamers can play games for free with the option to upgrade or customize their experience for a small fee. Free-to-play games are popular in Asia and are gaining fans in the U.S. Outspark makes its money by partnering with game developers in South Korea, China and Japan to bring their titles to the U.S. market.
It's a promising niche in a growing sector of the video game industry. Which should help Outspark as it battles a growing army of competitors in free-to-play, including his former employer, EA. - Suzanne Stevens
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