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Warner Bros. Interactive Entertainment (WBIE) is one of the treasures of the video game industry. Launched by Jason Hall in 2004 and run by David Haddad today, WBIE has 11 studios that make triple-A games such as Mortal Kombat, Lego Harry Potter, Middle-earth: Shadow of Mordor, Injustice, and the Batman Arkham series. That makes $ 300 million to $ 500 million in revenue per quarter, depending on what comes out.

But that was peanuts compared to AT & T’s revenue of $ 44 billion per quarter – and its staggering $ 169 billion debt. AT&T must have done something about that debt, so it’s spinning out Warner Media and properties like HBO and WBIE to merge them into Discovery. Despite being a crown jewel of gaming, WBIE has earned very little attention from AT&T’s top brass.

I’m worried about Warner’s games division.

WBIE is part of Warner Media, which is sold this week in a $ 43 billion deal through a Reverse Morris Trust, a tax-free deal in which a company sets up a subsidiary that ends up buying itself through debt and by other means. Warner Bros. Media will include HBO and will be combined with Discovery, owner of Animal Planet, HGTV and many other entertainment properties. Warner Bros. declined to comment on what will happen with WBIE, but I have heard rumors that not all parts of WBIE will go with the Discovery Company.

Last year, after deciding not to sell it, AT&T attempted to sell WBIE for $ 4 billion. He doesn’t have a taker, in part because he’s a complicated beast. It relies on licenses like Harry Potter and The Lord of the Rings, and in the case of Harry Potter, it’s not clear if the license goes with it if WBIE is sold. Without the licenses the game company is not worth as much as it owns 100% Mortal Kombat but not licenses like Harry Potter. WBIE clearly integrates better with Warner Media, where it has access to Warner Bros. licenses. WBIE Studios are among the only ones in the world to truly do justice to these licenses. Still, the fact that he doesn’t own them means it makes it harder for WBIE to fend for itself as a business and make a profit each quarter.

Above: David Haddad is President of Warner Bros. Interactive Entertainment in 2018.

Image Credit: Dean Takahashi

Maybe he’ll be better off as part of Discovery, where he can be surrounded by rich entertainment properties that could become game licenses. But my concern is that, especially with the rumors that it could be split into parts, WBIE will be in turmoil again. Perhaps sensing a chance to recruit WBIE employees, Electronic Arts hired a former Monolith Studios executive to run a studio in Seattle.

Hopefully the uncertainty ends soon. But it’s a reminder that big conglomerates and Hollywood studios aren’t always the best owners of game companies, which need a lot of attention and investment before they pay off. NBCUniversal has shut down its game publishing division after expanding it to 50 people. And Disney has acknowledged that its ability to run games is quite mixed, so it has conceded its entertainment properties to outside companies such as Electronic Arts and Glu.

Neglecting a gaming business because it’s a small part of an empire isn’t the best way to run a treasure.

What about Big Tech?

Jade Raymond at the launch of Stadia.

Above: Jade Raymond at the launch of Stadia in March 2019. She is no longer with Google.

Image Credit: Google

I also wonder if the big tech companies could be better managers of game companies. But we don’t have much of a track record there. Microsoft has certainly had great success over the past two decades with Xbox. Sony has also done a remarkable job growing its PlayStation business. But the recent setbacks at Google Stadia, where it closed a proprietary studio run by gaming veteran Jade Raymond, are disheartening.

And Amazon has also experienced a series of woes in the management of its gaming business. The company started and then closed Crucible. It has delayed the launch of its massively multiplayer online role-playing game New World. And he also recently shut down a game based on The Lord of the Rings after failing to license with Tencent, who took over a company that made such a game. It made me sad, because I’m a big guy. fan of JRR Tolkien, and I know Amazon is making a TV series about the second age of Tolkien’s Middle-earth lore, a period that takes place before the Third Age and the events of The Lord of the Rings. It would have been nice to see what Jeff Bezos’ money could have done for a true transmedia of entertainment of one of the most important intellectual properties in the world. I still think the Tolkien franchise and transmedia deals are huge opportunities as well.

But it was not to be. And that’s a lesson. Even if your owner is one of the smartest businessmen in the world, it doesn’t mean much if your business is so small that it doesn’t register as a big deal for the bigger company. Big tech companies have shown very little ability to run complex game businesses in a way that is authentic to fans. Maybe Facebook could play a bigger role in games because it has invested a lot in VR. But virtual reality is still in its infancy and has a lot to prove.

Apple doesn’t own game companies, but its App Store and mobile devices have given games the biggest expansion platform of the past decade. But as we saw in the Apple trial against Epic Games over the past two weeks and the changes to the Apple ID for advertisers (IDFA, which has hurt game companies by promoting privacy over targeted advertising), Apple doesn’t exactly have the interests of game companies in mind when making major decisions on the platform. In the name of dodging Epic’s legal attacks, an Apple executive has even gone so far as to deny that Roblox’s gaming platform and user-generated games are actually games. He called them experiences. Finally, Netflix, which is a hybrid between Hollywood and Big Tech, has only taken small steps in games.

Given the choice between Hollywood or Big Tech, I’m not sure who is the best steward for a games business.

Independence

Valheim

Above: Valheim is a big hit.

Image Credit: Iron Gate Studio

Maybe it’s time for the $ 175 billion games business to function on its own. I would probably vote for local governance, genuine management that really cares about the games, and financial independence from industries like Hollywood that are in full retirement due to the pandemic or Big Tech companies that are the subject of. increasing antitrust scrutiny.

This week, earnings results from Embracer Group, a publicly traded holding company for game studios in Sweden, caught my eye. It has seen good growth thanks to the success of the independent game Valheim, which has sold 6.8 million copies. And Embracer’s dozens of studios have a total of 160 games in the works, including 90 that are slated to ship next year. Embracer CEO Lars Wingefors has had acquisition talks with 150 game companies and is in late talks with 20 of them. And Embracer has $ 2 billion to make acquisitions.

Wingefors pointedly stated in its results report that its “determination not to become a ‘corporate machine’” is stronger than ever. At the very least, that’s what it takes to run a video game business well, or at least avoid knocking it into the ground. We talk so much about “indies” in the gaming industry. But I really want indies to be big corporate game studios like WBIE that have the independence to make their own decisions and financial investments. People like Forte co-founder Kevin Chou (who just raised a ton of cash) are busy creating the technologies and business models that could allow game companies to grow faster and become more financially independent.

I have no illusions that a lot of bad managers come from the gaming industry. Jason Schreier’s new non-fiction book, Press Reset, tells the story of why so many game studios had to be closed, affecting the livelihoods of game developers, forcing them to relocate, scramble to find new jobs or simply escape the game industry. clueless Hollywood management, like Disney trying to be a parent to Warren Spector’s Epic Mickey games.

I can’t wait to read this for answers, but I’m afraid silly bosses come in all shapes and flavors.

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