The Great Consolidation Debate

Introduction
I've been watching recent events in the video game industry with a mix of trepidation and optimism. I'm referring to the wave of mergers and acquisitions that have overtaken the video game industry (not unlike the newspaper and radio industries before it.) Of particular note is the Blizzard/Activision merger and Electronic Art's recent acquisition of Bioware and Pandemic, which represent landmark consolidations in the industry.

Blizzard, the gaming powerhouse behind World of Warcraft, Warcraft, Diablo and Star Craft has joined forces with Activision, the publisher of recent hits such as Call of Duty 4 and Guitar Hero Three. Electronic Arts, which resembles something akin to Goliath in the gaming industry (particularly prior to the mergers), has brought games like the Battlefield 2142 to the public in addition to a wide selection of sports games. Bioware created the instant classics Mass Effect and Star Wars: Knights of the Old Republic.

Why the Consolidation is Potentially Good
The days of two paddles, a ball, and a dream are behind us. Games today offer massive adventures featuring incredible worlds, all delivered in increasingly impressive graphics. Understandably, developing these games require substantial investments on the part of the company--and significant risk. For smaller companies, producing a game with the quality such as Bioshock or Mass Effect represents a tremendous risk to the company. If the game tanks, the failure will drag the company down with it, even if the company has enjoyed numerous successes. All of the time and expense spent developing an excellent team of programmers will be lost as the company crumbles--a terrific waste of resources.

A larger company diversifies this risk by producing numerous games simultaneously, and the profits and successes of one game will cover for the failures of another (similar to movie studios). Thus, in a larger company, an excellent development team can suffer an off game without facing imminent doom and destruction. Imagine the unthinkable: Warcraft was excellent, but Diablo was a complete dud...would we have ever seen World of Warcraft? In a corporate behemoth this debate need not occur.


Why the Consolidation Potentially Disastrous
A common argument is that a heavily consolidated industry will suffer from a lack of diversity and innovation. Larger corporations are generally beholden to their shareholders and maximizing profit, which at times creates significant risk aversion in the boardrooms. The refusal to take chances on new and untested ideas could very well result in missed opportunities for the industries and the gamers who rely on it. Also, larger corporations often operate under explicit corporate policies that encourage compliance, which may further hamper diversity in thought.

Thus, when a smaller operation is purchased and incorporated into the mother corporation, many of the attributes that granted the smaller operation flexibility and maneuverability may dissipate. When the employees and managers are responsible only to themselves they may be much more willing to gamble with their fortunes since they are masters of their own fate and will directly reap the benefits of their efforts.

Conclusion
I'm really unsure at this point. I'd have to see what games Bioware and Blizzard churn out in their new homes. Activision has historically been incredible at publishing excellent games while leaving the creative direction in the hands of the game studios they own (so I expect great things from this merger.) I am hopeful for EA, but I know significantly less about their internal management policies. If EA simply provides Bioware with enough funds to take their work to the next level I expect great things; if they attempt to substitute their own corporate vision for Bioware's I'm more skeptical.

Either way, I think we're in store for some real interesting developments. Game on.