<<<
Near-Total
Annihilation?
GT Interactive/MicroProse Merger
Falls Flat
by Terry Coleman
Everyone on Wall Street seems to have an opinion about the
"annulled marriage" of MicroProse and GT Interactive. But when
we cut through all the spin doctoring, CGW found that the merger
broke off due to a fundamental difference: how each company
writes off its research and development costs.
MicroProse uses the more typical approach for game publishers.
For example, when Ultimate Civ II ships this summer, MicroProse
will pay the developer, and write off those fees that quarter-taking
the revenue "hit" immediately. GT, on the other hand, in a similar
situation will amortize the developer fees over a longer period of
time. The GT approach can put a better bottom line on paper in
the short run, but if, say, more than a single product's sales are
below expectations, the company could feasibly show huge
losses down the line. This is not the first time such accounting
differences have been divisive among game publishers. Forbes
magazine once wrote that Sierra was playing "adventure games"
with their books for writing off debts using the entertainment
industry method that GT uses. Sierra changed their accounting
procedure several years ago.
In the end, the two companies could not come to a compromise
between the two methods, and a split ensued. In the long term,
the non-merger may end up benefiting MicroProse more than GT.
We'll know for sure once Falcon 4.0 ships. >>.
cgw.gamespot.com
Coy |
