This is probably old news to most here,
but in case it's useful to anyone:
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Copyright 1998 Information Access Company,
a Thomson Corporation Company;
ASAP
Copyright 1998 Golden Empire Publications Inc.
Computer Gaming World
March, 1998
SECTION: No. 164; Pg. 40; ISSN: 0744-6667
IAC-ACC-NO: 20209803
LENGTH: 240 words
HEADLINE: Near-total annihilation? failure of MicroProse - GT Interactive
merger; Company Business and Marketing
BYLINE: Coleman, Terry
BODY: GT Interactive/ MicroProse Merger Falls Flat
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 doctor-ing, 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. In a similar situation, GT, on the other hand, 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 its books for writing off debts using the entertainment industry method that GT uses. Sierra changed its 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.
[Computer Gaming World March, 1998
LOAD-DATE: February 10, 1998] |
