The Role of National Stock Markets


In a given industry at a given time, many factors can limit the growth of any particular company relative to its competitors. Growth is always a risky process, and the management of some companies might purposefully avoid it. In the French videogame industry, for example, Delphine Software, a highly regarded development studio, has remained small with about 35 employees over the past decade, easily finding publishers and getting favorable terms for the two games it produces each year. Delphine's strategy can be contrasted with that of Kalisto, which increased employment from 46 in 1996 to 270 in 2000 before going bankrupt the following year. For companies that do pursue a growth strategy, success or failure will ultimately depend on the investment strategy and organizational structure of the particular company.

Nevertheless, the British-French comparison over the last cycles suggests that the national context can make a difference. It is clear that the British had a superior developer base, yet it was the French-based companies that grew. In both countries, the leading firms had long-established roots, at least given the young age of the industry in question. There is no compelling evidence that the French were better managers than the British. In the case of the videogame industry, what the French had that the British lacked was an ebullient stock market that bestowed far higher price-earnings ratios on the French listed companies than on the British [Schroders01], enabling the leading French companies to raise huge amounts of capital through share issues or convertible bond issues without too much dilution, as shown in Table 1.6.3. As a result, these companies could engage in a much more aggressive acquisition strategy than their British competitors, paying with the cash raised or directly in highly-valued shares.

Table 1.6.3: Cash Raised Through Share Issues and Long-Term Debt Issues by Leading French and British Videogame Companies, in millions. Information adapted from Thomson Analytics database [Thomson].

1994

1995

1996

1997

1998

1999

2000

2001

Infogrames

12.17

2.10

100.82

70.48

17.51

333.54

334.00

52.2

Ubi Soft

n.a.

n.a.

3.57

13.95

29.88

73.05

60.42

0.10

Cryo

n.a.

n.a.

n.a.

n.a.

24.43

19.00

40.21

0.00

Titus

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

165.66

0.00

Total

12.17

2.10

104.39

84.43

102.25

425.59

600.29

52.3

Eidos

0.69

n.a.

6.53

58.62

49.05

1.25

6.61

1.28

Rage

0

16.27

2.8

0

0

0.02

21.59

0.10

SCi

n.a.

n.a.

n.a.

6.4

1.65

0

33.58

0.00

Empire

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

9.76

6.05

Total

0.69

16.27

9.33

65.02

50.70

1.27

71.54

7.43

Within Britain, this disadvantage is recognized, and is attributed to an aversion of "investors" to the videogame industry, or even to high-tech industry in general, especially when it is based on small-scale enterprise. For example, Peter Molyneux, a famous British developer and CEO of Lionhead, argued in The Financial Times that he "would love Britain to be at the forefront of the games sector. There is no doubt of the impact of British designers. Our problem is shortage of investors" [Grande01]. One of the very few City analysts to follow the game industry, Nick Gibson from Durlacher, expressed similar views: "There is no doubt that British investors are more conservative than their continental and U.S. counterparts and it could be argued that this has much to do with their lack of understanding about how the games industry and games companies work" [Gibson00]. In the previously mentioned "creative industries" report, the British Department of Culture, Media and Arts stated: "British innovation in interactive leisure software development has not been matched by a British willingness to invest. The fact is, the London Stock Exchange is not prepared to back 'Britsoft' with the same vigor as do NASDAQ, the Nikkei, or the Bourse de Paris for their respective industries" [UKMedia01].




Secrets of the Game Business
Secrets of the Game Business (Game Development Series)
ISBN: 1584502827
EAN: 2147483647
Year: 2005
Pages: 275

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