Why former PlayStation boss Jack Treton is trying to buy a billion dollar gaming company

It seems everyone wants to buy a gaming company, including former Sony CEO Jack Treton.

Best known for his involvement in the original PlayStation in the 90s, and then from 2006 to 2014 as president and CEO of what was then known as Sony Computer Entertainment America, Tretan has since been busy working with an independent developer. through gaming funds such as Interactive Gaming Ventures. Now he wants to continue this mission by acquiring an independent studio.

Speaking to IGN, Tretan says while working at Sony, and he has since noticed that the gradual shift has allowed small studios to be less dependent on major publishers to bring their games to the world.

“Thanks to online shopping, anyone can be a publisher,” says Tretan. “So the good news is that the barrier to entry has dropped a lot. Creating a game is still very costly, but it’s not enough that it was in the days when you had to do a project for a hundred million dollars to see daylight on the shelves. “

Jack Treton

But that doesn’t mean releasing such a game is easy. He says when Indians look for more sources of funding, he sees growing interest in mergers and acquisitions [M&A]. But Indians are reluctant, he says, because they don’t want to lose independence and go public to make money from investors – it’s an expensive and difficult proposition. How then can indie attract money from investors while remaining independent, small and secure?

Enter Tretan and his new company: PowerUp. PowerUp is SPAC: a special purpose acquisition company. As Tretan briefly explains, SPACs are companies that exist for the sole purpose of acquiring or merging with an existing private company and accepting it as a merged entity. This is an easy way for small companies to go public while receiving additional financial support and possibly an experienced team of industry professionals who can offer advice, support and guidance. In the case of PowerUp, Tretan says it also means allowing the studio to remain independent while remaining a minority owner.

“We want to have a more teaching role if we can take a seat on the board, but we are not interested in joining the management team or taking over the team,” he explains.

There are hundreds of SPACs, but PowerUp is relatively unique as the gaming industry. Tretan says the lack of SPAC in the gaming industry of about $ 200 billion, especially as acquisitions are becoming an increasingly relevant topic, was part of what prompted him to start PowerUp with a group of leaders who are already familiar with the gaming space. That experience, Tretan says, was lacking in the few SPACs he’s seen that have so far sunk into the game, forcing the developers they care about to distrust what they sell.

Thanks to online stores, anyone can become a publisher.


This experience is also necessary because the PowerUp plan is not just to throw money at projects that they consider profitable, but also to actively develop the gaming company. Tretan says he is looking for companies with strong management teams that already intend to go public, valued at about $ 1 billion to $ 2 billion. That sounds huge, but for comparison, the Bungie was acquired by Sony for $ 3.6 billion – so imagine something about a third the size of Destiny’s studio. Not a tiny indie, of course, but independent, and not massive. And Tretton is also looking not just at developers: PowerUp could capture a studio, publisher or gaming-related company in an area such as media, eSports or advertising.

Between Tretan’s experience in the industry, including with a number of real acquisition deals, and his newly established SPAC, he obviously has a lot of insight into M&A in general. Although these days it seems that mergers and acquisitions are ubiquitous, the public actually sees only the end results, and none of the processes behind them. Companies are constantly discussing mergers and acquisitions, so rumors of such talks are constant and may or may not come out. Tretan explains that there are a number of reasons why deals fall in the middle of a discussion. There may be one majority investor who is not involved in the day-to-day life of the company, who is not interested in the deal, who is ruining the whole thing. Or there may be a problem with valuation, which Tretan acknowledges is a difficult topic from both the public and the parties involved – one that includes counting shares as to the actual amount the company is worth while as well as its future potential.

“Appraisal is when you start to bore gamers, but the basic definition of appraisal is that your company is appraised realistically, because if you’re going to buy, you want to raise your appraisal as high as possible to get as much cash as you can. can if you get it, ”explains Tretton. “If you’re going to go public, you have to be very realistic in how you evaluate your company because the stock and value of the company will be based on what everyone sees. And if you inflate it, it lasts for a few days, and once you fail to make that assessment and meet your goals, the supplies will go to the toilet. ”

When Activision becomes part of Microsoft, it creates a place for new Activision.


But during the discussion of mergers and acquisitions, the parties sometimes face each other because of the difference between the perceived value of the acquired company and what its investors see on the basis of data. This clash can also go both ways – sometimes investors do not have a full understanding of what a company can do, but sometimes companies overestimate their own capabilities and value. It is a challenging dance that requires the participation of all participants.

And there are many other reasons why the deal may fail.

“People have changed or someone else comes in at 11 o’clock and fills their heads with a vision that is different from what they originally signed up for on both sides,” says Tretan. “You’re in a letter of consent, someone comes in and turns your head, or you see someone more attractive, and you go out on it. I would like to think that this will never happen, but I can tell you that everyone who has done these mergers will tell you that you better talk to multiple players on both sides because deals can fall apart and you think on the road with someone, and the deal falls apart. It is very time consuming and very expensive to make it happen. “

So what’s behind the surge in acquisitions in the gaming industry lately? Tretan’s theory is that the boom is associated with more gaming companies compared to 15 or 20 years ago combined with the rapid numbers that the largest gaming companies get every year. Just need to buy more and more money to do it. And, he adds, that’s good.

You have several strategic mergers and acquisitions that I think are good for the industry because if Activision becomes part of Microsoft or Zynga becomes part of Take-Two, it creates room for a new Zynga or a new Activision to appear, and, maybe someone who is a share of Activision or Zynga will be the next Activision or Zynga, and these guys are going to bring smaller companies with them, ”says Tretan. “So I think it’s a sign of industry growth and a sign of industry value, and it’s all positive.”

But what about the shortcomings? Will large companies that emulate smaller ones stifle the creativity of acquired companies? And what about the exclusivity of the platform for popular cross-platform franchises? Tretan is confident that, in general, these will not be problems – or at least not significant.

“I think the relationship between the two companies is obviously much closer once you bought that company,” he says. “And hopefully Microsoft will be a bigger priority for Activision than it was before Microsoft acquired them. But ultimately, they were bought to increase their profitability and grow their own business to benefit Microsoft and benefit the entire industry in this way.

I don’t think it would make financial sense for them to take Call of Duty and make it exclusive to Xbox platforms.


“So I don’t think you’ll see the titles become exclusive to the platform … I don’t think it would make financial sense for them to take Call of Duty and make it exclusive to Xbox platforms. And they certainly haven’t behaved that way in the past, and I think that’s true for all the other mergers and acquisitions that you see, and I think you’ll continue to see multi-platform development. This will simply be done under the wing of the acquiring company, but they are looking to maximize the profitability of this company’s business. And the way to maximize that profitability is to make a multi-platform track. ”

Sure, Tretan is interested in making the acquisition look like a good idea at the moment, but he also had plenty of time at the helm of one of the industry’s largest ships, so he understands exactly where they might go wrong. Having this experience and looking to pick up a gaming company on their own, Tretan wants to assure that the increase in mergers and acquisitions in games is ultimately not a shift that will hurt people playing the game. Most likely, he hopes this will lead to bigger and better games as well as more of them.

“Competition in the gaming industry is not about other gaming companies, it’s time. Only 24 hours a day. You have to sleep. And games are a much bigger threat to other types of entertainment than to other gaming companies. If you spend more time playing games, you spend less time watching TV.

«[But] people with an inflated index in games are also people who over-index movie attendance … and everything else, so they’re just a very voracious consumer who will support any form of entertainment they like … These acquisitions are from these big multibillion-dollar companies just show more and more commitment to the games. When I’m a gamer, more and more people are concerned about getting my entertainment dollar, and if they want my entertainment dollar, they better give me something to truly engage with their time. I see this as a sign that people are supporting the industry and supporting their hobby, not reducing their choices. ”

Rebecca Valentine is an IGN reporter. You can find her on Twitter @duckvalentine.

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