Could EA buy 2K Sports?

PlayStation Universe (PSU): "Electronic Arts would be wise to buy 2K Sports, or so says industry analyst Michael Pachter for Wedbush Morgan Securities. The suggestion came amid the move from Wedbush downgrading Take-Two Interactive's stock from “hold” to “sell” Friday. Take-Two Interactive owns 2K Sports as a subsiderary.

“It is clear to us that Take-Two’s sports business would have tremendous value to EA, as it would give EA a monopoly on football, basketball, baseball, and hockey,” Pachter said. His analysis concluded that EA might purchase 2K Sports for as much as $200 million dollars, but he noted, “It is arguable that EA would benefit by as much as $1 billion if it were to obtain an exclusive; this does not mean that it is willing to pay $1 billion.”

The acquisition would no doubt be controversial, as EA Sports games are seen by many consumers as inferior to their 2K Sports competitors. EA has responded to this by securing exclusive rights to the names and players of several sports leagues.

Sports games have long been plagued by a stigma of being unoriginal or made with little effort. As the rules of the games themselves seldom change, game companies often update rosters and give a brief polish to the graphics before they send it out the door.

The sale may end up being unavoidable however. Take-Two has been plagued by lawsuits and falling profits, buoyed only by its highly lucrative Grand Theft Auto franchise. Companies often sell off unprofitable divisions when trying to consolidate costs and reduce overhead, and as Pachter points out, Take-Two's sports offerings are a drain on their larger bottom line.

EA, the largest video game publisher in the world, has seen its shares fall roughly 5% since this time last year amid questions about competition and the change in the market associated with the next generation consoles, while Take-Two has seen its shares climb 30%.