Ok lets imagine that you are organizing a party. A very big party. And it will last a long time, even years.
The guest will get hungry and will want to eat something.
You need to provide food but you cant make much food at home.
What would you do?
I tell you what I would do. I would look for good pizza places, kebab , curry places, sushi, burger places, with good reputation, and I will ask them to provide food for my party, to make sure that my guest will get decent food at a fair price. I will make exclusivity or non exclusivity contracts with them.
Some food places might provide better quality than expected, some might be disappointing. No big deal, it is a short term deal. If they provide less quality than expected, no more contracts.
If my guests fancy any special food I can always quickly call some trendy place to secure provision of what they want.
I tell you what I would not do. I start acquiring the businesses.
I wont do that because it is very expensive. So I wont be able to get enough variety, maybe a burger place and a pizza place. That is a problem because I am pretty sure that my customers will get fed up of pizzas and burgers.
They will start asking for sushi, and I am stuck with pizzas and burgers.
It could be even worse. What if I notice that some of the business I have acquired are not good anymore? Then I am fucked. Not only I am giving my guests poor variety but I am stuck with mediocre quality.
So that is why I think that contracts are always better than acquisitions.
Personally, I would always choose acquiring a company that I work with continuously instead of on a contract basis because first, some other company can always come in and sign them to a contract in which prevents me from signing them to their next contract with me and second, in the long run, it’s always better to bring the company into the fold and make them an internally owned studio.
I believe that Sony should acquire Bluepoint Games and Housemarque because they work with them the vast majority of the time. If anything, not acquiring them wouldn’t make any sense and seems to make all the money, time and resources into them over the previous contracts seem to then be a waste. And if another company acquires them, oh man. Ouch.
Some studios are just perfect with a certain publisher. Bethesda is a perfect fit with Microsoft just like Insomniac Games is a perfect fit with Sony and I for one am very happy about Sony acquiring Insomniac because I know im getting amazing games from one hell of an excellent efficient studio that works best with Sony.
You seem to view this as a one size fits all game. Beyond the excellent track record most of these places have for burgers, pizza, tacos, etc. when they get more demand and people try to poach your favorite shop, you have to pay all the more out. Sometimes, it’s just neater.
You also have a greater level ot control to ensure the quality of the burgers and fries by having your consultants come by and having master chefs lend a hand, so both sides can learn. Whereas if you send your chefs over to help and then someone else steals your partner for their party, you lose these synergies on their side.
Finally, in the event that someone eventually becomes sick of burgers, then you help your teams adapt and see what the chefs want to make. Some may wanna play it safe and make something like a Philly Cheese Steak or a Cheeseburger Pizza. But others may wanna make Shrimp Scampi and now they can. I mean, could you have seen PlayGround making an RPG, Obsidian a Survival Game, Ninja Theory a MOBA Brawler and Coalition a Tactics Game (even though they brought in help) like 5 years ago?
Contracts have their ups. They are cheaper in the short term, they allow for studios under other ownership to make games for you and it bolsters first party. But eventually you need to tie the knot, and the longer you wait, the more it costs.
Also, IP matters a shitton for some of these studios. Playground, Undead, Compulsion, these were bought primarily for their talent. But Dounle Fine, Obsidian, Rare, Mojang and InXile have great talent and IP. And then you get Bethesda which beyond its clear talent has some of the biggest IP in the business. The kinda stuff my Dad who hasn’t played anything other than Wordscapes and Ashphalt in the last 5 years and Guitar Hero in the last 10 knows 100%, and something people as young as 12 know.
I’d say it’s less a failure and more a reality of the business. If most places are priced at relative parity proportional to quality, then people tend to go for the safer pick. Why grab the best Falafel in town if you’ve never had one and the best slice in town is just down the street? All the more reason a communal buffet where the barrier to entry is lower is important, as many more people go “Ooh, I like this Falafel thing” and may even buy some for the road from the mall that houses the buffet. Buffet and Mall are happy because they are under the same management, Falafel shop is happy they got a new customer they may not have.
So you are going to sign a contract with a few different food places and said contract is also going to have all of these places provide food to your party exclusively right? They won’t be able to sell food to anyone else and the contract value will have to be large enough to cover all of the money they could have made selling food to others (minus the added expenses of course).
So for example your aren’t going to buy a pizza place, you are just going to pay them the value of every pizza they normally make in a year but only receive the pizzas needed for your party.
The good thing of contracts is the flexibility. You might pay the restaurants for exclusivity, or not. Just enough to secure provision to your party.
If the restaurant is used to serve to other party you can tease them with a bit of extra money.
After the restaurant realises that their food is the most popular at your party’s buffet you can change the contract.
So much healthier than buying a restaurant that could be full of problems.
You know if you want to discuss contacted development vs internal development we can do that here. The scenario you are talking about is vastly different than console video games. You aren’t even discussing at the same scale. Do you have to feed 100 million people in perpetuity at your party?
They went to MS (and I assume others like Sony) and asked for offers to be bought. MS simply offered 12B+ and they rejected it. Discord will probably go public (IPO) now instead. Xbox already works with Discord, how much Sony will use them remains to be seen.
When I order a burger from a food place I enter into a contract for them to supply me a burger. The contract doesn’t stop them simultaneously supplying the same burgers to lots of other people. Which is why the cost of my burger is low because they are working on scale - and selling lots of burgers.
When I order an exclusive video game in MOST cases I’m paying for a large team’s staff costs and non staff costs for a long period of time to make a game just for me. The game isn’t going to be for anyone else. And therefore I also have to compensate them for the fact their burger/game can’t be sold to a wider market.
So in other words the opportunity cost of me buying a burger or even hiring a food place for one night is a lot better than buying out a team for a limited period to make a game just for me with no onward stake or investment.