Hi guys, I recently wrote an article for the popular investment web site Minyanville.com that MMA fans would find interesting. I argue that EA should acquire THQ, primarily to get its hands on the enormously lucrative UFC license.
EA has a mountain of cash in the bank collecting dust, while THQ is an extremely cheap company with some incredible assets that is being weighed down by some product-management snafus. We know what EA wants in on the growth of MMA, and the easiest, lowest-risk way to do it is to simply buy THQ.
Sure, EA has a shot at making a good MMA game, but it doesn't have a brand like the UFC to go with it. Among the general public, UFC is a MUCH better known term than MMA. And the UFC certainly isn't making things easy by laying out threats to fighters considering going with EA.
Here are some highlights of my article:
But the real kicker would be THQ's Ultimate Fighting Championship (UFC) license. The UFC is the leading brand in mixed martial arts (MMA) -- a sport combining fighting disciplines such as boxing, wrestling, and jiu-jitsu. Once derided as human cockfighting by John McCain, the sport has become increasingly mainstream to the point that Bud Light and Harley-Davidson grace the UFC's famous octagonal cage.
Luckily for THQ, the 18- to 34-year-old male demographic that makes up a great deal of the UFC fan base likes video games. A whopping 2 million units of UFC 2009 Undisputed were shipped within 2 weeks of its May 19 release. And since this sport is still illegal in New York and Massachusetts, there's still plenty of room for growth.
EA is planning a rival title comprised mostly of non-UFC fighters. But according to a Sports Illustrated report, UFC president Dana White put the word out that fighters considering signing with EA had better think twice -- an ominous warning given the company's virtual monopoly on the sport in North America.
In fact, an extremely conservative free-cash-flow model indicates that the UFC license alone is easily worth hundreds of millions of dollars over the long term. Moreover, EA would be getting its hands on other THQ licenses -- including the cash cow WWE, and some valuable intellectual properties such as Company of Heroes.
I'd love to hear what you guys think, and if you could Digg this article for me, I'd really appreciate it!