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 Thursday, 26 September, 2002, 09:46 GMT 10:46 UK
Microsoft bullish over games deal
Halo screenshot for the Xbox
Halo: Hugely successful game for the Xbox

Microsoft has denied that its multi-million dollar purchase of leading British games developer Rare was an act of desperation to obtain more exclusive games for its Xbox console.

The US giant bought the company, including a 49% share owned by rival Nintendo, to ensure that games made by Rare appear only on its machine and not on other consoles, such as PlayStation 2 and GameCube.

The acquisition is typical of an increasing practice by giants Microsoft and Sony to ensure their consoles, battling it out for supremacy in the billion-dollar market, have the right games to entice players to their machines.

Analysts say the deal is unlikely to have an impact for some time, given the length of time it takes to develop new computer games.

"The major short-term effect is to highlight how much Microsoft is willing to pay to secure the Xbox's position, boosting the number of games available to attract more customers," said game analysts Frederic Diot and Adrian Drozd at Datamonitor.

"Looking at this move alongside the recent Xbox price cut, it seems that short-term console profitability simply isn't a consideration."

Exclusive games

Microsoft paid $375 million in cash for the independent British games developer.

"I go all around the world and I look for the best game developers and I try to find ways of bringing them to the platform," said Ed Fries, one of the creators of Xbox, told journalists at an Xbox press event in the Spanish city of Seville.

Xbox and Microsoft had a clear vision and that was more important to us

Chris Stamper, Rare founder
"Who would not want to work with Rare? They have more than 20 years of incredible history in this business.

"Their average game sells 1.4 million units. That is phenomenal. For me this was just an incredible opportunity to work with them," he said.

Mr Fries said he was happy with the numbers of developers producing exclusive material for the machine.

Limited impact

Some analysts have questioned Microsoft's ability to bring "exclusive" games to its machines, games which are crucial in the battle to promote its machine.

Tomb Raider developed by Eidos
Lara Croft: Only for the Playstation
They point out that Microsoft is paying a high price for Rare, but will not get key titles such as Donkey Kong.

They expect the short-term impact on sales of Microsoft's Xbox console to be limited.

Sony has exclusive license to games such as Tomb Raider and Grand Theft Auto, one of the most popular video games of all time and a key title to convince computer game fans to stick with its machine.

"It is too bad that so many gamers that would love to play it on the Xbox that will not get the opportunity," said Mr Fries about the lack of Grand Theft Auto on the console.

Nintendo has struggled to attract third-party publishers to its console but is well-known as a producer of its own software.

As the games industry grows to rival the film industry, key games become as important to the console manufacturers as blockbuster movies are to film studios.

Christmas battle

Games such as Halo on the Xbox are the gaming equivalent of the Star Wars movies. Gamers will buy a sequel on the strength of the original just as the original Star Wars movies has kept the movie franchise extremely profitable.

The Rare deal was too good an opportunity to pass up

Ed Fries, Xbox creator
Rare are behind games such as Donkey Kong 64, Banjo-Kazooie, GoldenEye 007 and Perfect Dark, some of the most successful games of all time.

Chris Stamper, one of the founders of Rare, said the company had been looking for a partner with a "clear vision of the future".

"Xbox and Microsoft had a clear vision and that was more important to us," he said.

Microsoft is investing billions of dollars over the next few years in its online service, Xbox Live, which will allow gamers to play against each other across the world.

But its Xbox console is still lagging behind the market leader, Sony's PlayStation 2, and each machine is sold at a massive loss to the software and hardware giant.

The next few months leading up to Christmas is a crucial battleground for all three console firms and each company is trying to impress users with its "exclusive" titles.

Mr Stamper said Rare felt under no pressure to succeed, despite the fickle nature of the industry and the huge price paid by Microsoft for a firm whose only assets are ideas.

"We have been doing this for 20 years. We have strength in depth and our objective will be to show Microsoft and the world that buying Rare was the best thing they have ever done," he said.

Mr Fries said he was not actively looking to acquire more software companies in the near future.

"I would be happy to go five years without buying another company but the Rare deal was too good an opportunity to pass up."

See also:

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