The future of games-only distributors appears to be over with the speculation that Centresoft is expected to be picked up by leisure European developer Activision.
As revealed in PC Dealer last week (3 December), Activision is expected to pay about #15 million for the distributor. According to sources, Centresoft put the for sale sign up just one year after it went through a management buyout (MBO).
In April 1996, Centresoft's management team, led by managing director Richard Steel, conducted an MBO, following the sale of its former parent company CentreGold to video compression software specialists Eidos, for #17.1 million. The distribution business was sold off to the management for #7.5 million, and Close Investment Management provided the equity.
Under the terms of the agreement, if Centresoft was sold off within 24 months, Eidos is entitled to a further payment.
While Centresoft has managed to hang on to its exclusive PlayStation supply contract with Sony for the last two years, it remains unclear how the company has managed to double in value in less than two years. Centresoft's jewel in the crown is undoubtedly the PlayStation, but the contract expires at the end of March and Sony's popularity cannot be guaranteed next year.
One industry source said: 'Who knows if there will be a PlayStation next year. You start building companies on what is tomorrow, not today.'
The other question raised by the prospect of Centresoft's acquisition is whether leisure distributors can survive on their own. The other players in the market have already shifted their total reliance on the leisure market. Gem has the backing of Irish conglomerate DCC and is the sister company of peripherals distributor Midwich Thame, while Pinnacle has the support of the music industry and Leisuresoft was bought by games developer Philips.
However, Activision's move to buy a distributor was seen as an intelligent one since the developer will gain full control over the sale of its products.
Instead of having its products fighting for the mindshare of its partner, Activision can make sure its games are pushed over those of its rivals.
It is also important to note that buying a salesforce with knowledge of the market and relationships with retailers is an expensive option to build from scratch.
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