What is Summer Redstone's game plan in acquiring a video-game company?


In controlling giant Viacom, Sumner Redstone controls the world’s largest harvester of television ad revenue.   He has now bought Midway Games not for Viacom but for his personal holding company, National Amusement. Even though the midsize publisher of video games currently loses a great deal of money, in scramble to buy 80-percent of the company, Redstone has driven up Midway's share price almost three-fold. He then made his daughter Shari Redstone its vice chairman and installed his own board. Clearly, he wants to be in the video-game business which he described in Business Week as "the hottest part of the entertainment industry.”

     If Redstone is right, part of the sizzle comes from video games' potential as platforms for paid “product placement,” a euphemism for unlabeled advertising. The logic goes like this: Since Rupert Murdoch’s DirecTV, Time-Warner Cable, and Comcast are all now equipping their subscribers with Tivo-type digital recorders at nominal cost, it is only a matter of time before a significant portion of television viewers will routinely be able to Tivo-out TV ads. At that point, advertisers will need to find new ways to reach their audience, and product placement in video games is one attractive possibility. Imagine, for example, if all the players in a hip-hop video basketball game were suddenly sporting the Nike swoosh or downing Cokes on the bench? Video games also offer an excellent magnet for just those “eyeballs” that advertisers are willing to pay a premium to reach, such as teenage boys (who, market research shows, have begun defecting from conventional TV fare). "Unlike television,” as Shari Redstone points out, “you know they're glued to their screen” when they’re playing a video game.

With Midway Games now in his personal portfolio, Sumner Redstone is positioning himself to continue his reign as ad-revenue king, even if the stream from television advertising is partly, or substantially, diverted to video games.

Corollary Question:

Does Redstone’s ownership of Midway Games conflict with his control of Viacom?

This is a totally commerce-free site. No charges, no advertising.