Sony “Vastly Overpaid” for Bungie, Says Analyst Michael Pachter

Sony’s acquisition of Bungie has made countless headlines over the last week, because other than the inherently momentous nature of the deal, there’s plenty else about it that catches interest. Bungie is going to remain fully independent and multiplatform, while Sony has also spoken plenty about how the acquisition of the studio is going to “considerably” accelerate PlayStation’s own plans in the live service space (where it’s collectively got at least 10 games in the works).

Whether or not the Bungie purchase will prove to be a beneficial one for Sony remains to be seen, but according to industry analyst Michael Pachter of Wedbush Securities, they may have paid way more to purchase the studio than they should have. Speaking recently with Yahoo Finance, Pachter compared Sony’s Bungie purchase with other recent major deals in Take-Two’s acquisition of Zynga and Microsoft’s acquisition of Activision Blizzard, stating that in terms of the cost and the revenue that Bungie makes, Sony has “vastly overpaid” for the developer in comparison.

“The Activision deal and the Zynga deal were both done below those stock’s recent highs,” Pachter said. “So Activision had traded over 100, and the deal was at 95. Back in October, it was over 100. Zynga had traded over 11, I believe, and the deal was done at 986. So you know, they didn’t really overpay, either of the acquirers. Bungie went for $4 million per developer. And most deals are between $250,000 and a million. I’ve seen deals as close, you know, as high as $2 million per developer. This is crazy talk.

“And just to compare and contrast, EA bought Respawn about three or four years ago for $700 million with 400 developers. And those guys generate $700 million a year in revenue. Bungie does about $200 million in revenue. So I think Sony vastly overpaid. I think this was a statement that we’re not going to let Microsoft get ahead of us, so we’ll just buy something out of desperation. It’s not really a deal that makes a whole lot of sense to me. The others do.”

Interestingly enough, reports have indicated that Microsoft was initially in acquisition talks with Bungie, but a $2 billion deal allegedly ended up falling apart. Whether or not that resulted in an inflation of the studio’s price when Sony approached it would be the key question, of course.

Recently, it also emerged that of the $3.6 billion that Sony is paying for Bungie, $1.2 billion is being used for collective incentive bonuses for retention of the studio’s employees. Read more on that through here.