Interplay Says French Deal Nearly Complete

Interplay Entertainment Corp., saying its financial troubles are firmly in the past, expects to finalize its $25-million investment deal this week with French software developer Titus Interactive.

The agreement, announced in May, would give Titus a 50.6% stake in Interplay. In exchange, the Irvine-based game maker would get a healthy influx of funds and the U.S. licensing rights to a new line of video games.

More important, says Interplay Chief Executive Brian Fargo, the company isn’t facing the same retailing trouble it was late last year.

“If the market senses any weakness, everyone jumps on you,” Fargo said. “We were swamped with retailers returning our products--not because the games weren’t selling, but because they thought we were going down. And when you get $30 million in returns [in fourth-quarter 1998 and first-quarter 1999], you find yourself trapped in a self-fulfilling prophecy.”

The flow of returns slowed radically, Fargo said, as Interplay began to streamline its product line. The company has also started to enjoy sales from several recent hits. This year, the online role-playing game “Baldur’s Gate” has sold more than 550,000 copies worldwide--generating about $24.8 million in revenue, according to Interplay and industry research firm PC Data. Analysts expect the ultra-violent “Kingpin: Life of Crime,” which hit store shelves last week, to do just as well.

Besides the obvious financial incentives, Interplay was receptive to dealing with Titus because “we could become a larger player without selling the whole company off to someone,” Fargo said.

As part of the deal, Titus Chairman Herve Caen will become Interplay president. Fargo, who founded Interplay, will remain chairman and chief executive.

In a rapidly consolidating industry, where very few titles make a profit, mergers between French and U.S. game firms are becoming more common. “For one thing, the French market values game companies far more favorably than the U.S. market,” said Simon Price, editor of Multimedia Wire.

Analysts say French publishers can save on marketing costs here. In Europe, publishers must customize each title to fit with a country’s native languages and local customs.

Infogrames Entertainment SA, another French video game publisher, bought privately held Accolade Inc. in April for $50 million--and spent $10 million more to cover outstanding debt and other expenses. Ubi Soft Entertainment, headquartered in Paris, announced in May that it had picked up the PC game assets of Interactive Magic Inc. for an undisclosed sum.

Paris-based Havas became one of the top PC game makers earlier this year when it paid $800 million cash--and agreed to future contingent payments of up to $200 million--for Cendant Corp.’s software unit. The software divisions include educational and entertainment software makers Sierra On-Line and Irvine-based Blizzard Entertainment.