Redstone's Midway Foray Goes Beyond Personal Interest

The entertainment companies already feel that they are leaving too much money on the table when they license their titles to video-game makers, noted the fund manager, who requested anonymity. A move by Viacom could spur its rivals to try to bring that revenue in-house, likely sending the video-game maker's stocks -- which have already posted strong gains year to date -- even higher.

"If [Redstone] buys Midway, Activision and Electronic Arts (ERTS Quote) will be in play," said the fund manager, who owns shares in Electronic Arts, Activision and Take-Two Interactive (TTWO Quote).

Of course, not everyone is convinced of Redstone's grand plan, much less its broader implications. Redstone himself has said that his Midway purchases are a "personal" matter, unrelated to Viacom. At least some analysts are willing to take his words at face value.

"Until he indicates that this is something other than strictly personal, you can speculate till the cows come home," said P.J. McNealy, an analyst who covers the video-game sector for American Technology Research, which does not do investment banking. (McNealy does not hold shares in the companies he covers.)

Notably, few entertainment companies have had much success by themselves in translating their box-office blockbusters into video-game hits, aside from closely held LucasArts, with its access to founder George Lucas' Star Wars library.

To date, most companies have chosen to sell off the rights to their movies and TV shows to video-game software companies. Thus, THQ produces games based on Disney (DIS Quote) and Viacom titles. Even Sony (SNE Quote) -- producer of the PlayStation consoles and a game maker in its own right -- has sold off the rights to its upcoming Spider-Man 2 movie to Activision.

But the practice of farming out titles may be starting to change. Time Warner's (TWX Quote) Warner Brothers division is attempting to build a game studio from the ground up. Vivendi Universal (V Quote) built its own game division and recently released a new title in conjunction with its upcoming Vin Diesel movie, The Chronicles of Riddick.