Activisionâ??s deal to steal Rare â??collapsedâ??

The famous 2002 all-smiles photo of Microsoft and the newly-acquired Rare concealed turbulent months of counter-bids and secret meetings, as Nintendo and Activision looked to snatch the developer away from Xbox.

Ed fries, the man central to Microsoft’s record-breaking $375 million acquisition of Rare, revealed to Develop that Bobby Kotick’s Activision made a princely offer for the GoldenEye studio – one that Rare was eager to sign.

“There was a bit of a bidding war between us [Microsoft] and Activision – a war which they had won at first,” Fries says.

“They made the best initial offer, and Rare looked at both of us and, from the way I saw it, was more interested in partnering with Activision. I think it’s because they wanted to be third-party, independent of all platforms.”

Fries (pictured, centre, between Rare co-founders the Stamper brothers) resigned as vice president of game publishing at Microsoft in 2004. His inside story of the Rare deal comes as part of an eye-opening interview with Develop – set to be published tomorrow – where, for the first time, he provides his own account into how the Xbox system was born.

Yet, even with his exceptional insight, Fries was at loss to why the Rare-Activision deal broke down.

“Something happened between them and Activision. I don’t know what it was, but relatively far along in the deal things got cold, and we made a counter offer.

“Our bid was bigger than Activision’s, but Activision was still in control of the deal at the time. The prices were getting so high, by this point, that it didn’t look like Nintendo was willing to participate.

“So, very near the end, Activision backed out of the deal, for reasons I still don’t know, and Rare came to us.”

Microsoft had to dig deep into its reserves of cash to buy Rare at $375 million – a figure often remarked on for its exorbitance.

But Fries reveals, for the first time, why the offers were so inordinately pricey.

“Nintendo owned half of Rare, and had an option to buy the other half. By the time we started getting interested, that option had passed its deadline and effectively expired, though Nintendo had argued for a temporary extension, which they got.

“That extension began to expire again, and by that point us and Activision got involved in the conversation to acquire Rare. Still at this point, Nintendo had the priority option to buy the other half of Rare at the price we were offering.

“So, there’s a problem; if we drive a hard bargain and put in a low price for Rare, Nintendo would have the chance to buy at that low price and probably would. So, the price was high.”

Rare, which turned 25 this year, is currently developing a range of Kinect projects for Microsoft.