Warner Bros Entertainment recently made an agreement with SCi Entertainment Group Plc which comprises:

• £44.5m purchase of 10.3 per cent of SCi equity by Warner Bros

• multiple licensing agreements which enable Eidos (SCi's publishing label) to make games based on Warner Bros IP including Batman, Looney Tunes, Hanna-Barbera characters, Loonatics Unleashed, Legion of Super Heroes and The OC. These agreements give Eidos the right to develop, publish and distribute globally up to twenty games based on Warner Bros IP across all major console hardware platforms: Sony PS3, PS2, PSP, Microsoft Xbox 360, Nintendo Wii, DS, Gamecube, GBA and PC

• Warner Bros Home Entertainment Group will provide retail distribution and media buying services to Eidos in the US.

In addition Warner Bros Entertainment also struck a distribution agreement with the UK-based publisher Codemasters which will see Warner Bros handling distribution and sales of Codemaster's games in the US. The Agreement runs from April 2007 to May 2008 and will involve the games DIRT: Colin McRae Off-Road, Overlord, Clive Barker's Jericho, Turning Point: Fall of Liberty, amongst other unconfirmed titles.

Both agreements enable Warner Bros to leverage its extensive US distribution operations which are significant on account of its home video business. In addition the SCi deal is indicative of Warner Bros continuing efforts to fully exploit its valuable IP by licensing it to games makers. However this is not an exclusive or exhaustive agreement. This deal runs concurrently with others which enable software publishers to make games based on Warner IP (eg, Electronic Arts).

For the counterparts both Sci and Codemasters gain significant distribution muscle in the US where, with the right games, they have considerable potential for growth given most of their revenues are generated in other territories. SCi also gains £44.5 million cash which it will use to expand its internal development resource (by either growth or acquisition) as well as funding games development of the newly acquired licenses.

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