Warner tie-up gives SCi faces for its games

SCi Entertainment plans to bolster its mobile phone games division with titles based on famous cartoon characters such as Bugs Bunny, Batman and Tom & Jerry after Warner Brothers paid almost £45m for a large stake in the computer games developer.

Warner Brothers, part of the Time Warner media empire, has taken a 10.3 per cent stake in the British video games company. It is the latest step in SCi's rapid transformation into one of the world's larger video games publishers after its purchase of Eidos, the developer of Tomb Raider, in 2005.

Jane Cavanagh, the chief executive of SCi, said the move was a strategic partnership rather than a stepping stone to a full takeover but that Warner had proved it was actively interested in the video games market.

"We will have to see what happens but you can generally acknowledge that there will be a convergence between different types of media. Movies and games is an obvious partnership," she said.

Warner Brothers has licensed SCi to develop around 20 games based on its Batman, Looney Tunes and Hanna-Barbera cartoon franchises. SCi will also develop a game based on the teen television drama series The OC for Warner Brothers.

Ms Cavanagh said the company was keen to invest in developing more games for use on mobile phones and handheld consoles. The deal also widens the company's portfolio to include more games that are suitable for families and children. Ms Cavanagh said: "The demographic of game buyers has expanded outside the core market of 18 to 24-year- old gamers. We've seen families, girls and children buying more games."

The deal gives Warner a route into the lucrative market for video games based on high-profile movies and television shows. Recent video games based on the Scarface and Godfather films have proved popular with consumers. SCi has previously developed games based on The Great Escape, The Italian Job and the Futurama cartoon series.

Time Warner rival Vivendi Universal owns one of the world's largest video games developers whilst maintaining a 20 per cent stake in the movie and television company NBC Universal.

SCi aims to use the funds to beef up its development team, acquire smaller rivals and to establish studios in China and Canada. The deal also means SCi will gain access to Time Warner's vast retail distribution network in North America. Ms Cavanagh said that the company expects eventually to derive around half of its revenue from the region compared to 38 per cent when it last reported.

She said there were also opportunities in nascent markets like micro-transactions - where, for example, gamers pay small amounts to personalise characters, buying, say, a new outfit for Tomb Raider's Lara Croft.