To the prissy critics of the video game business, Vivendi has in less than a decade traded in real sewage for digital garbage. The misshapen conglomerate that not so long ago traded as Compagnie Général des Eaux and operated the waterworks beneath Paris has emerged, after many false dawns and mistaken deals, as a giant in the computer games business. But the fact is that Vivendi’s transformational deal moves the company beyond its grubby past and into a brightly lit future.

Computer games are, for the moment, the fastest growing part of the entertainment business. Music is collapsing and film is not exhibiting much growth now that the DVD boom is over. Piracy is always a risk, but the vast file sizes – millions of lines of computer software mean that games are among the most complex manmade artifacts today – are as good a defence as any.

Vivendi’s deal creates a computer games major with little debt and with the best profit margins in the industry. It has the risk of being a hits driven business. But being world number one will help and, unlike music, the talent doesn’t argue back. Vivendi’s strength in PC games, that is World of Warcraft, allied to Activision’s heritage in console games, such as current hit Guitar Hero, helps to provide some protection from the perennial problems of hits turning to misses.

Given that Vivendi’s cash outlay is only between $1.7 billion and $2.4 billion, for which it gets anywhere between 52 per cent and 68 per cent of a company that hopes to generate $1.1 billion in operating profit in 2009, it looks like a good deal. But this still only represents one round for Vivendi. Buying Activision still leaves it far from winning the bigger game: it does not answer the question of what is the company for. Vivendi has five divisions, ranging from Moroccan telecoms, mobile and pay-television in France, Universal Music and now Activision Blizzard. There are some synergies between the businesses (there has been a 50 Cent computer game, as well as the odd top-selling album from the rap artist) but such serendipities do not justify the group structure.

Jean-Bernard Levy, the chief executive, may all too easily find that trying to increase the size of the phone company will use up capital that might be better applied to the entertainment business. One day a demerger will make sense. But after the agonising years of Jean-Marie Messier’s stewardship of the company, Mr Levy has, at last, given Vivendi second life.

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