Bobby Kotick and a partner bought the once-struggling Activision for $440,000
in 1991, at a time when it was losing $30 million on $10 million in
revenues. Now the world's biggest independent computer games company, it has
a market value of $16 billion (£10 billion) and operating profits of $179
million in the first quarter on sales of $981 million.
Activision overtook Electronic Arts last July when it was in effect taken over
by Vivendi of France in a deal where Vivendi injected World of Warcraft into
the company for a 56 per cent stake. With such success, Mr Kotick, who runs
the business from Beverly Hills, can probably get away with saying anything,
which, soon enough, he does.
The target is Sony, the once-dominant hardware maker. “I'm getting concerned
about Sony; the PlayStation 3 is losing a bit of momentum and they don't
make it easy for me to support the platform. It's expensive to develop for
the console, and the Wii and the Xbox are just selling better. Games
generate a better return on invested capital on the Xbox than on the
PlayStation,” he says.
It is not a very subtle hint, although Mr Kotick says his company paid $500
million to Sony in royalties and other goods last year, which “probably
still worked out at 400 per cent of the profit they made”. Actually, Sony's
games division lost $597 million last year, and Mr Kotick seems to think it
may have to risk more losses if the £299.99 PlayStation 3 is to develop.
“They have to cut the price, because if they don't, the attach rates [the
number of games each console owner buys] are likely to slow. If we are being
realistic, we might have to stop supporting Sony.” Ask when and he says:
“When we look at 2010 and 2011, we might want to consider if we support the
console — and the PSP [portable] too.” Sounds like Sir Howard Stringer,
Sony's chief executive, is going to have to call Mr Kotick pretty fast.
Activision is pretty fortunate in that it has ridden the trend away from
traditional “shoot 'em up” titles to family-oriented, interactive games such
as Guitar Hero, which grossed more than $1 billion last year. “It was
as big as Titanic [the film] with better margins”.
DJ Hero, with its own turntable, will follow this year, although
Activision will have to endure its main competitor, Viacom's Rockband,
launching a Beatles-themed game.
But it is a trend that, unlike Nintendo, which practically reinvented gaming
with the Wii, Sony has been slow to react to. To illustrate the point, Mr
Kotick stands on a plastic skateboard that turns out to be the controller
for Tony Hawk: Ride — the company's attempt to reignite the well-worn
franchise. Using motion and infra-red sensors, the board detects movements
in both the player's body and feet, and speed is generated by swiping a foot
on the floor next to the board. It is hoped the title will be a blockbuster
later this year.
“Such a physical interface could be ideal for Sony,” he says, building up the
sales pitch, before he warns that he will “generate better returns on
invested capital” on the Wii and the Microsoft console. If he can persuade
Sony to bend to his will, then it will be a sign of how far the power in the
computer games industry has changed.
