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sequels. This has led to criticism that Activision’s approach is too dependent on exploiting and reexploiting
franchises. But Mr Kotick vigorously denies that his company fails to innovate. “A small segment
of very vocal gamers say everything has to be new and different every year,” he says. “Actually, people
are happy with existing franchises, provided you innovate within them.” The trick, once again, is to strike
a balance: between the familiarity of a trusted brand and “innovative and inspiring” new features.
Mr Kotick’s greatest coup was the merger of Activision with the gaming arm of Vivendi, a French media
conglomerate, completed last year. Vivendi’s main gaming asset was Blizzard, the firm behind “World of
Warcraft”, a wildly popular online fantasy game played by 12m paying subscribers. Although the deal gave
Vivendi a 54% stake in the merged firm, Activision’s management team was kept in place to run it. Mr
Kotick had wanted to get his hands on “World of Warcraft” for some time, because its subscription-based
model provides regular income, in contrast to the sporadic, release-driven proceeds from games sold in
shops. More than half of Activision Blizzard’s operating profit now comes from subscriptions, he says:
“‘World of Warcraft’ is the most stable form of profitable revenue in the industry.”
Let’s get physical
As the industry moves towards a greater reliance on subscriptions and online gaming, Mr Kotick’s firm is
on the right side of the trend. “Guitar Hero”, meanwhile, was an early example of “physical gaming”, in
which players use special controllers to get closer to the on-screen action—another big industry trend,
encouraged by the success of Nintendo’s Wii console, with its motion-sensitive controls. Activision was
quick to recognise that the Wii would broaden the appeal of gaming, and it is now the biggest producer of
games for the Wii after Nintendo itself. “We are seeing new audiences emerge because of the physical
nature of the experience,” says Mr Kotick. His firm’s latest entries in the physical-gaming arena are “DJ
Hero”, a music game in which the player handles a turntable, rather than a guitar, and a new version of
“Tony Hawk” with a motion-sensitive skateboard control.
So what games does Mr Kotick like to play at home? These days, he admits, he only indulges in the odd
bout of “Guitar Hero” with his children. When he used to play more games, he says, he would find himself
trying to tweak his firm’s products to accord more closely to his own tastes. Such decisions are best left to
product managers, he insists, who combine their own judgment with feedback from focus groups. The
trick is knowing which bits of feedback to ignore. “That’s the delicate balance,” he says. Mr Kotick looks
rather incongruous as he proudly shows off his firm’s new skateboard controller, putting it down on the
floor and grinning as he wobbles to and fro. As he knows better than anyone, success in video-gaming is
all about balance.
Copyright © 2009 The Economist Newspaper and The Economist Group. All rights reserved.
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