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.
In an interview with the London Times, Activision / Blizzard CEO Bobby Kotick has some strong advice for Sony and threatened to pull its support for the console. “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. “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,” Kotick said. “If we are being realistic, we might have to stop supporting Sony.” As for the timing on that, he adds: “When we look at 2010 and 2011, we might want to consider if we support the console–and the PSP (portable) too.”
For its part, Sony, which is mired in third place behind Nintendo and Microsoft in the next-gen game-console wars, keeps saying it won’t be pressured into trimming the price of the PS3.
Sony Dismisses Activision
Sony Corp. CEO Sir Howard Stringer responded directly–and dismissively–to Kotick’s comments. “He likes to make a lot of noise,” the Welsh-born executive told Reuters at a tech conference in Sun Valley, Idaho, which Kotick is also attending. “He’s putting pressure on me, and I’m putting pressure on him. That’s the nature of business. … [But] I lose money on every PlayStation I make–how’s that for logic?”
Speaking of the PS3, Sony Computer Entertainment America CEO Jack Tretton deflected questions that a widely rumored reduction in the console’s cost could come as early as next month. “We feel that we’re sacrificing the short term to pay dividends in the long term,” he told Silicon Valley magazine Fast Company. “People are having short-term thinking–the platform is not even three years old…. It costs a lot to invest in rolling out new technology, and if the consumer walks away before the life cycle is over–you can talk about the install base of hardware, but how many of those machines are still active, how many people are still playing them?”
“In 2008, we had a 38 percent increase in sales and we hit our 10-million-units-worldwide goal for PS3 sales,” he explained. “We had $6.4 billion in revenue in US alone on the PlayStation brand, and a 116 percent increase in software sales. At the worst possible time, if you’re hitting numbers and delivering success… my hope is that as our production efficiencies improve and more great games come to market, the horizon has got to be better for 2009 and 2010.”
Bioware Wants Attention
Now, Bioware co-founder Greg Zeschuk, has talked about the statement war, “I don’t think it’s really fair to poke fun at Sony,” Zeschuk says. “Certainly the Wii’s been a massive success and Sony’s probably not going as fast as they thought it would be but I think that they’re starting to make the right moves and the software’s coming along. I think it’s silly to be saying you’re not going to support Sony. The brand itself is still huge and there are millions of users out there.” Keep in mind bioware scared Sony witless when they threatened to not bring their title Mass Effect to the PS3. Also bioware is not in the number #1 spot for 3rd party developers as the giant Activision is.
My Take on the Situation
First of all Activision is right. Sony has priced probably 50% of the gaming market right out. The Nintendo Wii can be found for $126. The XBOX 360 can be found for $183. There is no way that at a price point of $400.00 can a PS3 even compete. For all those nay sayers, saying Activision is goofy or some other stupidity, follow the money.
Secondly developing for the platform is expensive. Again, follow the money, if the platform is far more expensive to develop for and it’s in 3rd place behind two consoles that are A) selling more and B) cheaper to develop for… It’s a no brainer.
Lastly the “too big to fail”, doesn’t apply in real business, unlike banks. People are saying that Activision would be giving up a huge platform if they didn’t support PS3 any longer. “More bang for your buck”! Ever heard of that? If they drop PS3 and target exclusively XBOX and Wii, and they get a much higher return for every development dollar? Who cares how large PS3 is, they are going to go where the money is.
I think Sony introd the market at a whopping $799.99 price point simply because their name is Playstation and they thought people would buy it regardless of the price. It is ridiculous. You could buy a car for that much, and get yourself a job delivering pizza. And, it would make you money, unlike the PS3.
I vote Activision follow through with the threat. Who’s to stop them? For all this sabre rattling, no one is taking them seriously.