Activision threatening to pull support from Sony

[ragbag]

http://business.timesonline.co.uk/tol/busi...icle6531367.ece

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.

Activision is becoming more ballsy by the second, but this can't be good for either side. Hopefully Sony just tells them to let the door hit them on the way out.

[Maxx]

Yes because telling the company that produces Guitar Hero and Tony Hawk and countless other million seller games to get lost is just great business.

[ChrisSteeleAteMyHamster]

I can only work on the figures in Japan cos that's where I am but eh SP for a start is very well received here and sell solidly with racks of games available for it which will never been seen outside of Japan.

Okay, June sales so far in Japan:

DSi: 75,655

PSP: 55,974

Wii: 35,619

PS3: 20,182

360: 14,640

DS Lite: 11,072

PS2: 7,594

I'll do May as well....

[ChrisSteeleAteMyHamster]

May sales:

DSi: 238,037

PSP: 181,036

Wii: 95,102

PS3: 77,035

DS Lite: 33,399

360: 23,588

PS2: 23,568

April sales had the Sony consoles outselling the Nintendo consoles pretty heavily with over 62,000 PS3 sales in one week of April due to the Final Fantasy demo (compared to 38k DSi, 13k Wii and 9k 360).

So yeah basically Activision should actually bother releasing Guitar Hero in Japan cos it'd sell very well on the Sony consoles. Also Rock Band should be sold over here but isn't. Neither is SingStar...)

Edited June 20, 2009 by ChrisSteeleAteMyHamster

[King Ellis]

There is no way in hell that this is gonna happen. With the money boner that Activision has had in the past few years, they're not gonna cut their nose off to spite their face.

[Crybaby Bunting]

Yet if they cut their ties with Sony, they'd be spending £500m less on royalties etc to Sony and would only realistically see a 30-40% drop in profits

The royalties far outweigh the money they'd lose for pulling out of support for the console.

[Captain Kirk]

When they talk about the console not selling do they only look at the North American market?

[SeanDMan]

Er.

Edited June 20, 2009 by SeanDMan

[gunnar hendershow]

Notice how they don't ask for the price of games to drop along with it. Call the bluff Sony.