Activision was out in force at E3. How does your line-up compare to the other publishers that attended?
This is arguably our best competitive position that we’ve ever had. Our titles are strong, and competitive titles are a little sparser than in the past. The expansion of our Guitar Hero franchise to DJ Hero, Band Hero and Guitar Hero 5 is the strongest line-up we have had for that franchise – and then you couple that with Modern Warfare 2, which we think will be the biggest Call of Duty title ever.
Then take into account the innovative new Tony Hawk game Ride, and our entry into the racing category with Blur, and in total we’re in great shape.
Guitar Hero is at three different iterations now – can it sustain that growth across multiple brands?
I don't think there is any doubt. If you look at what consumers want and our strategy of driving satisfaction against the 12m households that have already purchased Guitar Hero, then compare that with the number of households that haven’t purchased Guitar Hero, but enjoy music… Well, in North America and Europe there are about 300m households. So with 15m we’ve only scratched the surface.
Products like Guitar Hero Van Halen, Guitar Hero Metallica and Guitar Hero 5 are going to really satisfy that current 15m, while DJ Hero and Band Hero are drivers of audience expansion. That way you get into new genres; Band Hero is our first E-rated game in the franchise and is all pop music, whereas DJ Hero is our first step into hip hop and rap.
DJ Hero should also do particularly well in Europe where that is a strong genre of music – it is growing in North America, but is strongest amongst Europeans so gives us a major opportunity to expand that userbase.
The Rock Band brand was prominent at E3 with its The Beatles and LEGO spin-offs. How do you view the competition?
Well, Rock Band is the most similar title on the market, but Guitar Hero outsells it by four to one in the US; in Europe that number is ten to one. We have a large base of consumers who are excited about what we are offering, so we are focused on what we provide them and how we satisfy our consumers.
Why did you apply the games peripheral model to Tony Hawk?
Tony Hawk was very successful for nine years. It generated over a billion dollars in sales. But we had let the game become less innovative than we needed and we slowly lost our mass audience. So we took a year off to to bring innovation to the franchise. Tony Hawk is still a very relevant sportsman and franchise. He ranks right up there with other sports celebrities. And a skateboarding game is still very relevant with consumers.
What we came up with was Ride, and the core premise of that game is that anyone can skate like Tony Hawk skates. It’s the same analogy as Guitar Hero, where you can feel like you are a rock legend, even if you can’t play a single note; now with Ride you can skate the way a skating legend like Tony Hawk skates, but you won’t break your head open. It’s proving to be lots of fun, and the peripheral board, with its sensors, is very responsive. It’s a thrill.
With these peripheral games is there not an issue for consumers that this means the price of games is rising?
And retailers need to find space to store them. Do all these games not create logistical concerns?
We’re not in the peripheral business for the sake of it – we’re only focusing on peripherals when they define a magical experience that comes about when you marry hardware and software. DJ Hero, Guitar Hero and Ride just aren’t possible without the peripherals. Trade customers are very receptive and consumers are excited when we create that magic.
So when it is a holistic experience there is genuine enthusiasm – that’s the answer. We do it when it’s right, not because peripherals are popular.
On the flipside it means that consumers have to go to stores to buy peripherals; it validates retail.
Well, it’s hard to download a guitar! [laughs] I think retailers recognise the unique value those items have. I also think that retailers know – when it comes to the supposed threat of digital distribution – that in-store experience, the value of displaying products and seasonal shopping and gifts. Retailers are going to be around for a long time in this business. There’s no question.
And peripherals are key to each format now – as the Wii, Sony Motion Sensor and Natal show. What’s your view on the newer controllers?
I think that all of these new innovations – if they are successful in engaging consumers and bringing more consumers into gaming – that’s good for all of us. And we’ll watch all of these new peripherals controllers closely and if we can make sense out of how they work and add value to our games, we will support them.
If they add more engagement into gaming that’s a good thing for everyone.
Blur is Activision’s first serious move into racing. What’s your strategy?
We got into that category because we recognised there was a big opportunity. The consumer just wasn’t being served. With Blur we’re focusing on realistic cars and realistic locations, with fun and fantastical racing where there is a battle and power-ups to be more competitive.
That’s a very distinctive position, and one that all of our research suggests is new, different and compelling.
Why does Activision otherwise have a restrained approach to new IP?
New IP is risky – successes are great but most of them fail. So we take a very focused and deliberate approach to new IP. It’s always part of our portfolio but it’s a balanced part of it. We are very selective but we go through a checklist: is it global, is it franchisable, is it unique and compelling in this space, does it have the right developer? When we go through this process we greatly increase our chances – versus other publishers who are usually just throwing spaghetti against the wall.
It’s hard to refute your assertion that Modern Warfare 2 will be huge. What do you do to stop that brand becoming stale?
It’s simple: we make sure we deliver on breakthrough innovation. If you look at what Modern Warfare and its successor World at War did, they innovated and greatly stepped forward each time – Modern Warfare 2 will be no different, it’s incredibly innovative. But we have to be vigilant on that – do it well and you ensure the franchise has a long life.
What did you think of the announcement of the new PSP? Can the new design restimulate publishing on that format?
Our approach is that we want to deliver our games every way and any way in which the consumer wants them. So we generally publish on all viable platforms. If the new PSP delivers a big userbase we will be supporting it.
All platforms have to continue to prove themselves. If Sony can deliver a strong userbase and a good following we will be there with games.
You previously described your European revenues as ‘under-developed’. How will that change?
We’ve been steadily growing our European business by adding more marketing and selling capability and establishing top to top relationships with key customers.
We’ve been expanding with better content that is more appealing to the European population – Guitar Hero is a great example where, in the March quarter, sales doubled compared to last year. And that was because we have done a great job of providing better music content that is more appealing to local consumers. That will continue with Guitar Hero Metallica and DJ Hero.
It’s all about getting the right capability in place – which we now have – and now it’s about delivering the content, which we continue to be focused on.
The game market is roughly evenly split between Europe and North America and that ought to be what our business looks like. But at the moment, Europe is about a third of our business. That’s why we are enthusiastic about the continued prospects: because we have seen great growth but we’re still under-developed.