INTERVIEW: Activision’s Peter Hepworth and Michael Sportouch

Activision now claims to have not one, but two of the biggest franchises in games, serving two very different audiences. MCV asked European VP Michael Sportouch and UK & Ireland MD Peter Hepworth if Call of Duty and Skylanders can keep growing in the face of a pressured retail market

Black Ops II is out in November. Given Call of Duty’s historical standing, you must have high expectations for its performance. Can it really match them?

Michael Sportouch: From a European perspective, our focus is to excite and engage the massive audience we have. Treyarch has pushed the boundaries, we think, with Black Ops II. The studio is taking real creative risks, which keeps the game fresh.

Peter Hepworth: From a UK point of view, we were working very closely with all of our retail partners since the start of the year planning for our Q4 because of the Call of Duty: Black Ops II launch. Amazon’s announced the real success it has had on pre-orders and we’re getting consistent feedback across retail.

MS: Our vision for the franchise is to continue to grow and grow our number of players around the world.

Why has there been such early pre-order demand?

MS: Year after year we’ve done better and better. From a marketing standpoint, we’ve been working a lot more closely in terms of the creation of the game, and the promotion. We are executing the reveal better and better each year. People and fans were probably not expecting that we would change setting but we’ve seen an overwhelmingly positive response. And that translates into pre-orders. We have the luxury of having 40 million active players of Call of Duty but that’s a big responsibility – we take all the feedback and use that to improve and refresh the experience.

What about the talk from a publisher set on taking away Call of Duty’s market share? Did they manage it? Does it matter to you?

PH: From a UK point of view, we focus on our own games, not the others – because we have competition everywhere. We’ve got competition this year, last year and I’m sure for gamers that is great. It’s always there. But I wouldn’t focus on that so much. From a growth point of view, the install base continues to grow every year. We’re confident that the way Activision does its business is through this relentless focus on its own games.

MS: Our focus is not looking at the competition but first and foremost, we look at ourselves and listen to our 40 million fans. We have tons of data through our multiplayer gameplay patterns – you learn more from that than anything else. We take what we learn and apply that to continue to improve the gameplay. And the fact that the competition is also trying to deliver good games and innovate is also positive for the industry overall. We don’t feel the competition is only coming from other war games, the competition could come from different forms of games and other forms of entertainment. Our strategic vision is how do we keep the players engaged and happy with the game so that they keep coming back. That’s our key benchmark.

Call of Duty hasn’t peaked, then?

MS: Even with Modern Warfare 3, we are continuing to see growth of the franchise – specifically in new markets and also some mature, established markets in Europe. And we want to keep pushing the franchise in new directions. We’ve signed a Call of Duty partnership in China with Tencent, where we will grow the franchise with a free-to-play, micro-transaction game. We certainly don’t think the growth is over and the growth could come from an actual retail game like Black Ops II.

Has the extended lifecycle for the current consoles helped that year-on-year growth of Call of Duty?

MS: We have benefitted from the extended console cycle but what we have really benefitted from, and I’m sorry to sound like a broken record, is this huge amount of feedback and data from the multiplayer backbone. But yes, that helps us refine the experience, to understand what people like and how they play.

PH: That’s an aspect of what’s been happening during this console title. The increase in connectivity on consoles worldwide has gone up while the consoles have been unchanged and that’s supported what we do in multiplayer.

Call of Duty Elite obviously dovetails with that emphasis on the multiplayer community.

MS: It has only been in existence since the end of last year, but we are already honoured to have 12 million registered users and 2.3 million subscribers. We’ve been actively listening to the Call of Duty Elite community and taking that feedback on board.

Let’s change tack to your other big franchise, Skylanders. Although it’s vastly different from the core gamer market and Call of Duty, the pressure is on to similarly succeed year-on-year. So how can you ensure Skylanders doesn’t become a fad?

MS: We’re going to engage with the kids and Skylanders fans in the same way that we engage with Call of Duty players. We are hopefully going to secure loyalty in the long term. To do that we will continue to deliver a great game and a great gameplay experience. Originally we said ‘Let’s do one game and let’s see if it works’. But there is a five to ten year plan and vision behind the franchise and the idea of bringing toys to life. This unique combination of toys and software is not going to be a fad. Obviously there is never any guarantee that the consumer will follow us through the long-term journey that we want to take them on, but at least we’ve had a fantastic start. What’s been amazing for us is to see the stickiness of the game.

We see a lot of kids come back and play again and again. My son is 10 years old and I got him Skylanders at Christmas and usually, with other games that I won’t mention, he will play them for a couple of weeks, and then move onto something else. But he, like so many players, keeps coming back, replaying the game with new characters, new adventure packs. That makes me very optimistic about the long term appeal and success of the franchise.

Skylanders certainly put paid to the idea that the market for kids’ games was dying off at retail.

MS: The studio took a big risk of going into a market lots of people were saying is not big enough, or shrinking. We invested a big budget in triple-A production values working with Hollywood talent. Some retailers, and credit to them, have really welcomed the opportunity and really supported us in a fantastic way. Some others, when Peter and the teams throughout Europe presented the opportunity, just looked at us and thought ‘You guys are just crazy’. And when we’d say ‘We want Skylanders to be the next billion dollar franchise for Activision’ they looked us at like we were insane. But what we ended up with – as the MCV Awards acknowledged – was probably one of the best, certainly during my tenure in the gaming industry, and most integrated campaigns from the creative vision of the studio to the execution at retail.

How did you win over sceptics?

PH: Well eventually retail really did embrace it – it didn’t take long after the UK sales and trade marketing team showed it to retailers at E3 2011. You’re now seeing dedicated Skylanders bays in major grocery stores. We know from working with these retailers and other companies that some of the biggest consumer product brands in the world can’t get the dedicated bays we now have.

Retailers are seeing the benefit firstly through sales, which have been outstanding. And then through repeat visits from children who want to complete their collection. And I’d say that’s getting more people looking at the games sections. We’re arguably bringing another generation to games. So retail is fully on board now. What we’re working on in particular now is to take it further, using Skylanders as a way into stores that arguably wouldn’t have stocked games in the past. Through that, Skylanders is on track to be our most widely distributed product ever in the UK.

MS: We’ve proven that there’s still room for innovation. We invested a fortune in creating the toys and not only just making plastic toys but quality toys – it was innovation everywhere, on the marketing side, on the PR, on the retail investment, on the toy production, and on the game. It probably sounds easy now but for me it was the most difficult project I’ve worked on in that sense – there has been so much hard work on this franchise from all the teams at Activision.

Activision obviously works closely with retail – but spending on the High Street is down overall. What can the trade do to correct it?

PH: I think the secret is all about innovation and rethinking and working together. We’re constantly working with our retailers to find ways where we can find growth. As I’ve already mentioned, we think we are bringing a new generation of consumers to games and giving new retail partners a chance to experience games. We work closely with retail, whether it’s market research or consumer segmentation, to keep changing and help them as the market changes. Another example there is pre-orders, and we’re looking to have pre-ordering for Skylanders so it can expand pre-ordering away from more traditional core games.

MS: And broadly, what we are trying to do is to deliver an experience around brands, and include the industry in that. So when we launched Modern Warfare 3, we did some spectacular execution at retail with the game, selling Elite, and also selling things like Turtle Beach’s headsets. You almost had a shop-in-a-shop. We want to give a full experience to the consumer. I don’t know if that’s the magical solution for retail, but just look at other businesses, such as fashion or the way Apple executes in its stores – it is clear that with very strong brands you succeed.