Kotick: Retail pressures killed Vivendis games

Activision Blizzard CEO Bobby Kotick has talked for the first time about what led to the company dropping ex-Vivendi franchises such as Ghostbusters and 50 Cent: and blamed a less than tolerant” retail environment.

Speaking in the company’s earning call following the announcement of its Q3 fiscal results, Kotick was asked why he had de-emphasised” certain brands.

Kotick pointed to Activision’s rule that every game released has to have a chance of meeting a target for $100 million-plus in revenues – and have the potential for popular sequels.

H added that the firm had to be hard-nosed when it came to any games that Activision Blizzard knew could reach those targets – because of the competitive, less than accepting” retail environment.

He replied:

With respect to the franchises that don’t have the potential to be exploited every year across every platform with clear sequel potential that can meet our objectives of over time becoming $100 million plus franchises, that’s a strategy that has worked very well for us.

It’s something that we have been very disciplined about and so while there are lots of promises for a lot of these products that we had in the portfolio, I think generally our strategy has been to focus, especially given the increase in development expenditures on the products that have those attributes and characteristics that we know if we release today, we’ll be working on 10 years from now.

And that has been – you know, narrow and deep has been essential to our strategy of how you expand operating margins. The difficulty in establishing new franchises or unproven franchises as we have seen over the last 20 years, that is one of the great challenges of the business and I think that you have a less than accepting and tolerant retail environment.

It’s harder to attract development talent to projects that are more speculative in the long run, and so what we found is that if you have a [need] for innovation in existing franchises, that’s a recipe for margin expansion and you still need to have production of new original intellectual property, but you need to do it very, very selectively and if you look at the number of new original intellectual properties successfully launched in the market each year over the last five or ten years, it’s a small single-digit number.

We happen to have a number in development ourselves but the focus is I think at retail and generally for the consumer is to continue to be on the big narrow and deep high profile release strategy.”

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