Activision - How They Fared in 2005

[fitbabits]

In the second of Next Generation (http://www.next-gen.biz)'s look at how the big publishers fared in 2005, they analyze Activision's major activities over the past twelve months (http://www.next-gen.biz/index.php?option=com_content&task=view&id=1818&Itemid=2).

Making Money

Activision's year ending March brought in record revenues of $1.4 billion, 50% higher than the previous year. Profits came in at $138 million. Bobby Kotick said, "We delivered the highest net revenues, operating margin and earnings in the company's history." It's doubtful that achievement will be repeated this March.

Getting Mad About Pricing

Everyone was thinking it, but it was Activision that first started talking about raising game prices. Bobby Kotick branded Take-Two’s budget-priced ESPN sports titles as “irresponsible” and “disruptive” and predicted way back in January that game prices for the next generation would be up $10. He added, "We haven't raised prices as an industry in 20 years. Look at the movie business as an analogy. You're not getting any more hours of entertainment -- it's the same two hours of a motion picture -- and yet you're spending twice as much as you did 10 years ago."
For the record - Call of Duty 2 on Xbox 360 is awesome!

[Wonka]

For the record - Call of Duty 2 on Xbox 360 is awesome!

Yes, which makes it all the more tragic that the COD2 multiplayer is completely fucking ruined for me.

PLEASE correct me if I am wrong, but there is no identifiable way in Call of Duty 2 that I have found to create a private game, and then invite friends. For me, if I cannot play with just my friends and have to play with random asshats, then this completely defeats the point of LIVE! for that title. I know that they implemented a new ranking system, to keep out the 13 year olds. Whoop-dee-doo, that's great. But that still doesn't mean that I don't want the option for a private game. IMO, this is one of the WORST things that has gone wrong with the launch of this console.

When you see how great of a single player game this is on the 360, it makes you want to cry that the multiplayer is completely hamstrung like this. It's bad enough that the game only supports 8 players. But in addtition, you can't guarantee that you will be able to play with your friends! Someone needs to be slapped about this, but a lot of reviews don't even mention the multiplayer aspects of the game. Are people just completely blinded by their nostalgia for this series?

Yes I am bitter about this.

[MosBen]

Yeah, we pay more for movies than we did in the past and it's still the same two hours (though I think there's an argument to be made that the recent surge of longer movies might be related in some tangential way), but for game we're paying the same price for substantially shorter games. Now, I'm not one of those people that complains about the fact that we don't get many 100+ hour RPGs anymore, but even most FPS's back in the day were pretty damn long compared to some of the six hour games we get today.

Eventually game prices have to go up, that's just a fact, but there are plenty of reasons why they haven't gone up, mostly due to the fact that the gaming audience has had continued growth for the last twenty years. A ten dollar increase in new games isn't going to make me bitch to much, but it's just sort of annoying to see an industry guy act like there was no reason for the stagnant pricing other than the consumers just getting an increadible deal.

[torrefaction]

Yes, which makes it all the more tragic that the COD2 multiplayer is completely fucking ruined for me.


No shit! I was frustrated as hell. I found some players I enjoyed playing with (And that weren't lagged to hell and back), but god forbid they implement a party system. Or a private room. Or uh...fucking anything that doesn't start right away, and never give you enough time to invite.

Yes, I'm bitter about this as well.

[bean19]

I think the $60 price point will lower sales in the long run. Due to high costs, I've moved from being a game buyer to a game renter. I'll still buy games that are great, or that are among my like top 12 favorite games/year, but for the most part, I play games by renting them through Gamefly, or by purchasing them after they are being resold for $20 or less.

We aren't really seeing the results of the price raise yet. The X360 is next gen and people buy games that are "too expensive" in spite of themselves due to wanting to have options on their expensive new systems. Plus, they aren't reaching the mass market yet. At some point, they'll have to lower system prices so that people who make a great deal less money can afford to buy units too, and they will probably be even less likely than me to pick up games at a $60 price point.

Movies can go up in price because they were relatively inexpensive and have remained relatively inexpensive. Video games started out expensive and have gone down in price as technology has advanced. . . at least until this somewhat artificial bump in price.

I think analysts will find that for many software products, budget prices, or at least falling back down to budget prices on old software (like the various "Greatest Hits" deals seen with this generation) will earn them more sells, and the price/unit is very small.

Let's say a publisher has sold 500,000 units at $50. The retailer gets $5/game, manufacturing & shipping eat up another $5. Okay, that's $40/copy that the publisher gets on each unit minus the costs of funding the developer to make the game and marketing costs.

Okay, scary estimates of the cost of making games for the next generation say they will go up from the current $3 to 6 million dollars/game to $10 to 20 million/game. Let's say this game is in the middle of the scary unproven prophecy and costs $15 million to make and market (still a budget FAR FAR below that of a movie). Now because the pricepoint is $50 instead of $60, and because our hypothetical game is good but not something outstanding it sells 500,000 copies (basically what you might expect a new videogame title to sell once released worldwide if it is not the cat's pajamas, but is nontheless a solid title. . . like it got a 7.5 to an 8.5 from most raters). That means that after the retailer's cut and the cost of making the discs and sending them to distributors, our company has made 20 million (5 million profit). If we raised the cost by $10 and this scared away 20% of our customers, we would make 20 million (5 million profit). Either way, they are making money on a moderately successful game, but not a lot of money. The point of this is to sort of fudge statistics so that people can understand without getting lost in the math. . . basically, at the volume of sales for a moderatley saling game, the increased price point cannot scare away more than 20% of the customer base or there will be a net loss.

However, once a publisher has a game's costs paid, everything after that point is profit. So when a good game has been out for a year or so, and sales decline so much that the title is not offered on shelves anymore except in used copies, publishers can make a lot more profit from selling the software as budget software. For every $20 game, the publisher is making at least $10/copy. Sell a million more at this point and the devloper makes an extra $10 million.

Seems like a bad investment all around though doesn't it. Well, not really. This is an average game. One that is good and sales well, but isn't amazing. The "amazing" titles will sell like hotcakes and the extra $10 won't scare off nearly as many potential customers. Those are the ones that give tens of millions in profit.

However, the most profitable game ever follows the MMO model. WoW makes literally hundreds of millions of dollars each year, and the costs of making an MMO are similar to the scary projected costs of making top-notch console games. That is why it is so surprising to me that we don't see "big name" companies jumping into the MMO market looking to pick up some of the new market WoW created.

[Ernst_Jager]

Private games lead to exploiting the ranking system.

[Metal Jesus]

I was surprised at how much I enjoyed Gun and Call of Duty 2. Even the Ultimate Spider-Man game was decent and better than most action games.

[Borys]

For the record THAW is really kick-ass. I haven't enjoyed a TH game this much since THPS3. Both Undergrounds are trash, THAW is good. Too bad I picked up the worst possible version - the GCN one.

CoD2 suffers from consolities and is a FAR cry from CoD1 and even UO. It pains me to say that because CoD1 was brilliant in almost every way.

[fitbabits]

CoD2 suffers from consolities and is a FAR cry from CoD1 and even UO. It pains me to say that because CoD1 was brilliant in almost every way.
With all due respect, I must disagree. CoD2 is leaps and bounds better than CoD1 - and the better version is on Xbox 360.

[Borys]

To each his own I guess.

I wouldn't trust your opinion as much as you won't trust mine :)

But THAW is really fun, pick it up for your 360, fit. The Classic Mode is awesome, worth the $50 pricetag alone.

[motorhappy]

The movie analogy doesn't really help his point. Ticket sales for movies are the worst they've been in 20 years, and most analysts blame it on the constant increases in ticket prices. Many people can't afford a family trip to the movies anymore. $9-12 per ticket plus snacks. If games increase in price the industry is still going to be unable to break into the currently untapped demographics.

[Maskatron]

... and the better version is on Xbox 360.


Does that include MP as well? Because I've been hearing that's far from the case...

[Magnanimous Gnome]

His analogy about prices is indeed stupid, as someone else pointed out. Movie sales are WAY, WAY lower than they used to be - factor in inflation and Gone with the Wind is by far the highest grossing movie of all time.

I'm definitely not paying $60 for a title, and I'm sure many others feel the same way. I can't even spend $50 on something unless I absolutely can't wait for a price drop. Zelda: TP will be the first full priced game I've bought in at least two years.

[The Iron Weasel]

I actually thought CoD2 on PC felt like a PC game, and when I tried it on 360 it didn't feel right.

[Evil_SPanKY]

Yeah, I have to say that the PC version of CoD2 is much better overall IMO. 360's felt cludgy to me, compared to the PC version.

Hell, I only have the PC version, as I got it free (well, techinacally 2 copies for free) when I bought my SLI 7800 GT's from Evga. But, it is the better version, both SP and MP.