Notes from Activision CEO presentation. Take-Two "irresponsible" over sports pricing.

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cja

Member
If you looked at what happened for example with NFL and ultimately what caused EA to go exclusive on the NFL is that you had a more irresponsible competitor selling $20 bills for $14 and you can only do that for so long but its very distruptive, we find entirely unnecessary, and I think that as you move towards more exclusive content you will be able to eliminate that as an issue.
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Bobby Kotick, CEO of Activision, in his just finished presentation at the Barney Citigroup Entertainment, Media & Telecommunications Conference. As usual he was willing to be more outspoken than most on the pricing, some would say greed, of the industry going into next-gen.

Miscellany of notes from presentation.

- 1,400 employees, almost 800 in development, $600m in cash
- EA when a 1bn in revenue company had a 9% operating margin. Activision 12%. EA at 2bn -- 18% 3bn -- 26%.
- Aimed for Ten, one million sellers, in the last year, beat that. In fact four, two million sellers.
- Sweden prior to own offices 8% op margin. Own office of four people now a 18% op margin now
- Game Boy Advance has a 18% operating margin.
- Home consoles have a 25% operating margin.
- Nintendo DS has a 25% operating margin.
- Plan to have PSP titles with $10 higher wholesale price than DS so potentially highest operating margin of any format.
- PS3 and Xbox 2 unit prices to wholesale at $10 more.
- PS3 and Xbox 2 have integrated online experience.
- 60-65m PS3 and XBox2s by 2009 if no market growth.
- Micro-transactions. $4.95 Tony Hawk level downloads theorised. Operating margin of 50%.
- 8-34 males spent 30 billion hours watching TV last year and 30 billion hours playing games. $8.5bn spent on TV ads. $20m for game ads.
- To create ad rate card with cookies to be put in products to show interaction in game that is sent to Activision and Nielson.
- Barriers to entry into the industry have never been higher

- Trailer for Neversoft's new game shown:
Epic sounding jingle
From the team that brought you the $1bn Tony Hawk game franchise comes an entirely new massive, colossal, electrifying, epic, earth-shattering, explosive, monumental, mindblowing, groundbreaking, gargantuan new game and its called.. <insert clips of cartoon characters saying be quiet and it wouldn't be prudent>
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Bobby Kotick -- "the team wouldn't let us disclose". "Early testing suggests that we have another terrific franchise that should generate in excess of $100m a year for many years to come."


Q&A
- Op profit is 50% from own IP, 50% from long-term brand franchises, i.e. Spiderman.
- Aim for Op profit 65% from own IP, 35% outside IP in the future.
- Raised price on Shrek, Shark Tale by $10 from similar (kids) titles, no decline in demand. $5 more on Doom III than any previous premium PC title, no decline in demand.
- Spiderman 2 DS, sold all inventory manufactured despite $10 higher wholesale price than Game Boy titles.
- Not seeing sensitivity for high price titles if high quality, exclusive product and recognisable brand, this was followed by the NFL comments at the top.
 
So basically the jist of this is that they're pissed that ESPN was 20 dollars and they didn't see their increased price titles decline. They're for above average MSRP prices, as Spiderman 2 NDS was 40...
 
I love vague teasers. Yay another franchise for Activision to drive into the the ground. Here's hoping for New Franchise Underground 3 in 6 years!
 
Wow. Pretty interesting conference to take a shot at Take Two and at the same time mention game prices are going to be jacked up 10 bucks on PSP/Xbox 2/PS3. I'm not spending 40-50 bucks on THUG2 PSP (I have been thinking 30) so I guess that goes out of the window as a purchase. But these conferences are aimed at shareholders, right? They won't complain about software prices going up. But they will when the number of units sold go significantly down.
 
- $5 more on Doom III than any previous premium PC title, no decline in demand.
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Execpt maybe from me. I refused to buy it just for the reason that they jacked the price up over the usual MSRP...and, though not Activision, why I bought HL2 directly from Steam to support the developer directly.

Quote:
From the team that brought you the $1bn Tony Hawk game franchise comes an entirely new massive, colossal, electrifying, epic, earth-shattering, explosive, monumental, mindblowing, groundbreaking, gargantuan new game and its called.. <insert clips of cartoon characters saying be quiet and it wouldn't be prudent>
Bobby Kotick -- "the team wouldn't let us disclose". "Early testing suggests that we have another terrific franchise that should generate in excess of $100m a year for many years to come."
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$100m a year!!!!!!!!!!???????????? Sweet. I'm pre-ordering at EB tomorrow!

...Ugh. I really don't want anything to do with the business side of gaming.
 
I wish someone would take a risk and start releasing all games at $20-$30. They'd have to stick with it of course, and that would be difficult for most companies, but if they could then I think they'd be surprised at how many more games we'd buy.

I'm sure that practically everyone here has stories of games they could afford to buy last year, even though they wanted them as there was so much quality around.
 
Games are getting more expensive to make, hence all these developers selling out. With that in mind, $20 games across the board wouldn't happen. But I would think that publishers could get away with $40.
 
- 8-34 males spent 30 billion hours watching TV last year and 30 billion hours playing games. $8.5bn spent on TV ads. $20m for game ads.

These are fascinating figures. Advertising in games is something that really just hasn't been approached properly in our business yet.
 
Irresponsible pricing? Yeah, fuck Sega/Take-Two for selling a competing game at a price the consumer would dig. OUTRAGEOUS!!!1

...assholes.
 
dskillzhtown said:
Games are getting more expensive to make, hence all these developers selling out. With that in mind, $20 games across the board wouldn't happen. But I would think that publishers could get away with $40.
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Well they're not nearly as expensive to make as a movie, yet they sell tickets for $10 or even less.

And that's my point, if you can reduce prices across the industry and maintain it long enough for the userbase to increase, you could have $25 games and still make great profits, because they'd sell so much more.
 
jetjevons said:
- 8-34 males spent 30 billion hours watching TV last year and 30 billion hours playing games. $8.5bn spent on TV ads. $20m for game ads.

These are fascinating figures. Advertising in games is something that really just hasn't been approached properly in our business yet.
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I agree they are fascinating, but still somewhat misleading.

TV: a huge group of men, all watching TV at say, an average of 10 hours per week; that's a lot of impressions

Games: a much smaller group than above, but with a higher hour average playing per week; fewer impressions, but arguably more valuable since it is interactive

IMHO (e.g. I don't have to data to support these claims, but it's almost common sense. When you're a gamer, you play for much longer hours than when you watch TV, on average)
 
That ad stuff is interesting, i look forward to HALO 3, in association with McGriddles.


With the pricing stuff these developers are just begging the pirates to intervene, and im sure they'll oblige.
 
Nothing they haven't said before. I always find it disturbing how they leave Xbox Live out of anything they mention. They say the new consoles will have online integrated, and on the new consoles they will be able to do microtransactions, although it's already possible now with Xbox Live...

Anyways, also very childish to call on Take-Two and Sega like that. 'Disrupting' the market my ass. Means he sees a possibility that he will make less profit because of it. Tarts. Really Activision is the EA wannabe in extreme.
 
Mrbob said:
Wow. Pretty interesting conference to take a shot at Take Two and at the same time mention game prices are going to be jacked up 10 bucks on PSP/Xbox 2/PS3. I'm not spending 40-50 bucks on THUG2 PSP (I have been thinking 30) so I guess that goes out of the window as a purchase. But these conferences are aimed at shareholders, right? They won't complain about software prices going up. But they will when the number of units sold go significantly down.
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That's the trouble they probably wont. But it's sad because they don't NEED the extra money, still they will take it. Greedy bastards in a position of power make this world a paradise for the rich and a hell hole for the poor.
 
Aside from all the upping in pricing, it's interesting that they never mention Nintendo outside of handhelds. The Rev is so screwed support wise.
 
It's not irresponsible considering exactly whom the ESPN brand was attempting to take on. It was ballsy, smart, and paying off. Because the industry doesn't have as many opportunities to recoup development costs as other entertainment venues, I understand the desire to keep margins high. That said, I think what's limiting the industry from really expanding further is, among other factors, prices in particular. Of course, I'm not CEO nor am I analyst; but I personally find the direction the industry is taking increasingly discouraging both as a consumer and as a former employee.
 
cja said:
- 8-34 males spent 30 billion hours watching TV last year and 30 billion hours playing games. $8.5bn spent on TV ads. $20m for game ads.
- To create ad rate card with cookies to be put in products to show interaction in game that is sent to Activision and Nielson.
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I JUST got done writing a story about this, like 30 minutes ago. Interviewed some nielson people and they mentioned how activision had really been thought-drivers in this field.
 
cja said:
$5 more on Doom III than any previous premium PC title, no decline in demand.
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Totally stupid. No one bought it because of Activision, they bought it because it's fucking DOOM, and much like Blizzard, id doesn't release 20 games every year, 10 of which are sequels.

I don't mind paying the extra $5-10 for something from id or Blizzard because I know they're going to be quality experiences (even if they are sequels, there are usually several years between renditions and -significant- improvements), instead of the yearly rehash and milking that Activision and EA throw at us.

Sales WILL go down if $60 becomes standard software price.
 
shoplifter said:
Totally stupid. No one bought it because of Activision, they bought it because it's fucking DOOM, and much like Blizzard, id doesn't release 20 games every year, 10 of which are sequels.
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It's not stupid at all. He's not fucking saying they bought it because of activision. He's saying that $50 isn't the glass ceiling. He's saying just as many people bought it at $55 as would have at $50, meaning the supply/demand curve is going to shift upwards.
 
It's great from a business point of view, but from a consumer point of view it sucks utter balls ; he's effectively saying :

Hey , our profit margins are going up on these handheld machine thingies... (DS/PSP) so we are making more due to lower dev/licensing costs , so we are making more money... so.....

Let's put a $10 premium on those titles as well!

And then to rag on another company for offering a cheap product...
and then mentioning $5 level downloads
("yes, well, don't give the consumers so many levels, let them pay for those later on!"
"But boss... if we are gonna do that , i guess we should sell the game at $39.99 rather than $49.99 right?"
"Noooooooo ! We're gonna do better than that, we are gonna sell the XB2 / PS3 version at $59.99!!! BWAHAHAHAH - fuck, i'm a genius!")

Activision : Gamers, we are right behind you! (with a 24 inch black rubber cock)
 
Well if you invested in activision (ATVI) a year ago by now you would have gotten your money back +50% by now, and probably much more in a couple of years. they're certainly growing fast and they know what they are doing.
 
^^^ business wise, absolutely. but it is good for the long-term health of the industry? I don't know the answer to that. At some point people are going to get sick (at least I hope so) of the endless sequels.

GDJustin said:
It's not stupid at all. He's not fucking saying they bought it because of activision. He's saying that $50 isn't the glass ceiling. He's saying just as many people bought it at $55 as would have at $50, meaning the supply/demand curve is going to shift upwards.
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I'm well aware he's not basing it on Activision's name, though I didn't mean to make it sound like that, upon re-reading my post it does. $50 isn't the glass ceiling for EXCEPTIONAL titles, most of what Activision publishes isn't in this category. People need to see something truly great or from one of those 'mythical' (valve, id, Blizzard) developers for the $50 price point to be broken.

Keep in mind that PC gamers are a different market segment, and typically those people spend big money on their rigs. They don't mind spending the $60 to show it off.
 
Mrbob said:
Wow. Pretty interesting conference to take a shot at Take Two and at the same time mention game prices are going to be jacked up 10 bucks on PSP/Xbox 2/PS3. I'm not spending 40-50 bucks on THUG2 PSP (I have been thinking 30) so I guess that goes out of the window as a purchase. But these conferences are aimed at shareholders, right? They won't complain about software prices going up. But they will when the number of units sold go significantly down.
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Yep, the conference is aimed at investors and the analysts who supposedly influence 'em so there was a continual hyping of growth potential and increased profitability.

Realistically Activision aren't going to put their line-up of product on the shelves at a higher price point than EA's range. For one-offs like Doom III okay but not for the mass of franchises. So, Kotick can talk about higher margins but he doesn't really have the final say on retail price-point, unlike EA and the first parties.

shoplifter said:
I'm well aware he's not basing it on Activision's name, though I didn't mean to do so. $50 isn't the glass ceiling for EXCEPTIONAL titles, most of what Activision publishes isn't in this category. People need to see something truly great or from one of those 'mythical' developers for the $50 price point to be broken.

Keep in mind that PC gamers are a different market segment, and typically those people spend big money on their rigs. They don't mind spending the $60 to show it off.
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400,000 PS2 owners bought the Madden collectors edition for $60. Almost as many people bought the "limited" edition of Halo 2 as the regular despite the $5 hike in price, Activision are offering Doom III on Xbox with extras for $60, Midway had a similar marketing drive for Mortal Kombat. These may be exceptional titles but four years into a console cycle its pretty exceptional that premium product is going up in price, not down. Won't the hyperboled xenon/PS3/Revolution launch titles be equally exceptional? :)
 
400,000 PS2 owners bought the Madden collectors edition for $60. Almost as many people bought the "limited" edition of Halo 2 as the regular despite the $5 hike in price, Activision are offering Doom III on Xbox with extras for $60, Midway had a similar marketing drive for Mortal Kombat.
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I have no problem with these, you get something (whether it's a 'super-cool' case, or MK1 - though it's debatable as to whether a standard price of $50 is
"gouging" for Madden when compared with their profit margins on it) for that extra $5-10. My beef is with -standard- pricing going to $60.

As an aside, I'd be curious to see what the development costs were for Madden this year, then compare it with the costs from previous years. Surely the first iteration of the engine will be more, but I'd like to see the change in profit margin over the years.

The rise in development costs is going to put a lot of small houses out of business unless they license engines from bigger houses, which is going to lead to even more sequels so they can re-use engines as much as possible to maximize profit margins. Meanwhile, these big houses are going to up their pricing while still re-using these engines gouging the consumer even more.
 
This is from the company that brought out Shark Tale and Shrek 2 at $50 when most kiddie games, even from EA, were offered at $20-$40. These guys don't care about consumers, they care about lining shareholders pockets. Opertaing magins and profits blah blah blah, no wonder they're upset that a major player was able to sell games and make a small profit at $20. They want to squeeze prices even higher than they're currently are...I used to have some respect for Activision, but I guess they went to the dark side...
 
You're all acting like this is news. I paid $80 for SF2 on SNES with no bonuses. The bonus was playing SF2.

I wouldn't spend this for all games and neither would you. Publishers will realize this quickly. With price drops necessary to make room for new games on the shelves, $60 becomes $50 and then $30 and so the cycle continues.

Don't worry too much!
 
I couldn't even tell you the last Activision game I bought. And if they're going to jack up prices too, I can't tell you the next one I'll buy either.
 
I think Nintendo is right, if this trend continues I expect there will be another market crash shortly.

Instead of paying $50 for a portable version of Spiderman 2, people will just start looking for other forms of entertainment.
 
Games will probably go up by $10, by then again most N64 games were $59.99 standard, and that wasn't *that* long ago.

People will bitch and moan for a while and then pay the price.

Portable games have to be under $40 though. If devs want to price those at $50, that's their perrogative, but I don't expect they'll sell too many of them.
 
shoplifter said:
I have no problem with these, you get something (whether it's a 'super-cool' case, or MK1 - though it's debatable as to whether a standard price of $50 is
"gouging" for Madden when compared with their profit margins on it) for that extra $5-10. My beef is with -standard- pricing going to $60.
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For me the extras you get for the extra $5-10 are no different to the freebies you'd have gotten with a pre-order previously. The companies are spending 50 cents and charging $5-10 more, that's good business. Perhaps the DVD style extras, retro game bundling and deluxe packaging will become standard with a standard price of $60 next-gen!
 
If prices go up, I'll just wait for price drops on more titles. Nowaday's price drops are happening fast if your not GTA or Halo. If games start coming out for $60, it probably means they'll hit $20 faster than they would if they started at $50. Yeah I'd still buy Halo 3 on day 1 for $60, but not much else. There are so many titles on the market nowadays, I'll have more than enough quality budget games to buy and play. I don't care if I'm a year late on Spiderman 2.

I don't like these grumblings of price hikes, but it's that bad.
 
Yet another third party that makes no mention of Revolution when talking of the next generation.

It really makes you wonder just what the hell is going on over at Nintendo's camp.
 
Dave Long said:
I couldn't even tell you the last Activision game I bought. And if they're going to jack up prices too, I can't tell you the next one I'll buy either.
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Hehehe, MTE... Actually I think the last Activision game I bought was Super Pitfall on NES :P What else have they done that was interesting lately? I think they released Alundra 2 and Guardian's Crusade on PSX... Guardian's Crusade looked cute.
 
Take-Two is only irresponsible because they undercut what Activision wants to do by $40-45 and proved that CHEAPER PRICES SELL GAMES.

I'll tell you this, though. It takes balls of solid steel to go up there and say that giving consumers what they want and lowering prices is bad for the industry.
 
The market will dictate prices. If consumers don't want to pay $60 for a game then that game will sit on the shelf. Sales figures will be affected and companies will notice this and react accordingly. Either way, the industry certainly won't crash.
 
I bet the likes of EA and Activision view companies like Take2 as rogue and undisciplined company ecause they can't get them to walk in lock steps with the rest of the video game companies. How dare they cut prices on games without consulting the powers that be??? Video game companies want to act like oil companies, set the prices the same and thus forcing customers to pay. If any company could have taken advantage of its success it would have been Take2/Rockstar. They could have offered a premium or special edition of GTA for $60 like Madden, Halo2, and Mortal Kombat, but in an interview Sam Houser said they dislike taking advantage of gamers.
 
... you had a more irresponsible competitor selling $20 bills for $14 and you can only do that for so long but its very distruptive
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I wish his indignation would also be aimed at the console makers selling their hardware at a loss. Of course, since that benifits his company I'm sure he hasn't a problem with that.

Hypocritical bastard.
 
I can kind of understand where they're coming from, really. If some slash-n-burn folks come through selling products where there is no profit whatsoever, then it forces everyone down to their level and nobody does very well. In the ESPN-Madden situation I don't think it would have mattered. Millions will buy Madden anyway, even with a budget priced competitor. In the hardware woldk, a no-profit model works because there are royalties on games, but if you are selling a game for less than it's worth then there's really no way you are going to make that money back.

One thing I don't understand -- why are they using DOOM 3 to prove that increased pricing is something that the market will bear? Yeah the game sucked, but it was still the most anticipated PC game in years. An extra five bucks is really nothing for something with such unstoppable hype and momentum. Try selling mediocre schlock or new IPs at that price and you will get burned. I think that they would see a downturn even with a $55 Tony Hawk.
 
If you looked at what happened for example with NFL and ultimately what caused EA to go exclusive on the NFL is that you had a more irresponsible competitor selling $20 bills for $14 and you can only do that for so long but its very distruptive, we find entirely unnecessary, and I think that as you move towards more exclusive content you will be able to eliminate that as an issue.
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Kinda like how it was irresponsible for a medicore game in True Crime to take pot shots at the GTA series? Granted Take Two weren't able to buy the exclusive free roaming blast-a-thon license for themselves in response, but still...
 
border said:
If some slash-n-burn folks come through selling products where there is no profit whatsoever, then it forces everyone down to their level and nobody does very well.
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*cough*Sony*cough*Microsoft*cough*
 
So for next gen game pricing...

Nintendo DS: $29.99-$39.99
PSP: $39.99-$49.99
Xenon: $49.99-$59.99
PlayStation 3: $49.99-$59.99

:/
 
Mama Smurf said:
I wish someone would take a risk and start releasing all games at $20-$30. They'd have to stick with it of course, and that would be difficult for most companies, but if they could then I think they'd be surprised at how many more games we'd buy.

I'm sure that practically everyone here has stories of games they could afford to buy last year, even though they wanted them as there was so much quality around.
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This is so true it's not even funny.

People would probably buy about five $30 games where they'd only buy one or two $50 ones. More people buying more games would easily offset the lower profit margin per copy, it would make more games big sellers (which leads to more profit on the GH rerelease), and the odd bomb would be much less devastating.
 
People would probably buy about five $30 games where they'd only buy one or two $50 ones.
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Unless all the games bought from the same publisher (unlikely) and the profit on 5 $30 games is greater than the profit on 2 $50 games, then it's still not a very good deal for the people making the games.

Reducing MSRP by 40% probably cuts into the profit margin much deeper (50-70%). The problem is that such a big reduction will probably not increase sales enough to offset such a huge hit to profits.

Western developers already don't give a shit about polish. If they're making pennies per game then it's only going to get worse. Try picking up any of the $20 budget titles out there (the ones that started at that price). I got World Championship Poker and it's pretty atrocious (in terms of polish/presentation), even though it should have been a relatively cheap game to make.
cybamerc said:
*cough*Sony*cough*Microsoft*cough*
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*cough*read entire paragraph*cough*
 
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