Kotick: Activision Aims To Become Most Profitable Entertainment Company

Activision’s Bobby Kotick is CEO of the most profitable video game publisher today, but that’s not enough -- he now wants to make Activision the most profitable entertainment company in the world, and that includes film and TV companies. In an analyst presentation this week during E3 in Los Angeles, Kotick said over the past 10 years, Activision’s mission was to break new ground in interactive entertainment and provide a return for shareholders. But he updated the company mission: “The change today is now to become the world’s most profitable entertainment company,” he said. One overarching way to reach that goal is through an “unwavering culture of financial discipline; a recognition that in order to continue to create the most compelling interactive entertainment, we have to provide a return -- a superior return -- to our shareholders," he said. Activision already lays claim to the best-selling game of 2009 in Infinity Ward-developed Call of Duty: Modern Warfare 2, and the most profitable MMORPG in Blizzard’s World of Warcraft, among other popular, commercially successful series. “If you continue to have the kind of rigorous commitment to excellence in our product development processes, and capitalize on these changing dynamics in the marketplace, what you’re likely to see five or 10 years from today is Activision becoming the most successful, profitable developer of entertainment,” said Kotick, who argued that the video game industry is where the most successful franchises are being born today -- not in TV or film. Kotick, an admitted non-gamer, is a savvy businessman who is always eying ways to expand Activision’s business. One way to expand the company’s margins is to find ways to become active in the lucrative used game market. Retailer GameStop generated $2.4 billion in revenues in used video game product sales (video games, hardware and accessories) last fiscal year. It's a market in which publishers see no revenue. “Today there’s a $3 billion used games market that we do not participate in, in any way,” Kotick said. “There’s roughly a $500 million opportunity for us in used games. It’s highly margin accretive.” One way that Kotick said Activision can participate more in the used games business is to find ways keep games from hitting used racks in the first place. The exec said this is achievable by creating “better, deeper games that provide persistent engagement that make people actually want to keep those games longer.” Downloadable content also is a way to keep consumers engaged for a longer period of time, he said, and Activision is highly active in providing post-release DLC for its games. A more direct way to participate in the used game market, Kotick said, is to “partner with our retailers to implement new technology solutions that allow us to continue to provide value to their customers through lower-priced products, but where we actually get to participate in the revenue stream.”