Kotick: Activision Focusing On Higher Margins, More Online

Activision Blizzard CEO Bobby Kotick said that revenue growth will be "much less significant" for his company in the next five or 10 years -- margin expansion is now the main focus, driven by a continued move to online models. "We're in a different business now than five or 10 years ago," Kotick said at Bank of America Merrill Lynch's Media, Communications & Entertainment Conference in Newport Beach, CA Wednesday, in commented listened in on by Gamasutra. "Being the world's largest online entertainment company, the focus of the company has always been on return on invested capital and improving profit. The revenue growth is much less significant to us," he added. While the company's focus is turning towards online business models and margin expansion, Kotick noted that the company's revenue growth has compounded about 15 percent over the last 20 years, and he expects continued solid revenue growth. Activision Blizzard expects to generate over $4 billion in revenue for the current calendar year. "We're better focused on figuring out how to expand the operating profit right now than chasing the revenue growth that's only going to contribute 20 percent operating margins. But the business over the next five to ten years will continue to grow," he explained. Asked how Activision plans on monetizing the millions of hours of online play that gamers have got from paying $60 per copy of games like Call of Duty, Kotick replied, "We don't start the product development process with a focus on monetization. What we've always tried to do is create the most compelling content and then figure out a variety of ways for our audiences to enjoy that content." "Some [possible methods are] free-to-play, some of it is subscription, some of it is virtual item sales, some of it is a packaged goods product, some of it is digital download on a one-time fee," he said. "But what we really try to do is figure out how to create experiences and monetization structures that are going to be oriented towards the broadest possible consumption." Kotick previously expressed interest in a Call of Duty MMO, and said that he would like to incorporate a subscription fee within future Call of Duty products. While Activision Blizzard already has impressive margins, the move to more online businesses will raise the company's average, Kotick expects. "Today, probably 65 percent of our operating profit comes from online or online-related sources," he said. "As we see more televisions that have microprocessors that have an internet connection where we can get direct to the consumer, you'll continue to see the operating margins expand." Kotick recently expressed support for PC-to-TV technology, backing PC makers like HP and Dell. Unlike consoles, PC is an open platform, and Activision would not have to pay video game royalties to console makers like Sony, Microsoft or Nintendo. "We have some businesses that are [at] 50 percent operating margins and some businesses that are [at] 15-20 percent operating margins," he said. "The bulk of our business five or 10 years from now are going to be those higher operating margin businesses with higher returns on capital."