Activision, Inc. and Vivendi Games, parent company of Blizzard Entertainment, forged an $18.8 billion merger agreement that created Activision Blizzard, Inc. Under this agreement, the companies would continue to operate as separate entities that allowed each company to operate autonomously. Blizzard is home of three of the most successful franchises on the PC: World of Warcraft, which is the largest subscription-based online game with over 12 million subscribers worldwide, StarCraft, and Diablo. Blizzard also manages and maintains the Battle.net platform, which is an online multiplayer service that connects gamers from all of its franchises in an immersive online interface. In 2010, Blizzard contributed approximately 34% of Activision Blizzard’s total revenues. http://en.wikipedia.org/wiki/Activision_BlizzardActivision was formed in 1979 and was the first independent publisher and distributor of video games for consoles. Over time, Activision employed a merger and acquisition strategy and began purchasing several third party content developer studios with the intension to become the exclusive publisher for critically acclaimed and successful franchises. Currently, Activision Blizzard is home of arguably the most successful and profitable franchise in history: Call of Duty. Call of Duty: Black Ops shattered all release records and has the honor as the best selling video game of all time. Activision Blizzard also has a third business unit, Activision Blizzard Distribution that is responsible for the distribution and logistics of its content in Europe.http://en.wikipedia.org/wiki/ActivisionActivision Blizzard, Inc. 2010 Annual Report
While Activision Blizzard is a single entity in the eyes of analysts, Activision and Blizzard have very distinct strategies. Activision’s strategy focuses on investing the majority of its development budget creating sequels to its most popular in-house franchises, such as Call of Duty and recently defunct Guitar Hero. To date, there have been 7 and 12 separate title releases for the Call of Duty and Guitar Hero franchises respectively,. The remaining portion of the development budget focuses on licensing content from other companies (see network diagram) in hopes of developing and publishing “the next big” franchise, but usually generates only marginal revenue. On the other hand, Blizzard’s strategy is creating immersive online content in the form of Massive Multiplayer Online Games (MMOG) with titles such as World of Warcraft, StarCraft, and Diablo. This strategy facilitates more consistant revenue streams for Activision Blizzard through monthly subscription charges. Blizzard also manages Battle.net, which is an online gaming service platform that allows gamers to create profiles and friendlists, track progress of all Blizzard’s games, and a matchmaking service for online play.http://en.wikipedia.org/wiki/Guitar_herohttp://en.wikipedia.org/wiki/Call_of_dutyhttp://en.wikipedia.org/wiki/Battle.net
This slide describes the current core capability of Activision Blizzard, which is developing, publishing, and distributing video game content across all console platforms.
Activision Blizzard is currently at a crossroads that may define their future in the gaming sector. Currently, it controls two of the most popular content IP in the sector: Call of Duty and World of Warcraft. However, how long can Activision Blizzard rely on generating enormous profits off two key franchises before gamers’ tastes will change. Activision Blizzard learned a hard lesson with its Guitar Hero franchise that no longer exists. With an over-saturated market of first person shooters, how long can the Call of Duty franchise keep hardcore gamers entertained? The same can also be said about World of Warcraft now that it is about to enter its eighth year in operation this November. Activision Blizzard continues to operate under an old archaic and antiquated business model in the constant evolving gaming sector. This is why Activision Blizzard must think of how to align their core compatibility to remain competitive in the gaming sector when these trends become more mainstream and to remain the largest developer and publisher in the sector.
Activision Blizzard must learn from its mistakes of managing other popular franchises that have been mothballed, such as Guitar Hero and Tony Hawk Skateboarding. Call of Duty is the most popular franchise with consumers, but Activision only releases new disc based content every year. The multiplayer/online component of Call of Duty is by far the most popular part of the game. However, without innovating this franchise in new ways will make the Call of Duty franchise a prime candidate to become stale. Call of Duty makes up a large portion of Activision’s revenues so it is imperative to continue the success of this franchise for as long as possible or the future of the company will be at stake.For these reasons, Activision must prepare this franchise for the emerging trends in the gaming sector. My recommendation is for Activision to create a Call of Duty platform that will allow Activision to release new content in a shorter development cycle as well as allow gamers to access the platform in some capacity from all devices. A new element to the platform will allow gamers to build content for the game through multiplayer map and weapon creation that will ensure that gamers will be able to play content that they are attracted to. Activision Blizzard already has the current core capability to develop and publish content, but this capability must adapt to the changes in the gaming sector.
This collaboration platform will allow the Call of Duty franchise to keep going through the future and will constantly have fresh content that users can integrate into the game. Game developers from Activision Blizzard can continue adding new content themselves as they see fit. They can add expansion packs that add additional story lines to the main plot and charge consumers a fixed price. Activision Blizzard’s core capability align well to this new shift in strategy in order to adapt to the emerging trends in the gaming sector. For the most part the new capability needed for the platform is very similar to that of its current core capability, but there are some subtle differences. The company will not have to make drastic changes to their current core capability.
Several of the players in the gaming industry are already connected to each other or have some sort of partnership. As the Call of Duty platform expands and cloud capabilities become feasible, Activision should look towards Amazon and their Web Services division. Amazon has zero presence in the gaming industry and has the ability to meet the cloud capabilities that Activision will need to utilize.
Activision Blizzard Capabilities
Activision Blizzard, Inc: Core Capabilities andFocus Towards 2016Paul TaylorIS 714Profs Henderson and Venkatraman12/12/11
Overview• Largest developer and publisher of video game content with $4.4 billion of revenue in 2010• Home of popular franchises such as Guitar Hero, Call of Duty, World of WarCraft, Diablo, and StarCraft• Recent release of Call of Duty: Modern Warfare 3 on November 18th shattered the greatest launch release record set by it’s predecessor Call of Duty: Black Ops last fall
Strategy and Core Capability• Core capability: developing, publishing, and distributing video game content across multiple platforms and consoles• Current strategy: – Continue to release content (sequels) of their most successful franchises – Developing its Battle.net multiplayer platform for its Blizzard games (World of WarCraft, Diablo, StarCraft) – Small scale games for licensed based IP (movies, brands, etc.)
Core Capability• People: Game developers and designers that can translate ideas into code compatible with all consoles. Publishing and marketing teams distribute content through all sales channels – Metric: Sales volume• Technology: Software development kits (SDKs) and other technology related to video game content creation, testing, publishing, and distribution is essential – Metric: Contribution margin• Governance: Project managers oversee the development cycle for games trying to meet the sales goals and release date specifications set by the leadership team. Projects also must meet the expectation levels of gamers. – Metric: Development cycle time and cost• Process: Development cycle of bringing video game content from conception to market on various consoles and platforms – Metric: Cycle time and sales volume
Future of Activision Blizzard• Current Strategic Analysis – Developing new content IP is harder now than ever before – Costs have risen exponentially to develop games on current generation console hardware – Activision controls two of the most popular franchises in gaming, but recently released content for these franchises is becoming repetitive and stale – Development cycle for a new game is between 1 and 2 years• Gaming in 2016 – Activision must shift its strategy and focus on new trends in gaming – Bundled services across platforms is an emerging trend as developers are publishing content across a multitude of platforms – Cloud gaming will allow players to play games “on-demand” – Diminishing hardware layer as computation and processing power shifts toward the cloud – Moving away from brick and mortar distribution of gaming content
Call of Duty Platform• Activision must continue to monetize their most successful franchise in new and innovative ways or else it will be phased out like their Guitar Hero franchise• The new platform can be accessed from any device that can connect to the platform through an application• Brick and mortar content distribution will be phased out in favor of a cloud based model• Content and collaboration from Activision developers and consumers will shorten development life-cycle with fresh content – Gamers will have tools and “content objects” at their disposal to create multiplayer maps and “missions” – Gamers can upload their content to the platform and receive feedback from other gamers in the form of a “rating” algorithm system• This will bring the content creation to the Edge and Activision will gain a better understanding of what consumers want from Call of Duty
Call of Duty Platform Capability• People: Game developers and gamers will be able to collaborate together to bring fresh Call of Duty content. Anyone that purchased Call of Duty will have access to the platform – Metric: Number of players actively joining the platform community• Technology: Networking technology needs to be in place that can support the infusion and integration of new content as well as gamers accessing content instantly and continuous. This will shift to the cloud when it is feasible to do so. – Metric: Server downtime, users on platform at any given time• Governance: Moderators and content developers will ensure that content is appropriate and worthy to be accessed on the platform. A ratings algorithm will surface the content that is highly regarded among peers – Metric: Number of rejections vs. successful submissions of content by users• Process: “Content objects” can be mixed and matched by users that can create “content modules”. Once submitted, game developers can refine the modules and integrate the new content directly into the game. This supplements their current process capability – Metric: Number of new content submissions from users
Future Partnership Activision Blizzard, Inc. • Need for cloud computing and processing power by 2016 • Call of Duty Platform will require continuous processing power and increases storage capacity as it scales larger Amazon, Inc. • Amazon has little presence in the gaming sector and can suit Activision’s needs for cloud processing and storage • Amazon can serve as a key distributor for Call of Duty content