The Show Goes On

Published as part of our sister-site GamesIndustry.biz's widely-read weekly newsletter, the GamesIndustry.biz Editorial, is a weekly dissection of an issue weighing on the minds of the people at the top of the games business. It appears on Eurogamer after it goes out to GI.biz newsletter subscribers.

When an event is described as sending "shockwaves" through the industry, it's commonly a piece of hyperbole - but it's truly no exaggeration to suggest that Activision's extraordinarily aggressive pruning of its product line-up has done precisely that this week. The discontinuation of the Guitar Hero and True Crime franchises is a remarkable step, while the UK development market - still reeling from Activision's decision to close Bizarre Creations last month - would feel the downsizing of DJ Hero developer FreeStyleGames particularly acutely.

All of this is taking place against a backdrop of what looks like a wholescale retreat from risk on Activision's part. The company and its outspoken CEO, Robert Kotick, have made many bombastic pronouncements in the past about only being interested in the biggest-selling, most profitable games. This substantial retrenchment of the entire business is a dramatic placing of Activision's money where its mouth used to be.

Once the dust settles, then, what's left? Well, there's Call of Duty - and there's Blizzard. Somewhere down the line, there's the eventual fruits of a publishing deal with Bungie to look forward to... And that's about it. That's now the entire headline line-up of the world's biggest third party publisher.

It's not hard to see what Activision is trying to accomplish in the short term. The company's executives are focused firmly on one goal - earnings per share, the all-important profit margin which, if boosted sufficiently, should send the firm's shares skyrocketing. Putting aside concerns or questions about creativity or artistry - because such things are irrelevant to executives whose primary responsibility is to shareholders - the company's decision making process is actually quite defensible. Up to a point.

That point is reached when you start thinking about the long-term forecast for a company which has, in the past few years, killed more headline franchises than it has created. Tony Hawk and Guitar Hero have been milked dry and unceremoniously cast to one side. That's not wicked, or evil - let's not fall into the trap of anthropomorphising game franchises, here - but unless you have something to replace them with, it's a somewhat short-sighted business strategy.

Yet Activision lacks a replacement for either of those franchises - not least because that replacement should probably have come from the ranks of games like True Crime, an undeniably flawed product which arguably held the seeds of a decent franchise, if given sufficient time and care. That's a debatable point, of course - what's not really debatable is that Activision has demonstrated that it has no appetite for the tough slog of franchise-building. It wants instant gratification from its IP, a hit with the first game followed by a tight development schedule allowing for annual updates until the cash-cow is exhausted.

From a profitability point of view, that's perfectly reasonable. There's a school of thought in business management which says that if something isn't working out, you cut it off entirely before inertia or sentiment allows good money to get thrown after bad. It's a school of thought that probably works very well in certain markets. In a business that's all about creativity, image and consumer sentiment, it may be a flawed strategy.

Still, Activision has Call of Duty, even if the very public spat between Infinity Ward's founders and their publisher - followed by their dramatic return to Electronic Arts to set up shop and work on a new franchise - has implied worrying cracks in the blockbuster IP's foundations. The most recent instalment wasn't developed by Infinity Ward, though, and still did the kind of numbers that leave almost every other publisher in the industry green with envy. There's plenty of life in Call of Duty yet - although for how many more years the fickle public (who, let's not forget, couldn't get enough of Guitar Hero a few scant years ago) will continue to snap it up en masse every Christmas is impossible to predict.

Activision also has Blizzard - although it's always tempting to speculate about just how true that statement actually is. I have no direct insight into the personal relationships between executives at Activision and executives at Blizzard, and given the highly private nature of the latter company, I doubt many people outside its boardroom have any concept of just how Mike Morhaime and his fellow Blizzard luminaries actually regard Kotick and the rest of the Activision team. For all we know, the relationship could be entirely sunny - until we see evidence to the contrary, it's important to assume that that's the case.

Yet Blizzard has a long and cherished reputation for independence from its parent companies, and it's a goose that has laid so many golden eggs over the years that nobody seems foolish enough to try cutting it open and examining the workings. It's easy to imagine angry faces at Activision when it comes to Blizzard's refusal to lock down precise dates (or even years) for its releases, but aside from a little huff and puff, there's unlikely to be any real danger of blowing the house down.

Which begs the question - if Activision is happy to boil its catalogue down to Blizzard's games and a single FPS franchise, who is really wearing the trousers in this relationship? Kotick may be the boss of "Activision Blizzard", but his company is now a single franchise decline away from being "Blizzard (with a side-serving of Activision)". In the twilight days of Blizzard's last parent company, Vivendi Games, there was a sense among some external observers that Vivendi had become the corporate scaffolding that supported Blizzard ("they're our bank", a senior Blizzard staffer told me in a moment of candour some years ago), with the company's non-Blizzard titles being little more than glorified side-projects. Is history destined to repeat itself?

Perhaps not. After all, let's not forget that Activision's strategy doesn't actually preclude launching new franchises - and even if the company lacks the patience to nurture franchises, it certainly doesn't lack the funds or the will to buy them. The recent spate of closures and consolidations within the publisher have, in fact, led to some pretty bitter sentiments among developers who see the firm as essentially predatory - buying out studios, milking their IP and promptly getting rid of them as soon as they have served their original purpose.

It's by the success or failure of this strategy, I suspect, that Activision will stand or fall in the coming years - and on this point, I believe that there is trouble on the horizon for the industry's flag-bearer. The company's deal with Bungie, for example, is an interesting one. Bungie is an empowered, wealthy, confident developer with a world-beating franchise to its name - by no means prey for a company like Activision, which finds itself relegated to the role of publisher alone. It will reap the rewards of an alliance with Bungie, but not the kind of control of the IP it enjoyed with, for example, Infinity Ward.

Is that the character of all deals to come? No, of course not. Bungie is an exceptional case. But many other developers, watching this week's events and observing the gradual changes in the structure of the industry as a whole, will question whether they want to place themselves on the chopping block of firms like Activision. The company's millions will always make some developers waver - who doesn't want to be rich? - but there are other routes to market, other profit models and revenue streams, ways of reaching consumers and making money that simply didn't exist when Activision's business model (itself a near-direct copy of EA's former model) was at its height. On their next shopping sprees, traditional publishers may find talented studios more equipped than ever to resist the lure of the chequebook.