In the second of Next Generation’s look at how the big publishers fared
in 2005, we analyze Activision’s major activities over the past twelve

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Acquiring Franchise IP

Activision needs to close the gap on its large competitor, Electronic
Arts. It’s gone about that by following the big ‘un’s lead, acquiring
franchises. Boss Bobby Kotick told The Street, "We have
$800-and-some-odd million in cash on the balance sheet. If we’re going
to go make a commitment to an intellectual property, that IP owner is
going to know we’re good for it." Activision extended its Spider-Man
deal, and held Dreamworks into a 12-year agreement, covering the likes
of Shrek and Bee Movie. Expect more deals.

Acquiring Development Talent

Likewise, adding to its growing portfolio of development houses was
also part of the plan. In the last year, Activision bought Vicarious
Visions, best known for its handheld expertise, kids games specialist
Toys For Bob and Quebec-based Beenox.

Failing to Acquire Development Talent

But it wasn’t always successful in landing developers. The company
thought it had hooked id Software earlier in the year, but it didn’t
work out. Activision tried to pick the firm up for $100 million, but
was knocked back by its directors. The whole thing came to light after
id founder Adrian Carmack, who left the company in 2004, launched a
lawsuit against id over the affair.

Fighting with Development Talent

Activision found itself embroiled in a feud with developer Spark, which
filed a lawsuit alleging unpaid royalties and theft of its ideas. The
company had developed the console versions of Call of Duty Finest
Hour.  Spark claimed the publisher owed it money on sales of the
original game, alleging that Activision reneged on a deal to hand Spark
a contract for more Duty work.  Activision hit back alleging
fraud, breach of contract, information misappropriation, trademark
infringement, false designation of origin, and false advertising.

Making Up with Old Enemies

Activision and Viacom finally kissed and made up, bringing an end to
their long-running conflict over the Star Trek franchise. In 2003,
Activision had walked away from its Star Trek deal, arguing that Viacom
had not been supporting the sci-fi brand.  The two firms had been
at each other’s throats ever since. But this year, they dropped their
suits against one another.

Making Money

Activision’s year ending March brought in record revenues of  $1.4
billion, 50% higher than the previous year. Profits came in at $138
million. Bobby Kotick said, "We delivered the highest net revenues,
operating margin and earnings in the company’s history." It’s doubtful
that achievement will be repeated this March.

Getting Excited About in-Game Advertising

Clearly identifying a new revenue stream, Activision has been one of
the main proponents of in-game advertising, working with research
outfit Nielsen to talk-up the sector’s potential. The most recent
report told us that advertising in games is a very good thing, and
should be heartily recommended to all agencies looking to spend money.

Going Mobile

In an attempt to bolster its mobile performance, Activision appointed
Random House’s new media boss Richard Sarnoff to its Board of
Directors. The company also got involved in a vast co-branding
co-publishing deal with Mforma and Marvel for various franchises.
Mforma’s CEO Daniel Kranzler said, "The  market and mobile
technology has matured to the point that a deal of this magnitude is

Getting Mad About Pricing

Everyone was thinking it, but it was Activision that first started
talking about raising game prices. Bobby Kotick branded Take-Two’s
budget-priced ESPN sports titles as “irresponsible” and “disruptive”
and predicted way back in January that game prices for the next
generation would be up $10. He added, "We haven’t raised prices as an
industry in 20 years. Look at the movie business as an analogy. You’re
not getting any more hours of entertainment — it’s the same two hours
of a motion picture — and yet you’re spending twice as much as you did
10 years ago."

See also: Electronic Arts