Activision: Case Study
Activision: Case Study
Activision was established in 1979 as a third party video game developer-publisher. Formation of Activision has been one of the most significant events for gaming industry. Activision is publisher of one of the most famous game publisher today. Games like Call of Duty, Guitar Hero and Pitfall series are published by Activision. Currently Activision is merged with Blizzard (creator of world’s most played subscription based game) to form Activision Blizzard World’s largest gaming company in a deal worth ? 9. 15 billion. Around the time of formation of Activision, companies used to dominate market place.
Gaming industry was not stable. But the things have changed today it’s a global multibillion dollar business. In the starting days of Activision, they had to compete with Atari in games. But later both companies came to understanding that availability of more game for Atari platforms meant more sales of hardware. And both companies kept building games for Atari platforms competing with one another and being benefited from competition. Creating games is a long and expensive process as normal games take about 2 year and $20 million while MMOG’s may take from $50 to $100 million in five years.
What Activision and Atari started as co-operative competition still prevails in gaming industry and has helped a huge deal in development of gaming industries. In 2010 there was 8% loss of packaged goods sales of consoles game but online revenue was booming. Activision was able to predict this change in gaming industry market and locate itself in front of customers. In 2010, around 50% of total revenue made by Activision came from digital sources. Since its merger with Blizzard, Activision is becoming more and more console independent.
Starting as publisher for console games, today Activision publishes games for anything that can play games like ipad, iphone, phone social gaming (facebook), etc. And the ability to adapt to changing market has kept Activision in top of the gaming industry for so long. There is an argument that more than half of Microsoft’s xbox live subscribers are there for Activision’s Call of Duty. This raise an issue should Microsoft be the only one being benefited from this while Activision only gets paid once during sale of game disc.
This makes console gaming dull in compared to World of Warcraft’s online subscription payment (Activision Blizzard charges fees for playing World of Warcraft online in PC). Activision’s competitor EA games seems to have found a simple solution, In order for online multiplayer, gamer have to either buy new disc or buy online registration code that allows them to go online using old disc whose online code is already used. Activision could use this strategy restricting people who bought used games and people who borrowed games to get online hence focusing only on customers who paid for online.
For first time ever, in 2008 Activision was the number one US console and handheld game publisher in dollar. In 2008 it published two games: Call of Duty 4: Modern Warfare and Guitar Hero III: Legends of Rock which were number second and first best selling game in US and Europe in dollars during fiscal year. Net revenue earned by Activision in 2008 was $2. 9 billion. Activision’s stage gate model “Greenlight Process” has helped in development in its product a lot. This process includes analysis of new products in development stage before entering market in four stages as concept, prototype, first playable and alpha.
Making sure that product functions properly and is as demanded by current market customers is a very important step in product development which is carried out by high-level cross functional team. Keeping your product polished and problem free is very important. Gaming industry is product based market. Even though there will be customer grouping making your product fit and well is the most. If the product is good customer from another group can be attracted by this (RPG players are different than first person shooter players). In July 9 2008, Activision finally merged with Blizzard entertainment.
Blizzard is owned by French conglomerate Vivendi and is the owner of World of Warcraft, world’s largest subscription based MMORPG. This merging helped Activision expand its reach in the industry. Instead of diversifying product Activision move toward merging has proven rather useful. Gaming industry is one of the fastest growing industries. Changes occur daily in market place. Gaming industry started with text games then moved to cartridge based platforms to today’s next gen consoles. And research shows that any gaming device staying in market for more than 10 years is considered to be outdated.
So the change is obvious and Activision has to be aware of these changes. Transition period between one generation of console to another generation of console hugely effects gaming industry. Activision’s performance record shows that gaming industry faces a huge halt at these times. During recession Activision was able to maintain its sales and profit curve but in 2005 when all console developers like Sony and Microsoft were preparing for launch of their new consoles gaming companies like Activision and its rival EA has to face depreciation in their business as customers are waiting for newer version of game and gaming consoles.