As I sit in the Activision lounge at Gamescom, an affable Eric Hirshberg is espousing the joys of his company's new product line, Skylanders Spyro's Adventure. As you might expect, he's quite keen.
"I'm sorry, I'm off on a...I love this game", Hirshberg tells us - showing off the $69.99 starter pack which features three of the chunky, colourful toys which are the physical component of the series, plus a game disc and the 'portal' which enables play.
Skylanders, firmly aimed at children and launching across 3DS, Wii, 360, PC and PS3, with a web, iOS and Android presence, represents a new direction for a company who's management once made it clear that it didn't see the appeal of mobile and social.
That's all changed now, as Activision prepares its own take on social and mobile, bringing its huge IP to bear on the fresh markets.
Read on to hear about Hirshberg's position on those markets, as well as CoD Elite, Blur, the economy and EA.
Q:So Skylanders will be a tentpole product for the business, alongside CoD and the Blizzard products?
Eric Hirshberg:That's the hope, yeah. We've also got our project with Bungie, forthcoming. Bungie's got a pretty good track record. We're doing a pretty ambitious project with them, so that will certainly be one of the tentpoles.
We've got Call of Duty Elite - I know you might not think about that as separate, but it's a separate development studio, it's a separate investment path and a separate revenue stream. It's a pretty inventive piece of software. It will travel and migrate from several different platforms and really affect the game.
We've got Prototype 2 coming out. People forget that Prototype was the biggest selling new IP the year it came out. Launching an IP is the hardest thing to do in this business. I think nine out of ten of the best selling games last year were based on existing franchises.
We only do it when we think we've got a really breakthough idea and a competitive advantage. So we feel that about Skylanders, we fell that about Bungie. We feel we can grow Prototype. That's obviously much more of a core audience - it's a grotesque, ultra-violent, beautiful game - that obviously doesn't appeal to everybody. It really appeals to the people who play it, so we think we can grow that.
Q:The contraction and refocusing of IP, which we've seen across the board in the industry was obviously at least partly a result of economic circumstances, but also a changing market - do you think we'll ever see a return to the days when big publishers were less cautious about new IP?
Eric Hirshberg:The one thing you didn't mention in terms of influence on that was gamers! Meaning, gamers seem to want to spend more time on, and go deeper into, fewer games. They're gaming more - all of the metrics in terms of number of uniques, number of hours spent, all those are up. Hardware install base is up.
If you look at all the graphs, it's hard to argue that economic turbulence is the driver, because people are still buying new Xboxes and PS3s at a record clip. We get 20 million unique Call of Duty players every month. The shift is that the games have gotten deeper, and as we've seen this shift to online connected play, the tail on games is a lot longer than it used to be.
What doesn't get a lot of focus is that we've also created a lot of jobs.
I think that, as much as anything else, has decreased the demand for new IP. Just a few years back, when there wasn't that long tail of connected play, you'd buy a game, roll through the campaign, roll through the various play modes. Maybe you'd do it again, but then you'd be done with it. There'd be very few games, maybe the sports games would be the exception, like the Maddens and the FIFAs, where you'd just continue to play them all year round.
But now you're seeing that more and more with these DLC strategies and a lot more connected play. This is something we're learning from gamers. Just because it's part of an existing franchise, doesn't mean it's not innovative, doesn't mean we're not bringing new ideas.
Call of Duty Elite is a great example of a big new investment in an existing franchise. Within the disc itself (for Modern Warfare 3), there's a completely reinvented spec ops mode, new multiplayer game modes, obviously a new campaign - you'd expect that. Just because it's in an existing franchise doesn't mean it lacks newness for the industry.
Q:But that winnowing of 'middle-ground' IP suits your purposes quite well, doesn't it?
Eric Hirshberg:I don't know, I wouldn't state a preference one way or the other. I think when the revenue was spread out across a lot more titles, that was cool too - it was fun to compete across more categories. I think that our approach is to focus more innovation, more investment more depth of gameplay into our best ideas, our best opportunities. That goes for existing IP like CoD and new IP like Skylanders.
So that's really the barometer for us - do we feel like we have something unique, something differentiating, something that can give people a unique experience. What we're not doing is sort of spreading our chips all over the table and trying to compete in every category.
Q:There have been a lot of job losses and closures this year, is that process an ongoing one?
Eric Hirshberg:Well there's a lot of people who we'd gladly work with again if the right opportunity arose. Those are decisions you never want to make, you never want to do that stuff, unfortunately it's a reality of business.
What doesn't get a lot of focus is that we've also created a lot of jobs. We've created Beachhead to build CoD Elite, those are all new jobs. We've expanded studios which are working on Call of Duty, we've obviously created a lot of work with Skylanders, everything I've mentioned about that has it's own resources - there's Toys for Bob making the console game, Vicarious Visions making the 3DS game, other developers we've partnered with on mobile and online.
So on one hand we've had to make cuts where it was reflected in our slate, but we've also created new jobs and grown where that's reflected in our slate. It's not an ongoing process, we did what we needed to do at the beginning of the year when we decided to not make Blur 2 and to shut down the production on the games in the Guitar Hero franchises that had been announced.
Which was the right business decision. That doesn't mean that Guitar Hero won't come back. It's an incredibly strong and well liked franchise and brand, but with the current model, those games just couldn't be made profitable any more.
Q:Freestyle Games looked very much like it would be shuttered, but it's been saved. What changed that decision?
Eric Hirshberg:Well I'm not able to announce anything yet, but what happens - I think people think of these consultation analysis periods as a fait accompli, that it leads to closure. Sometimes, like in the case of Bizarre, it did. Sometimes, like in the case of UFG, we were able to find a buyer for the work that had already been done on True Crime and they've been able to keep that group together and complete their vision. We couldn't be more thrilled and we worked very hard to create that opportunity.
We've got some opportunities in the hopper for Freestyle - I think very, very highly of that studio and the creative talent within it. We're doing everything we can to keep that group together.
Q:What's the process you go through when you decide whether a studio or employees makes the cut? Is it purely financial?
Eric Hirshberg:No, it's not. Obviously we have to be beholden to our shareholders and we have to run a profitable business in every way that we can. But this is a creative business and the road to profitability is hand-in-hand with creative excellence.
The analysis process has to do with, not only marketplace performance, but also potential. In the case of Blur, for example. I thought Blur was a great game. I think Bizarre did a tremendous job. When we greenlit that game, the racing category was on fire, there seemed to be a lot of growth there. In the three years or so it took to create the game, the racing genre really shrunk.
Everything else happened in the industry that you mentioned before, people started playing fewer games, and so we found ourselves in this position where we were like, okay - this is the world's sixth or seventh racing title now. It's new IP in a category with huge franchises like Gran Turismo and Need For Speed and Forza which are very well established.
So we had to be honest with ourselves and say, do we think we can out-execute the entire category by so many laps, excuse the pun, that we can break through all of that brand strength in a shrinking market? We just felt that our investment dollars were better spent on other projects where we had more of a competitive advantage.
I think gamers have spoken there too. Blur was a really great game, but the world didn't seem to have the appetite for another racing game. So that's not to say that it's not important. We often get painted with the brush that says we're only just working on our existing franchises. New IP with Bungie, new IP with Skylanders, doubling down on new IP with Prototype. What we're focused on is making the games that we feel we can make better than anybody else, the places where we have a unique advantage, idea or development partner, that can set us apart.
I thought Blur was a great game. When we greenlit that game, the racing category was on fire. In the three years or so it took to create the game, the racing genre really shrunk.
In a world where only the top one or two games in a genre really succeed on a grand scale, I think that's a smart strategy.
Q:In the past, Bobby has been fairly forthright in his belief that there's little in social and casual of interest for Activision - would it be fair to say that Skylanders and Elite are tangential ways of exploring new business model opportunities?
Eric Hirshberg:Well, first of all on Bobby's quote - people have a tendency to bring them up as if they were meant in perpetuity. That was said at a moment in time and I think at that moment it was insightful. A lot has happened since that quote. I think we see a very exciting business in mobile, particularly, as well as social.
But we have a different approach, which you're touching on. I think that these things can be gaming platforms in their own right. People forget that we have two or three of the top-grossing apps of all time on the App Store with CoD Zombies and Guitar Hero and I think there's a very well performing Crash game as well. So we were there early, but at the time it wasn't the kind of business which would take resources away from a much bigger opportunity somewhere else. That's changed.
The other thing is that I think we have a unique approach in that we're using social and mobile to expand our games universes and expand people's ability to connect with the games that they love. That's a different strategy to just throwing every piece of IP we have up on the App Store - which may or not be a great gaming experience. A lot of the console games I've played on the App Store aren't suited to that device and that interface and control mechanism.
So we haven't done that as much as some people in the industry have, but there's more than one way to skin a cat. I'm not going to say whether that's a successful approach for others, but I think our approach is a very sound one. Call of Duty Elite will exist on mobile, it will interact with your FaceBook friends, it will bring in elements from social media. It'll be on tablets, smartphones - all of that will connect, two way, with the game.
It used to be, if you were a sports fan, that the only way you could interact with your sport, was when the game was on. But now there's this whole ecosystem of content, whether it's highlight shows, fantasy leagues, websites, analysis, that connects people with the sports they love every day whether there's a game on or not. Why can't we do the same thing? 30 million people play Call of Duty, why can't we steal their time on their train commute setting up a game for that night with their friends, or messing with their loadout or studying how they did on the map last night?
I think that's a different approach to social and mobile than a lot of people have, and I think that's really exciting.
Q:To address the elephant in the room, I wanted to talk about your comments last night about EA's mudslinging - particularly your point that this doesn't happen in other industries. I've heard from several EA bosses that they're going to steal twenty per cent of your market share... There's been a lot of trash talk.
Eric Hirshberg:Well not from us. It's clearly a strategy, it's clearly a decision they've made.
Q:But what is about this industry that encourages this sort of public aggression between rivals? It's almost like sports...
Eric Hirshberg:I don't know! [laughs] What I do know is that...Even the answer you just shared about stealing market share...What about creating market share? I feel like it comes from a place that assumes that there's a finite number of gamers in the world. If we as an industry act like there's a finite number of gamers in the world, and just beat each other up to get access to them, I think that will come true.
On the other hand, if we act like we can constantly pull people into this passion, which is what has happened - the industry has grown exponentially - then I think that we can bake a bigger pie instead of fighting over a bigger slice of the existing one.
I don't really want to respond too much, if you don't mind. Let me think about how exactly I want to phrase this.
It's not a new strategy for challenger brands to try to get themselves mentioned in the same breath as leader brands. Coke didn't do the Coke challenge, Pepsi did the Pepsi challenge. It's a tried and true strategy to try and get yourself mentioned as much as possible in the same breath as the leaders so people start thinking of you in that context.
That's fine - competition is good for this industry and every industry. I think that, as I said last night, there's a difference between wanting your game to succeed and openly wanting other games to fail. To me this is an art form, and the more great content we create as an industry the larger the market for it will be.
Eric Hirshberg is the CEO of Activision. Interview by Dan Pearson.