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Activision backs Destiny with $500m launch investment

Activision backs Destiny with $500m launch investment

Tue 06 May 2014 7:59am GMT / 3:59am EDT / 12:59am PDT
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"The stakes for us are getting bigger" - Bobby Kotick, CEO

Activision Blizzard

Headquartered in Santa Monica, California, Activision Blizzard, Inc. is a worldwide pure-play online...

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Activision is anticipating launch and post-launch costs for Bungie's online shooter Destiny to hit $500 million.

That figure was revealed by Bobby Kotick, the CEO of Activision Blizzard, at the MIken Conference in Los Angeles last week. According to a report from Reuters, the $500 million amount was confirmed as accurate by a company spokesperson today, but the company emphasised that it will include, "marketing, packaging, infrastructure support, royalties and other costs."

"Bungie's very ambitious plan is designed to unfold over a 10-year period," the spokesperson said. "The depth of creative content, scope and scale is unprecedented and is required to bring Bungie's vision to life."

Activision has made no secret of the fact that it expects Destiny to join Call of Duty and Skylanders as a billion-dollar franchise, but $500 million would almost certainly be the largest ever invested in a single release. According to an estimate from Sterne Agee's Arvind Bhatia, Grand Theft Auto V only cost Rockstar between $200 million and $250 million in development and marketing costs.

"If you're making a $500 million bet you can't take that chance with someone else's IP," Activision CEO told the Milken conference. "The stakes for us are getting bigger."

Analysts speaking to Reuters estimated that the game would need to sell 15 million units or more just to break even - as solid an indication as you will find that Destiny will employ at least some in-game monetisation mechanics.

Destiny is expected to launch in September this year.

23 Comments

That is a lot of money.

Posted:3 months ago

#1

Matthew Bennett
3D Engine developer

20 15 0.8
Possibly too much money? I am not sure how they will make that back... considering 15 million sales is Call of Duty's peak territory, especially for a console only title.

Posted:3 months ago

#2
I'd like to know what sort of post-launch content Destiny will receive, and just how granular it will be. I doubt this sort of money can be justified without some potential for in-game monetisation.

Posted:3 months ago

#3

Andreas Gschwari
Senior Games Designer

556 607 1.1
CoD peak territory is 20+ million (which is over 1 billion USD in revenue). If Destiny hits the same sales as the CoD series, 500 million USD is a viable sum.

The danger with these sums is that risk might be kept at a minimum, which often means innovation is kept to a minimum. But we shall see!

Posted:3 months ago

#4

Andrew Ihegbu
Studying Bsc Commercial Music

440 146 0.3
I should hope that Bungie will not make the mistake of making the game generic, but I really doubt it seeing as they have been tied to MS's lap for the majority of the past franchise and left for the sole purpose of being creative. Pretty much every gamer I know wants this game, even those who cared little for Titanfall and GTA5. I entirely think they will make their 500m back and a lot more.

Posted:3 months ago

#5

Klaus Preisinger
Freelance Writing

1,072 1,007 0.9
A heavily scripted gameplay presentation and the quote "from the makers of..." is certainly not enough for us to say whether those $500 million combined with a ten year plan make sense or not. But the marketing is certainly in place to have people believe this to be the Jesus Christ of Co-Op lootshooters with RPG elements. On top of that, the fact of the game being released on old and current consoles alike certainly raises questions about the type of compromises which had to be made, particularly in regards to post-release monetization. The absence of a PC version also seems odd to say the least.

Posted:3 months ago

#6

Dan Tubb
Investment manager

23 112 4.9
I do wonder if it is even possible to make a great game costing that much. I say that because in order to recoup your cost you need to appeal to the largest possible audience, and perhaps make it bland as a result. i.e. McDonalds can produce a good burger, a burger that is firstly non-offensive and has mass appeal. But no one thinks they produce a great burger.

Are we going to see this investment deliver a game that most people agree is fun to an extent, and they buy on media hype. But that few people remember with any great affection a year later?

Posted:3 months ago

#7

Andreas Gschwari
Senior Games Designer

556 607 1.1
Well keep in mind that the actual development of the game is not what costs 500 million. The development will likely cost less than 100 million, perhaps closer to 60 million even. The 500 million mark is purely hit due to marketing, sales and "customer care". It's a new franchise and Activision is going to splash the cash to get it on every gamer's mind. Some of that cost does not have to be recouped for this instalment I would imagine, some could be written off over the next decade as brand management cost.

But buzz is good around this game, and while I am personally not at all interested (I was not moved at all by what I have seen at E3 and beyond), I do think I am in the minority and I feel this game will break out beyond the 15 million sales mark - i.e. it will turn a profit.

Posted:3 months ago

#8

Christian Keichel
Journalist

643 879 1.4
@ Andreas Gschwari
CoD peak territory is 20+ million (which is over 1 billion USD in revenue). If Destiny hits the same sales as the CoD series, 500 million USD is a viable sum.
COD generating $1 billion in revenue with 20+ million copies doesn't mean Activision has $1 billion in revenues from the game, because Activision doesn't earn $50 per copy.

It's a gamble for sure, if it will work depends on the holiday 2014 line up. a strong lineup from Ubi, EA, Sony, MS and probable a next Gen GTA V port could be really dangerous for Destiny.

Posted:3 months ago

#9
Yeah Im sure that is mostly marketing bucks. Hoping to pull the ol Subway sandwich marketing strategy. AKA. just market the hell out of something and americans will buy it no matter how good or crappy it is.,

Edited 1 times. Last edit by Todd Weidner on 6th May 2014 4:30pm

Posted:3 months ago

#10

Greg Wilcox
Creator, Destroy All Fanboys!

2,156 1,076 0.5
Yikes. This better be worth that hype is all I'll say. Still, if it's missing a campaign that can be enjoyed without others, it'll not do as well as expected, I'll bet. Me, I'm burned out on the whole sci-fi shooter FPS genre, but I do know people thrilled about anything Bungie puts its hands on. I'd rather have a new Myth game, personally... but we'll see where this lands once it does land...

Posted:3 months ago

#11

Sean Kauppinen
Founder & CEO

45 47 1.0
The important part that is being missed is that Destiny is a four game series and the $500 Million is to launch an IP over a ten year period according to the article. A large part of this will be the developer bonuses and revenue share per the agreement: http://www.iesherpa.com/?p=1151

Edited 2 times. Last edit by Sean Kauppinen on 6th May 2014 6:51pm

Posted:3 months ago

#12

Benjamin Crause
Supervisor Central Support

79 36 0.5
This is to me just a confirmation that the PC release is just held back in order not to cannibalize the console releases. You cannot shoot out of the door huge amount of money without the making use of the PC players. There are too many of them especially in the genres of shooters and MMOs. And here we got both combined.

Posted:3 months ago

#13

Shawn Clapper
Programmer

32 57 1.8
I'm thinking they might be ok with loosing money on the sales of this game if they are trying to create enough hype to pump out sequels for this game every year and make call of duty level profit. Perhaps this is a much longer term strategy instead of only sales for the first game in this new ip.

Posted:3 months ago

#14

Roland Austinat
roland austinat media productions|consulting

125 62 0.5
"Analysts speaking to Reuters estimated that the game would need to sell 15 million units or more just to break even - as solid an indication as you will find that Destiny will employ at least some in-game monetisation mechanics."

15. Million. Copies.

Posted:3 months ago

#15
"If you're making a $500 million bet you can't take that chance with someone else's IP," Activision CEO told the Milken conference. "The stakes for us are getting bigger."
But Bobby....Bungie owns the Destiny IP...hmmmmmmm.

Posted:3 months ago

#16

Eric Leisy
VR Production Designer

116 125 1.1
Wow. I totally missed that activision was publishing that title. Err.. Activision didn't buy Bungie when I wasn't looking, did they?

Posted:3 months ago

#17

Paul Jace
Merchandiser

904 1,340 1.5
Destiny will sell well because Halo made Bungie the official console fps deities of the last two generations. However, time will tell if Destiny gets anywhere near the mainstream appeal and gaming popularity of their last creation. But a big part of how well this will do out of the gate depends on what kind of competition it will face this holiday season.

Posted:3 months ago

#18
Its about time MMO's pushed the budget a little, frankly, The primary reason for the failure(or at least failure to be the wow-beater or even remotely close, the companies hoped for) of several of the recent big-brand mmo's has been lack of content, lack of ongoing fresh content, and so on, this all due to lack of budget, yet companies can make billions out of a succesfull MMO, but only spend a fraction of that price on it, what's the old saying low risk, low reward.

Lets just run a hypothetical here, say a given game has 9 classes you want an hour or two of new content per class every day, as a result you need a fair few numbers of ongoing employee's, say 1 designer, 3 artist, 1 coder forms a single "team" each double as playtester's, bit like having a whole bunch of in-house indie developer's only using the games existing dev tools and engine and graphics library etc, so only gfx specific to this quest is needed, and you give them say 5 weeks to come up couple of hours of good quality new content, additionally say you have your set of voice actors on the payroll, and a sound studio, to provide audio for all the teams.

Say you pay each member about 50,000 usd a year with an extra 50 to provide for their equipment and software and so on given economies of scale etc, so that's 300,000 usd per team per year as a result given the 5 weeks and including a few weeks off every year, you can reasonably expect 10 new missions a year from each team, so rounding up you'd need 329 teams a year at that rate to produce 9 new missions every day (or 3285 every year) weighing in at 98.7 million, say rounding up to an even 100 million usd a year adding voice acting troop and couple of sound engineer's, ok that ignores premises costs, but many of these companies have the space or could add it without much issue, indeed such a system would allow team-members to work from home communicating via video-conferencing (say star citizen style), eliminating this cost.

Obviously you'd need some damn good scheduling to pull off your 9 new missions a day all year, but it's all within the realms of possibility give or take a few million, so given a good game with a good budget and that kind of level of content (obv adding expansions and major new area's would not be part of this sections perview so cost extra), but either way you would have a game that simply doesnt run out of content for the vast majority of players, even the most hardcore rich computer bum players would be happy enough with that kind of content a day(otherwise known as whales' amongst other names in f2p games), not that a subs model wouldn't work well enough, this kind of fresh content would justify the expense to the majority.

Still given the sums sunk into initial mmo development for frankly "only" 100m more a year, instead of most of your gamers chewing through all the content then heading elsewhere for the next mmo's release content fix, you'd have a way to retain the majority of them in some form as long-term players, added to all the other traditional end-game content and so on, games like swtor and others may well have done a great deal better if they followed such a strategy, instead they made 300+ hours of content for release and hoped that would be enough, players happily consumed the lot then a great deal of them left, like a cloud of locusts, gamers are fickle they need a steady drip of new content in this day and age to stay attached to a game,

I'm looking forward to when the right company (ie one with enough mulla to fork out not to mention smart enough to try it) works out this is a good idea and implements it, then and only then does a company have a serious chance of making the kinda playerbase mmo's have the potential of gaining, more players = more money, making such costs negligible vs the profits an entity could reap, they could double it to 4 hours per class per day(to help retain those who dont like multi-characters) and add fortnightly larger ones and expansions and still making a thumping great profit, indeed doing all of the above would likely only increase the profit further, and give others a harder job trying to bite into your playerbase.

MMO's thusfar have followed the tried and tested methods for far to long, and experienced mmo players have gotton bored of the repetitive content "end-game" provides, instead a great number swap from one new mmo release to another in and endless wave, with only a relative handful staying on, they may well be back next expansion but then abscond again, people devour content, want to keep them, make more content then they can absorb, and make it new, fresh and fun, maybe hire some of the teams as disparate studios, have fresh gaming students manning a few, to give them a chance to gain experience (and save some cash), or to maintain independence, or by contracting out teams allow enterprising folks to form their own team sign up to a years contract etc, with only a certain percentage in-house, ensuring fresh people and fresh minds stay involved.

Edited 10 times. Last edit by Alexander McConnell on 7th May 2014 4:19am

Posted:3 months ago

#19

Martyn Brown
Managing Director

137 33 0.2
/face palm

Posted:3 months ago

#20

Brian Lewis
Operations Manager

127 79 0.6
This isnt actually that much money. The estimated budget for the game is only $60M. The other $440M is for marketing. This is what is expected from a AAA P2P title. It is all about moving those boxes.

Posted:3 months ago

#21

Christian Keichel
Journalist

643 879 1.4
The other $440M is for marketing. This is what is expected from a AAA P2P title.
A $440 million marketing campaign would be roughly 3 times of what Fox or Warner Bros. spent on the marketing of Avatar or The Dark Knight.

Source:
http://adage.com/article/madisonvine-news/fox-movie-avatar-soars-fat-ad-spending-mass-marketing/141262/

Edited 3 times. Last edit by Christian Keichel on 8th May 2014 5:02pm

Posted:3 months ago

#22

Shane Sweeney
Academic

355 269 0.8
Actually Activision owns the IP. Very publicly Bungie came out in 2010 to defend there contract with Activision during the ex Infinity Ward devs left over poor contract teams and jumped into the EA Partners programme. They had their whole "we don't need the IP" comment.

In 2012 as a part of the ongoing Respawn Entertainment/Activision lawsuit the contract between Bungie and Actblizz was submitted to the court and is public record. Very interesting stuff in there.

10 year vision. Four titles planned in the series, with an additional four digital expansion packs. Micro transactions. 5% of staff must be able to continue working on a Marathon sequel etc.

26 page contract fully detailed about how much commitment their was to this even back in 2009. It will easily make its money and then some.

http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-bungie-activision-contract-20120521-story.html

Edit: Actually my first paragraph about who owns the IP contradicts my source. It does appear Bungie owns the IP outright. When I'm at a PC and not on my iPad I'll dig up what Bungie came out with in 2010, maybe it was in reference that not all studios need their IP and wasn't referring to themselves.

Edited 4 times. Last edit by Shane Sweeney on 8th May 2014 6:47pm

Posted:3 months ago

#23

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