Activision had a great E3. Not only was its booth swamped for the three days, but it also won the Game Critics Awards for DJ Hero and Call of Duty: Modern Warfare 2. Those two titles are clearly going to be some of the biggest releases this year, enabling the company to act with all the confidence of the world's biggest games publisher.
Here, in an exclusive interview with GamesIndustry.biz, CEO and president Mike Griffith discusses the company's hit games for 2009, why DJ Hero can be bigger than its predecessor Guitar Hero, and why there's still room for the business to expand in Europe.
Q: What's been the reaction to your products on show at E3 this year?
Mike Griffith: We're getting great feedback. DJ Hero was really getting traffic on the floor. We're getting a lot of broad interest, but DJ Hero is stealing the show. There's tremendous energy behind DJ Hero, people are responding to the innovation, it's new and different and satisfies a new type of consumers and a new audience.
Q: You've got the new DJ Hero peripheral and the Tony Hawk: Ride controller out this year – would you say Activision is almost as much a hardware manufacturer as it a software creator?
Mike Griffith: We're certainly making a lot more hardware than we were in the past but it's a really a reflection of this cycle and the ability to have physical interface and the consumer's acceptance of that interface. Our objective is always really about the game and how to make that great and innovative.
We're not trying to get into the peripheral business, we're trying to make innovative gaming experiences for the consumer. With Tony Hawk that led is to a peripheral. We took a page out of the Guitar Hero book were it helps you feel like a rock star even though you can't play guitar. With Tony Hawk it's the same concept – you can feel what Tony Hawk feels even though in real life you can't come close. Make the right movements on the board and you live vicariously through the experience.
Q: Has it been challenging integrating a hardware business into a software company?
Mike Griffith: It started slow and organically and it felt more like an evolution. In the early days we had a lot of difficulty manufacturing enough guitars and a lot of difficulty with our logistics systems. In the early days of Guitar Hero we added capability and built a lot more support with people on the ground in Asia and logistics in Europe and North America and now we're pretty good of it.
Q: Does hardware compress margins significantly when you're selling it alongside software? I imagine it's not so much the case with Guitar Hero but with DJ Hero and Tony Hawk: Ride do you have to bite the bullet and take a hit on profit in the first six months of release?
Mike Griffith: We're as much focused on giving the consumer a great experience as we are giving the share holder a return on their investment. We don't really break our goals out item by item but I can tell you our objectives of delivering a return apply across the board.
Q: Do you expect peripherals to remain a significant part of this generation of console gaming?
Mike Griffith: They're going to be a big part for the rest of this cycle. The consumer has seen the advances in this technology, and seen peripherals take advantage of technology to deliver a more physical interface. The consumers has been very accepting of that and it's bought new consumers into gaming. Having said that, I don't think peripherals are taking over the gaming market. There are games like Modern Warfare 2 that don't require a peripheral and perhaps a peripheral would get in the way.
Q: Bundling peripherals with software makes the overall package expensive. You haven't seen a reaction from consumers that maybe this is getting too expensive?
Mike Griffith: We haven't and I think the consumer is saying if the value is there in terms of the entertainment experience then the price is fair. If you also look at in the economic downturn, traditionally stay-at-home entertainment vehicles have done better. Part of that is recognising the value that a videogame delivers. If you look at the extended life of a game, take the purchase price and divide it by the hours played, videogames become a very attractive prospect. While consumers aren't calculating the hard numbers, intuitively they understand that you can buy a videogame for about the same price as taking four people to a movie and it'll keep those same four people entertained for longer.
Q: Are you expecting DJ Hero to be as successful as the Guitar Hero titles?
Mike Griffith: It's certainly hitting a more mainstream and expanded audience from Guitar Hero. I think it will build on what Guitar Hero has been able to do. If you look at what our Guitar Hero franchise has achieved, we now have 15 million households that are active Guitar Hero users and we continue to satisfy them with more experiences and the chance to indulge in more music and gameplay.
But outside of those 15 million household's, there's another 300 million that haven't for one reason or another bought Guitar Hero yet. One of those reasons is we're not reaching new genres and new music audiences in a way that DJ Hero allows us to accomplish. DJ Hero is going to be expansive to the franchise and be particularly exciting for Europe where that genre of music is arguably more important than it is elsewhere.
Q: You already have specialised Guitar Hero products with Metallica and Aerosmith – is the plan to spin-off DJ Hero along similar lines?
Mike Griffith: It's too early to say what future versions will be but we already have the support of Jay-Z and Eminem in this release and they are very actively engaged with it. We have a special SKU which will come with two discs.
Q: Thomas Tippl recently said that the Activision business was under-developed in Europe. Can you expand on that where you see opportunities?
Mike Griffith: In particular if you look at the Guitar Hero franchise we are significantly under-developed relative to the share of the rest of our company in Europe. Some of that was driven by early decisions to allocate scarce hardware to North America instead of Europe, which we've now made up for. Some of it is due to not enough localised content to really satisfy consumers particularly in parts of Europe like Germany, France and the UK. We've done more of that and if you look at the March quarter consumer sales of Guitar Hero in Europe almost doubled. We're starting to hit a inflection point and things like Guitar Hero: Metallica, which will coincide with the band's multi-city tour this summer, DJ Hero that addresses that techno, hiphop and club genre, should help us accelerate that.
Q: Activision hasn't been shy in acquiring development studios – FreeStyleGames, Bizarre Creations – is that still on the agenda as past of the opportunity in Europe?
Mike Griffith: We have been acquisitive on studios over time. Our model has typically been to work with a studio, develop a relationship with them and then if there's something that's mutually beneficial we'll pursue it. That's been our history, but we're driven more by working with top developers wherever they are more than trying to target by geography. We're looking mostly at how do we establish deeper relationships with the most talented studios in the business no matter where they are in the world.
Q: What's your reaction to the motion control technology from Sony and Microsoft? Is that something Activision is considering incorporating into its projects?
Mike Griffith: Those are logical directions for Sony and Microsoft and obviously they're seeing what everyone else is seeing – that the consumer has responded well to the physical interface of the Wii. This has been their response and I think they are expecting it to expand their audience which will be good for the industry by bringing in additional gamers. We're always very supportive of their initiatives, we've got close relationships with all the first parties and if the consumer is receptive we'll be supporting them.
Q: Are you concerned about crowding in the market, with new motion technology bringing in new peripherals and competing with your peripheral-based products? Part of the Natal demo showed a user scanning a skateboard into a game, so why would they need a skateboard peripheral? Did that make Activision sweat a little bit?
Mike Griffith: No. We've known about that and looked at that technology ourselves and concluded that the precise movement detection that's in our skateboard, the infra-red sensors that detect hand grabs for example, are all very important to recreating a genuine skateboarding experience. The board that we have is going to deliver the best experience. In the future we're open to examining all different input devices. Guitar Hero is a peripheral already across all platforms, Tony Hawk: Ride will be across all platforms. For a our near-term peripherals business it doesn't really change anything because we're already across all platforms.
Mike Griffith is president and CEO of Activision. Interview by Matt Martin.