In part one of this interview with Guitar Hero CEO Dan Rosensweig, he talked about the success the company had seen with the latest edition of Guitar Hero, and how the launch of DJ Hero was shaping up.
Here in part two he looks at the health of the peripherals market, outlines the importance of the online component, and explains why Hero games are good value, even in tight economic times.
Q: Frank Gibeau, EA Games president, told us at Gamescom this year that there was a question mark over the market for peripherals - what's your take on that issue?
Dan Rosensweig: I think the broader picture is for something like Guitar Hero 5 - this is the fifth version - we're still growing the audience quite substantially, but we also have a huge installed base. So there's a shift from hardware-only sales - like you'd imagine in the first two or three rounds - that each round you bring out you should see an increasing percentage of software versus hardware.
So for 2009 we planned for that, we expected that to happen because we were focusing on selling a great deal of the games to the installed base that already loves the game - and also selling to new customers. That's why we made the first level easier, and you don't get booed off.
We expected the proportion to be more software than hardware - but with DJ Hero it's going to be all hardware, because we haven't sold it before. So I think there's a market place for great games with great value.
Q: And when it comes to talking to investors, do you prep them in terms of how that revenue splits out?
Dan Rosensweig: One of the beauties of running a division rather than running the company... that's what Bobby and Thomas and Mike do. What I do is build an organisation that focuses on creating the world's most fun games to play, that get incredible reviews, and that the fans love.
But our business plans assumes greater software than hardware in GH5, and obviously the full bundle in DJ, and a balance in Band Hero - because Band Hero is going to sell a lot to existing Guitar Hero players that want more pop, more modern, more singing-oriented content... in addition to GH5 or perhaps instead of GH5.
That'll bring a whole new audience - more families, more women - so that one's more balanced.
Q: And what are the latest numbers on GH5 sales?
Dan Rosensweig: I don't think we've released the numbers, but what I can tell you is that in addition to being extremely pleased - particularly here in Europe - the public report suggests that we've outsold 2/2.5/3-to-1 over Rock Band... and we've probably sold more copies of Guitar Hero 5 than any other Guitar Hero game at launch.
The category's been up over 25 per cent, we've been up over 50 per cent - we feel really bullish about it.
Q: And is that ratio based on unit sales or revenue?
Dan Rosensweig: Both in this case. In the US what we've seen is fascinating - we saw a very big launch and very big PR from our competitor, and we did incredibly well at the start. Our second and third week sales weren't really affected when they came out - but I went last night to the home pages of the big retailers, including GameStop, and we're a top-five selling game at GameStop right now. The other guys are nowhere to be found.
So over the course of the season - look, Neversoft just built a great game. It's the best one we've ever done.
Q: The basic gameplay mechanic hasn't really changed since the first edition was launched, although obviously with DJ Hero that's branching out, but do you have any concerns -
Dan Rosensweig: Let's be clear - the basic mechanic of car-driving hasn't changed either. There are certain things which shouldn't change, but the feature set and capabilities - that may not sound big to non-players - are huge... jump-in, jump-out is a huge advancement in the game.
The connectivity to the internet and the ability to bring more music, more experiences at different levels... all of these things are substantial changes to the game that have been innovations - but at the end of the day what people are familiar with is: You gotta hit the notes.
You don't want to change that mechanic - what's the point of playing guitar if you don't do that? I think that basic mechanic should remain the same, but what you do around that mechanic, what we've done - more social, more connected - all of those things are tremendous innovations.
Q: How important is the online side of things?
Dan Rosensweig: Three years ago not at all. I think it was really too early to focus on it until now, because until now really only the Xbox was connected. But now, as all the first parties are moving towards greater connectivity, that market place just really opens up - that's why this year's game, having forward compatibility and being able to bring your music with you, that's a big advancement.
We have a really exciting slate, including five Rolling Stones songs, and we just see a constant rise in the percentage of our users that are connected to the internet, the percentage that are playing online, and the percentage that are downloading music - it just keeps getting bigger and bigger.
Q: How significant are those download revenue sources?
Dan Rosensweig: Well, we don't release that, but I'll tell you that each month is a record versus the previous month, and it's getting to the point of being interesting.
Q: What the response like from artists now when it comes to licensing?
Dan Rosensweig: Our relationship with the majors for the most part is pretty terrific. We see value in each other - obviously we wouldn't be a music game without the music, but the labels and the artists see great benefits because we have over 40 million games sold.
We're able to introduce artists to whole new fan bases, re-introduce artists to previous fan bases that have perhaps haven't kept up with the band. That's led to increased catalogue sales and off World Tour, we did some research and found that if a song was in that game it increased catalogue sales by 50 per cent.
So we help artists meet new fans, reconnect with their fans, sell their catalogues, go out on tour more effectively because their music is popular again, get great radio play as a result of it... so for the most part there's a desire from most of the artists - not everybody - to be in the game. That's great for us, for the record labels, for the artists and most importantly for the fans.
When we do special edition games, like we're doing with Renegade for DJ Hero - with Eminem and Jay-Z - it's really the primary game with an upgraded turntable, stand and case, and a new music CD (one from Eminem, one from Jay-Z). That's amazing value to any fan, and particularly their fans, and they were very excited about that - in fact they're going to be in the commercial.
For Van Halen, again - we do a game like Van Halen because we honour the greatness of Van Halen, and it gives fans a chance to experience them in a way they never could have before which is to be part of the band. I think they are, and we are, extremely enthusiastic.
Not every band wants to do it, or understands it, or wants to be associated with the technology. We respect and appreciate that - but for the most part it's a great relationship. We can offer them tremendous value because we can offer their fans tremendous value - and of course we pay for every song in licensing, so the more successful the game is, the more money they make.
Q: Do you think these kinds of games have benefited from people tending to reduce their trips out for things like meals and the cinema and focus more on greater value entertainment at home?
Dan Rosensweig: I think the economy has affected everybody. What videogames are, and what Activision has always tried to do - and Guitar Hero really reflects this - is to create the greatest value for your entertainment dollar.
When you consider the amount of time they play Guitar Hero - when they play it and the frequency with which they play - the cost per hour to play is almost insignificant. To that degree, when you can get great value, we think that makes us something that consumers should really want... and they've shown us that they do.
So to that degree I wouldn't say we're better or worse than other forms of entertainment - I think people should choose their own forms of entertainment - but when you do the math, Guitar Hero for USD 59 with 82 artists and 85 songs... and if I were to buy those 85 songs it would cost me USD 85... I can play it alone, I can play it with my friends, I can play it online, I can play it forever - it's really hard to argue that we haven't created enormous value for the consumer.
Q: How do you view the platform mix - it seems to be evening out, certainly since the release of the PlayStation 3 Slim.
Dan Rosensweig: One of the great things about what we do is that we should be neutral and ubiquitous - so we'll work on whatever our consumers want to play on. We still develop for the PlayStation 2 and we have very good sales on that console. The PS3 Slim has done very well, and we're thrilled with the great partnership we have there.
The Wii is also an amazing partnership, and actually the game that's played on the Wii is a different game to that played on other platforms. And Xbox has just been phenomenal - so we enjoy great relationships with all of them, and we'd like to continue to develop for all of them as long as it makes sense to our fans, and economically for us.
Dan Rosensweig is CEO of Activision's Guitar Hero business. Interview by Phil Elliott.