Blizzard CEO Opens Mouth, All Hell Breaks Loose

The gaming community went nuts over a remark made by Robert Kotick, Activision-Blizzard's CEO...he'd gladly raise game prices if it was up to him.

Sometimes it's tough being blue. Blizzard, that is; or technically, Activision-Blizzard. It can be easy to forget that the developer/publisher that launched World of Warcraft a few years ago isn't quite the same company it is today. Except, that is, during times like these.

Because of a recent remark made by Activision-Blizzard CEO Robert Kotick about raising the price of video games (and, perhaps, the recent news that StarCraft II's release is being pushed back until 2010), some gamers and MMO fans are on the verge of an all-out, nerd-rage meltdown.

But is the anger really justified? Or is this just another example of the anonymous online collective banding together for a quick "screw the Man" tirade, only to dissipate and retreat to its usual consumer habits a few weeks later?

In a conference call between research analysts and Activision-Blizzard last week, one of the analysts—Tony Gikas—asked about the company's "comfort level" regarding its new, higher-priced games. (He was referring to games like Guitar Hero, which are bundled with special controllers or peripherals.)

Activision CEO Kotick replied, "You know if it was left to me, I would raise the prices even further," according to the transcription from the conference call (via vg247.com). As you can imagine, if you haven't already seen the resulting blowback from the community, a whirlwind of accusations and speculation ensued.

Some websites and blogs reported the story with a level-headed approach, while others pretty much demonized the CEO, accusing him of devaluing customer loyalty for the sake of pure greed. One guy,("James" of WeDoTech.net, even called for a boycott of all Activision properties in a video that's been making its way through the blog circuit. He claims Kotick and Activision-Blizzard are setting a harmful example within the industry, and placing us in danger of a gaming price-fixing fiasco reminiscent of the late 80s.

This isn't the first time Kotick has met opposition from the media and gaming communities; he's been quoted as saying that Activision-Blizzard doesn't consider a game worth publishing unless it has "the potential to be exploited every year on every platform with clear sequel potential and have the potential to become $100 million dollar franchises," according to MTV Multiplayer.

Another scathing—yet truthful?—commentary comes from a classic ArsTechnica editorial, written by Ben Kuchera back in January:

With Kotick, he's very brazen about his need to squeeze every last dollar he can out of every franchise under the Activision Blizzard label. He wants to exploit his games. He wants to make sure he has a sequel every year, and don't forget the Wii and DS ports. Why have one StarCraft game if you can have three? Just because people are used to Battle.net being free doesn't mean you can't find some way to make more money from the service.

World of Warcraft may look like it will go on forever, but the only thing greater than the loyalty of those players is Kotick's cash-lust. The only question is if the two will ever collide.

As an MMO fan, it's a bit easier to turn a blind eye when you're confronted with news and commentary like these, especially if you only play PC games and don't dabble in the console market. But don't mistake MMO or PC properties as inherently immune to the same issues and concerns that the console gaming community faces.

It used to be that the traditional, "living room gaming" market; i.e., console games, utterly decimated PC games, in terms of sales. In recent years, the gap between the two has significantly started to narrow. The whole Activision-Blizzard entity is, itself, a testament to that fact. Admittedly, Activision-Blizzard makes for an easier target to exemplify this concept, but the same is true with companies such as Electronic Arts, Atari and Sony; console and PC gaming have become bedfellows, both sharing a single publisher or developer.

That also means the successes or failures of each industry within a company like Activision-Blizzard aren't as insulated from each other as they were in the past. To illustrate that dynamic, consider the pushback of StarCraft II's release date. Activision-Blizzard explained the reason for the delay, claiming it needed to work on the Battle.net service before it launches the game. A portion of the official release:

Over the past couple of weeks, it has become clear that it will take longer than expected to prepare the new Battle.net for the launch of the game. The upgraded Battle.net is an integral part of the StarCraft II experience and will be an essential part of all of our games moving forward. This extra development time will be critical to help us realize our vision for the service.

According to Kotaku's coverage of the story, Activision-Blizzard is forecasting its global revenue in 2009 lower than it originally predicted—and partly due to StarCraft II's new release date. The upcoming StarCraft II trilogy will no doubt be a money-making cash cow, and it's no surprise that Activision-Blizzard wants to make sure Battle.net is working optimally by the time the game launches. You have to wonder, though—would things be different if the two industries weren't so intertwined as they now are, relying on each other's success and affected by each other's failure?

Sometimes it's difficult to remember that a video game publisher's sole reason for existence in this world is to make money, especially with the kind of media coverage we're privy to online. It can be tough for many gamers to see anything but the color red when they have honest issues and concerns as consumers, yet stumble upon an itemized report of Kotick's $15 million salary for 2008.

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Whine all you want about it
# Aug 14 2009 at 1:09 PM Rating: Decent
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But all business is based on greed, greed from the top. The business plan is to sell a service, item or belief to someone. You can make 10 million red hammers, in some places those hammers will sell like cold water on a hot day. In other places, their sales pale to the blue hammers.

What makes that change?

The consumer, the consumer has the power to end the business plan at any given time, by simply choosing not to buy into the concept of greed.

Our economy is based on a simple idea of credit/debt. The more credit you have the more debit you have and the more you pay to have both.

Places like Walmart do so well is simple, when some one makes just enough to get by they tend to find the bargains. Instead of paying $3 for a gallon of milk, they will buy it for less, even it is only a nickle, for every nickle adds up.

The true business idea is selling a quality item at a reasonable price for that market. If you have ever traveled from New York to California, all along the way you will notice how some things in some parts of the country are dramatically priced differently.

For example, electricity, gas, blue jeans and yes even video games. If the market can tolerate a $30 dollar game then it will sell, the trick is finding out how high you can sell it with out scaring away buyers.

AH is a prime example, everyone attempts to sell an item a few coppers less than the current price. But there is always a bottom line, where cost comes in to produce that item, that the price will not go below.

For some all that means is they need to go collect the items themselves to create the product and not buy the materials which increases the cost.

On one final note, I don't work in sales, but I have 26 plus years in manufacturing, I have seen first hand and personally what greed can do to the product and customer base.

CEO's seem to think that the majority of people who buy their products are dumb and prone to impulse buying. For the most part they are, those who can afford to pay seldom give a thought to what it costs. But when the pennies are being counted, those are the people who look for the bargains, not just a cheap rip off, but a good high quality product at a price that fits into their budgets.

During a recession, the people counting pennies out number the ones who aren't.

Would I pay more to continue playing the game? Probably not, as the game is a luxury entertainment for me, one that is already, by definition, susceptible to elimination.
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Great Job
# Aug 14 2009 at 6:14 AM Rating: Excellent
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Awesome write up there Waxy, I LOVE the linkies!
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gaming price hikes
# Aug 13 2009 at 8:19 AM Rating: Decent
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I really dont mind paying a little more money for a game that is worth it. The problem I've come across recently is that there are hundreds of titles that aren't worth a fraction of what we pay for them. If there is an increase in all titles there is no way I'll be buying a game the day it comes out. The problem with this is that there are a lot of "exciting" titles that I would want to buy immediately; this being part of the excitement of video game playing.

I also agree with Blizzard and every other company out there in that they're trying to make money. There is nothing wrong with that or being competitive. We as consumers also have the option to either pay a certain amount or not pay a certain amount for a game. I just dont want to feel like I got ripped off after buying a more expensive game. I also know that not everyone will be satisfied when playing a certain game, but a lot of games are real crap no matter who plays them. Just my two cents...
Prices
# Aug 13 2009 at 3:02 AM Rating: Decent
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As it stands, we pay a very fair amount of money in subscription, which i think could be better used to maintain the servers and minimize downtime, regardless, I think that a few pounds/dollars/euros on top for the next expansion pack would not be too terrible.
I could see myself paying up to £50 for an expansion, simple because it is exciting to see new content (and admittedly, i do not enjoy stale endgame)
No problems here
# Aug 12 2009 at 6:09 PM Rating: Decent
I don't see any problems with Kotick's view of things.

First point: game exploitation means an expansion pack on a regular basis. What's not to like there? Don't you want expansion packs? --- or is it just that the word "exploitation" gets on your nerves?

Second point: making money. If they start charging $5 more per xpack is it going to kill you? Are you going to refuse to buy it at a higher price? Hey, are you one of those people who raised the cost of ore in gold when TBC was released? What's the difference in attitude between that and Kotick's? Profit is maximized when sales and profits are balanced.
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meh
# Aug 12 2009 at 2:53 PM Rating: Decent
If it's too expensive for your tastes then don't buy it.

If, for example, Starcraft II retail price was set at $70 USD for the standard (you betcha arse they'll have a collector's edition) and $200 for the collector I wouldn't buy either.


BTW: Battle.net will become a pay-2-connect service for multiplayer. Don't believe me? then why doesn't B.Net2 support LAN? Why are they making it such an integral part of the new titles? Simple, down the road they can slap a price tag on the multiplayer service.
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meh
# Aug 12 2009 at 6:58 PM Rating: Excellent
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This is something I've been predicting, but haven't had the balls to say it yet...They might not do exactly this, but I'm sure there will be at least "premium services" available via Battle.net in the future for games like SC3 and DIII.
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Something to think about
# Aug 12 2009 at 3:18 AM Rating: Decent
Here is something to think about.

Blizzard charges an average of $14.00 per month to play World of Warcraft per account. The last figures I saw set that count at over 11 Million accounts. If this is true, then Blizzard makes approx. 154,000,000 per month on the WoW Franchise alone.

now on the flip side,

Blizzard has to be in CONSTANT R&D for new content, so there is a chunk of money.
Blizzard has to CONSTANTLY upgrade the servers to handle the ever increasing load, not to mention the NEW servers for NEW realms they add all the time.
Blizzard has to pay ALL the enormous bills associated with hosting a game of that magnatude.(Electric,ISP Provider,etc...)

If you look at the TOTAL picture, Blizzard probably doesnt have a large profit margin on the Online Venues.

SO, they increase the cost per item on the software and other things to make up for it.

Thats just my two cents, for what it is worth.

Something to think about
# Aug 12 2009 at 8:49 AM Rating: Decent
2 posts
Even with the amount of money spent on PR ,R&D, and main. on the game $154,000,000 per month is a lot and times that by 12 months in the year = $1,848,000,000. over $1.8 Billion dollars anually from WOW. Not to mention that you have to pay for the software which is on average 30 per pack so $90 for all three times 11 million = 990,000,000. Almost another $1 Billion just in software sales.That doesnt include the other franchises they own like Guitar Hero which has DLC that cost money to download. There not hurting for money by any means.
Something to think about
# Aug 12 2009 at 3:42 AM Rating: Good
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You forgot the biggest cost of all.

Labor

Pretty much no matter what business you have, around 30% of the company's money gets spent on paying the employee's paychecks.
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Something to think about
# Aug 12 2009 at 3:05 PM Rating: Default
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Karelyn wrote:
You forgot the biggest cost of all.

Labor

Pretty much no matter what business you have, around 30% of the company's money gets spent on paying the employee's paychecks.


Yes, I wonder how much Robert Kotick takes home, not to mention the CFO, HR, and various other executives and board members.

I know that wasn't where you were going, but I think it should be said. When terms like "profit margin" are bandied about, no one should forget that profit comes after the exorbitant salaries and perks that top executives in most large companies take in. Forgive me if I don't feel much sympathy for multi-billion dollar companies crying they aren't making enough money to satisfy themselves.

Oh, and as for video game companies selling games for less than it takes to produce them? Hogwash. Once they have some age to them and their appeal is diminished, yes, companies will sell off what stock they have left to try to recoup some of their cost, but not first-run production games.

ekaterinodar wrote:
Brilliant idea. Raise the price of luxury items in the midst of a recession. That will definitely get you more money. Right.


This.

/facepalm
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Something to think about
# Aug 12 2009 at 10:54 AM Rating: Excellent
You're all forgetting to factor in that a large chunk of the 11 million players aren't paying $14/month on average; at least, Blizzard isn't getting that amount from them. Everyone has their hands in the proverbial cookie jar. For instance, let's take the millions of players in Asia that are subscribed. They don't pay $14 a month to access WoW. Moreover, companies like NetEase that have the license to run World of Warcraft in places like China, get a large chunk of the revenue generated.

While it's clear that World of Warcraft makes an insane amount of money for Blizzard, the profit margin is likely less than most people presume.
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meh
# Aug 11 2009 at 8:16 PM Rating: Good
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Considering the time I spend with the typical game I purchase, I pay a few pennies per hour of entertainment. That's more than can be said of most anything else.

Therefore, I couldn't care less if the prices go up.
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Way out of proportion
# Aug 11 2009 at 4:10 PM Rating: Excellent
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People are blowing this way out of proportion.

Companies are not charities. They have one goal, and one alone: To make money

/gasp
/shock
/shun

People like to ignore this fact, but it's true. The only reason a company does anything it does, is because they think it will make them more money, so they can expand their business, and beat their competitors. If a company doesn't make money, they aren't a company for very long.

Usually this works out in the favor of the customer: better customer service, or a higher quality product is typically the route towards making more money. But sometimes the best strategy for the company is to raise the price.

The only thing Robert Kotick is guilty of, is being stupid enough to tell the truth that the average person would never want to hear.

Edited, Aug 11th 2009 8:12pm by Karelyn
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Way out of proportion
# Aug 11 2009 at 8:35 PM Rating: Good
42 posts
I quote Henry Ford here:
Quote:
"A business that makes nothing but money is a poor business."
Another one from Henry Ford I like:
Quote:
"Money is like an arm or leg - use it or lose it."


Collecting money is one part of business but many people who are very radically on left forget that using the money is other part of business. If Blizzard just goes in the direction of collecting more money they go in the direction of poor business. When Blizzard takes money from us WoW players they should never forget to spend that money for making more for us who play their games.

Money
# Aug 11 2009 at 2:59 PM Rating: Decent
9 posts
It's really a sad story when you can see the bigger picture. It's not just the gaming industry, it's almost every industry that is effected by money (the entertainment industry for example). In the capitalistic world we live in everything is based around money, that's why they call them for-profit businesses. I am not saying that the gaming developers do not pour their hearts into what they are doing. Sure it's a job which makes money, but nobody said you can't have a good time while making that money. On the industry's side of things these video games are not cheap to make. There is a lot of money, time and effort that goes into each and every game with the hope that it will make some money. If a developer creates a game and it fails then they are going to lose money which will make it harder for them to create more games.

Sure, it's a slap to the face when you read something like this but it's nothing new for gamers. How many games have we read about that have been released too soon just for the sake of coming out before that Christmas shopping season? I am surprised that this is shocking to some people, maybe they knew and it's just a touchy subject that they would rather not think about?
price gouging/battle net
# Aug 11 2009 at 2:20 PM Rating: Decent
21 posts
I have been trying to get Blizzard to answer me a simple question, why MUST I belong to battle net. I do not play any console game, nor any other computer game than WoW. I do not need another layer between me and the game.
The only replies I got were quotes from the FAQ", telling me all about the wonderful things battle net will let me do with all my games, or were replies telling me that the answering person did not handle such requests, and the message would be pass on to someone else.
One of the items I was discussing was cost, and all the answerers, in quoting the FAQ's, pointed out there would be no cost for battle net. I replied that there would indeed be costs, whether a direct fee for battle net, or increased prices in the games' monthly fees. I did not think of the price of the games going up.
But they will get the money from us, one way or another. So I quit. I un-scribed my 2 accounts for WoW, since blizzard would not give me actual answers to my questions.

What if we all told them we would no longer subscribe to their games? If no one buys their games, or pays monthly fees, blizzard would have to start treating people nicer, and keep fees/prices the same, or even lower.

And I will be looking for a non-activision/blizzard game to play.

Jamie
price gouging/battle net
# Aug 12 2009 at 8:32 AM Rating: Excellent
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Tindaial wrote:
What if we all told them we would no longer subscribe to their games? If no one buys their games, or pays monthly fees, blizzard would have to start treating people nicer, and keep fees/prices the same, or even lower.

And I will be looking for a non-activision/blizzard game to play.


I find it interesting that in your statement you don't ever use the word 'fair'. That's fine if you don't want to pay their price, it's part of being able to choose. Realize though that large game companies have in fact taken large hits to their wallets in order to maintain their customers and keep up with the competition. They've sold hardware/software at a cost less than what it costs them to produce. Now I ask if you if that's fair?

I don't necessarily agree that price increases are needed, but I know that in some cases there are current products that are under-priced and an increase would be more than reasonable for both parties. Also like was mentioned the CEO or whoever's quote was taken out of context and blown way out of proportion. I think it's fine to state your concerns to Blizzard, in a reasonable and mature manner, but a boycott on current games before price increases are actually in place or official announcements is a bit silly and extreme.

I was also interested in the the whole Blizzard is only out to make money and the Henry Ford comments about a company that only makes money is a bad company. Aren't you forgetting that Blizzard has maintained a high quality of standard in their games and continues to do so? That sounds like a great company to me. A great product and makes money. It's a win-win situation because it means the company can keep their heads above water while giving their customers a great service and/or product. That's true business.
From the transcript
# Aug 11 2009 at 2:14 PM Rating: Excellent
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Just so it is clear, Robert Kotick's statement about raising prices was in response to a very specific question posed by Tony Gikas of Piper Jaffray "<Activisions> comfort level regarding pricing of some of your new games that have some expensive controllers"and qualified with "if it was left to me".

Meaning the response was in regards only to games with "expensive controlers" and there are other viewpoints and/or mitigating circumstances which Kotick and Activision have factored into the decision not to raise prices even further which went unsaid.

This was a quarterly meeting involving business leaders and members of the banking finance community, of course they're going to be talking money and how to maximize it.

Edited, Aug 11th 2009 5:15pm by NeoJaecin
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byebye open game market
# Aug 11 2009 at 12:49 PM Rating: Decent
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Quote:
Quoted Text53.fearmonkey said:

August 7, 2009 at 8:20 am@bugmenot yeah, thats complete baloney.
Glad you buy into it, you can pay the higher prices, while the rest of us wait for used copies.
If they kill the used market with digital distro and use higher prices, watch the industry take a nose dive.
Look at the apple store, 99 c titles sell like crazy while the more expensive titles do ok. I truly believe that for publishers to kill the used market, the need to offer titles at lower prices. In my little gamer survey i have found that gamers will buy on impulse a title up to $24.99, anything from $29.99 and up seems like a major purchase.
If publishers want to charge higher prices fine, but they better drop them later to much lower prices for them to sell at all. All higher prices will do is make our purchases more selective, so games like singularity and Borderlands will die as everyone will only buy COD and Halo, and thats happening right now at the current price, but it will be much worse if they raise them.


totaly true.
/facepalm
# Aug 11 2009 at 11:50 AM Rating: Excellent
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Brilliant idea. Raise the price of luxury items in the midst of a recession. That will definitely get you more money. Right.

/facepalm
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# Aug 11 2009 at 1:52 PM Rating: Excellent
/chuckle
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