Activision CEO talks Take-Two takeovers, $500M WOW-killers

During a panel addressing the future of massively multiplayer online games at this year's Game Developers Conference, Blizzard Entertainment VP and chief designer Rob Pardo said he found it interesting to hear from publishers that World of Warcraft has set the bar too high to warrant launching a competing product. One of the publishers he was apparently referring to is Blizzard's soon-to-be partner Activision.

Speaking at a Goldman Sachs investor conference this week, Activision CEO Bobby Kotick said that just establishing even footing with Blizzard's titan MMOG would require a half-billion dollar investment, and even then the outcome would be far from certain.

"One of the motivations for us in doing this [merger with Vivendi] was our own recognition that even as a multibillion-dollar company with billions of dollars of capital and franchise assets, we would be playing an unbelievable amount of catch-up," noted Kotick. "Even if we were willing to invest the $500 million it would take to just get to a standstill with Blizzard, it would result in declining operating margins and huge risks. And we don't think that even if we made the $500 million or $1 billion investment to get a product out that would be competitive with Warcraft that we would actually be successful doing it."

Kotick also stressed that the MMOG market is a tough nut to crack. "When you look at [LucasArts] and EA and Microsoft and Sony and you pick the venture capitalist--all of the money that's already gone into these businesses that have failed--there didn't seem the likelihood that even a well-managed company like Activision would have the prospect for profit anytime soon in this category. That became very apparent to us. Short of this transaction, I think we would be very hard-pressed on how to be successful in this category."

Activision's wide-ranging Q&A session with investors covered a variety of other topics relating to how the publisher plans to continue riding its current crest of good fortune. After taking a swipe at EA's unsolicited advances upon Take-Two, Kotick noted that the Vivendi Games merger is moving forward well and expected to conclude by the end of June. Kotick also said that the addition of World of Warcraft will especially complement the publisher's Guitar Hero brand in pushing forward the gaming industry's expansion into new demographics.

Kotick also addressed the seeming increase of gaming-industry consolidation, saying that he expects to see less company consolidation, and more developer and intellectual-property consolidation. "Licenses and development talent will consolidate to the places where you have the best prospects for realization," noted Kotick. The comments echo recent sentiments expressed by French publisher Ubisoft.

Returning to EA's buyout proposal of Take-Two, Kotick said that the Grand Theft Auto publisher didn't meet Activision's acquisition standards. "On the Take-Two front, we have had a well-stated criteria on what we are interested in in an acquisition. We need a history of profitability, good management, proprietary technology or franchise, history of multimillion-unit sellers, they would have to be nondilutive and operating margin credos. For us, Take-Two didn't fulfill those requirements."