Activision/Blizzard CEO Kicks off E3 with Predictions

As E3 kicks off this weekI spoke to Bobby Kotick, CEO of the largest video game maker Activision Blizzard for his insight into the future of the industry.

This week of video game presentations and announcements will be dominated by the console makers' new motion-control sensor technology.

Playing Guitar Hero
Playing Guitar Hero

I was surprised that Activision Blizzard isn't announcing any games that utilize that new technology, but Kotick explained that the company's waiting until they're closer to actual release dates.

Activision Blizzard's E3 announcements were primarily music-oriented — among other things, bringing some new high-profile artists to its DJ Hero and Guitar Hero franchises.

The company's continued investment in these brands is striking considering how much this game category has plummeted in the last few years.

In 2008 music games generated $1.7 billion in revenue; last year that number dropped to $875 million and this year analysts expect it to generate $500 million to $600 million in sales.

But Kotick says he is confident that music games will rebound.

His reasoning: more musicians are getting on board, which gives a broader range of music fans more reason to buy games.

But an increasing amount of Activision/Blizzard's profits come from everything but packaged video games. Kotick pointed out that over 60% of the company's profits come from online revenues — subscription fees for games like World of Warcraft as well as downloads for console games.

Kotick told me he has no plans to introduce a signature Activision Blizzard game onto Facebook for free, as its rival Electronic Arts has with "FIFA" soccer. But the company is investing in building a presence on the social network so gamers can engage more with its games and brands, even if they're not playing them on Facebook itself. The company is introducing some games targeted for the social platform, like a racing game called 'Blur,' but it's still wary of taking the plunge with a proven brand, wary of cannibalizing game revenue.

Activision Blizzard is introducing six games for the iPad and iPhone this month alone but Kotick says the Apple platform won't provide significant revenue any time soon. For now it's tiny, but growing.

Earlier today Wedbush Morgan analyst Michael Pachter suggested that Activision Blizzard should charge the gamers who play its console games for dozens of hours a week, competing virtually against other gamers. Pachter figures that these hard-core gamers are getting hundreds if not thousands of hours of play out of games, without paying anything additional, which created a huge opportunity. Kotick wouldn't address whether an additional fee could be in the works for gamers, simply saying that the company wants to offer a range of ways to pay and play. Of course he did point out that World of Warcraft is the biggest video game subscription in the world, so the company's familiar with the model.

Questions? Comments?