Activision Is Shaken by Departures

Tagged: Activision, Gaming
Source: NYTimes - Read the full article
Posted: 6 years 27 weeks ago

Call of Duty: Modern Warfare 2, one of the top-selling games of all time, has been a huge boon to its publisher, Activision Blizzard. But on Wednesday, the fate of that game franchise may have taken a bite out of its publisher’s stock price.

In an up market on Wednesday, Activision’s shares fell 3 percent to $11.90.

Activision has had some tough news of late with regard to Modern Warfare 2. On Monday, Jason West and Vince Zampella, creators of the game, announced that they had formed a new game development studio called Respawn Entertainment in partnership with Electronic Arts, Activision’s rival. The two men were top executives at Infinity Ward, the studio that created Modern Warfare 2.

Other defections have followed. Evan Wilson, an industry analyst with Pacific Crest Securities, said at least nine other employees had left Infinity Ward in the last few days, including top developers.

The defections come a little more than a month after Activision parted ways with Mr. West and Mr. Zampella, accusing them of insubordination for negotiating to work with other publishers, Mr. Wilson said. Activision and the two men are now engaged in lawsuits over, among other things, the fate of the intellectual property behind the Modern Warfare games.

At first, Mr. Wilson said, investors weren’t particularly piqued by the news. After all, developers and publishers can often have tensions over the way revenue is split, or around creative differences.

But Mr. Wilson said the continuing defections this week from Infinity Ward had given investors pause.

“Investors are starting to think Activision really ticked off a whole studio,” Mr. Wilson said.

That’s a big deal, he said, because Modern Warfare 2 was not just a hit; it was a major contributor to Activision’s profitability, bringing in some $550 million in the first five days after its launch in November, and selling some 16 million copies in the 4th quarter, Mr. Wilson estimated.

It is, Mr. Wilson suggested, one of three legs of Activision’s profitability stool, along with World of Warcraft and Guitar Hero.

Michael Pachter, an industry analyst with Wedbush Securities, agreed that investors were reacting to the news, but he thinks they are overreacting. He said Activision should have no trouble replenishing the supply of talent at Infinity Ward, even if Respawn winds up hiring 20 of its employees (it had around 90 full-time employees in November, Mr. Wilson noted).

“It’s not going to kill the brand,” Mr. Pachter said of the defections. But he added: “Competition will hurt the brand.”

Activision did not return a call for comment. Electronic Arts declined to comment.

Activision can continue to put out Call of Duty games and, in fact, already has one in the pipeline and others planned. Not all of the Call of Duty games were even made by the Infinity Ward studio. But Mr. Wilson argued that there’s a real prospect the company cannot reproduce the talent behind Modern Warfare 2, and the game’s quality, and that’s what has investors worried.

More broadly, the economics of the video game industry are changing in a way that make individual development studios increasingly important. That’s because it costs so much to develop big games now that the smash hits are essential to fund and drive publisher economics. In short, the brain trust of a single studio can make a difference.

“There has been a rise of the developer,” Mr. Wilson said.



GraysonPeddie's picture
Joined: 10/29/2006
Posts: 570

I know my post is quite a bit off-topic, but when I see the word "Activision," I tend to think of Mechwarrior 2: Mercenaries. I played that game in an Aptiva L Series (2140-L5H0 computer. It is a lot of fun at first, but it is quite boring after a few minutes of playing it. I can't believe that game works very well in an ATI Rage Pro (omitting the "128" as in "ATI Rage 128 Pro").

In short, when I see "Activision," I was bound to get carried away when it comes to mentioning old games.

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