Bobby Kotick the new Don Corleone?

My my how things have changed.

Just a few short years ago, Electronic Arts was considered the big bully of the videogame industry, but times have changed and so has the bully. Activision, who struggled mightily in the early 00's (with a stock price that was less than $0.50 in 2000), has surged with a vengeance and, with help from its merger with Blizzard in 2008, has become the biggest video game publisher with EA now second.  

Apparently, with the title of "World's Largest Publisher", also comes the title of "Don of the Videogame Publisher Cartel".

Britian's TimesOnline published comments from an interview with Bobby Kotick, Activision's CEO, where he makes a non-too subtle threat directed at Sony regarding the Playstation, "They have to cut the price, because if they don't, the attach rates [the number of games each console owner buys] are likely to slow. If we are being realistic, we might have to stop supporting Sony."

The PS3's price point has been a sore subject amongst publishers for awhile, limiting the install base in these tough economic times to only the true "hardcore" gaming crowd and videophiles - whereas the Wii and Xbox360 have lower prices which helps attract the more diverse casual gaming crowd. The notorious difficulty in developing for the PS3 cannot help either, as it has increased development costs for publishers across the board.

What seems to have sparked Bobby's concern? Well, we are halfway through 2009 and Activision's number crunchers probably have a good gauge on their revenue projections across consoles for the year - and it's very possible that those forecasts had accounted for a PS3 pricecut earlier in the year. Without this pricecut, the user base doesn't expand as greatly, which could potentially mean a repeat of 2008's numbers - and more importantly for Activision, a miss on their guidance numbers. Activision, being a public company, has a long history of underpromising and overdelivering when it comes to their forecasts... but if there's one thing that would really upset shareholders, it would be to underpromise AND underdeliver, which is what the lack of a PS3 pricecut could result in.

The target is Sony, the once-dominant hardware maker. “I'm getting concerned about Sony; the PlayStation 3 is losing a bit of momentum and they don't make it easy for me to support the platform. It's expensive to develop for the console, and the Wii and the Xbox are just selling better. Games generate a better return on invested capital on the Xbox than on the PlayStation,” he [Kotick] says.

The first reaction of commentors across the webosphere seems to be: Bobby Kotick is just a pompous jerk looking to make money for Activision and PS3 will roll on without them.  And while the pompous jerk may be correct, one must keep in mind that Kotick is no fool, he's almost single-handedly built Activision to the heights it is today, so he knows what he's talking about and cannot (and should not) be ignored.  Sony has no choice BUT to listen, as there is some history to what happens when a console is ignored by a top publisher.  During the last console generation, EA refused to offer up any content for Sega's Dreamcast, instead putting its development efforts into the Playstation 2 - a major coup for Sony that arguably lead to Dreamcast's eventual downfall and Sega's abandoning the hardware business entirely.

The "we can live without Activision" mentality is entirely mistaken - Activision has some of the best in-house development talent in the world, and gamers would be wrong to assume that Activision would not be missed.  There's no doubt that Activision has gone sequel-happy the last few years, but their sequels sell, and they usually sell very, very well (think Call of Duty/Modern Warfare, Guitar Hero, Tony Hawk, anything Marvel license). They have also been looking to expand and refreshed their IPs as of late - Singularity, Prototype, and Tony Hawk: Ride are all examples of properties that are either new on the scene or major overhauls of existing titles. Activision is as diverse a video game publisher as there is these days.

But lest we have forgotten, there's a little company called Blizzard that falls under Activision's umbrella. While Blizzard has been very coy with developing for consoles pre-merger, you can bet that Kotick has an eye on expanding their reach into the console market. The Diablo series would be a fairly good fit for a console, not to mention World of Warcraft (or perhaps the rumored upcoming MMO) - if Microsoft were to land any of these titles as an "exclusive", it could possibly be a fatal blow for Sony, at least for this generation.  There is no way Sony would want to inflict this pain on themselves.

So why is Kotick hitting this hot button now?  Interestingly, he mentions 2010/2011 as possible retraction dates where they would stop developing for the PS3 if a price cut doesn't materialize. Chances are the big-wigs were sitting in a room with the bean counters trying to figure out their development and release strategies, and determined that with the current console environment they were risking more than they wanted to with their PS3 development.

Activision, especially Bobby Kotick, aren't fools. They know exactly what they're doing, and by putting forth an offer that Sony just can't refuse, may get their way soon enough.

If not, Sony may find themselves sleeping with the fishes.