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Kotick: Activision Could Withdraw PS3 Support Without A Price Cut
Kotick: Activision Could Withdraw PS3 Support Without A Price Cut
June 19, 2009 | By Leigh Alexander

June 19, 2009 | By Leigh Alexander
Comments
    63 comments
More: Console/PC



Activision chairman Bobby Kotick has never been shy about urging hardware price cuts to drive console userbases. Now, however, he's taking it a step further by directly targeting Sony -- and implying that his company would consider withdrawing software support for the platform without a price cut for the $399 PlayStation 3.

"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," Kotick told the UK Times Online, adding that the return on investment is "better" on the Wii and Xbox 360.

He cited high development costs on the PS3, adding that Activision has paid Sony $500 million in royalties to boot.

"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," said Kotick. "If we are being realistic, we might have to stop supporting Sony."

Kotick told the Times he's looking at 2010 and 2011 for Sony, whose games business lost $597 million last year, to get its pricing in line with the rest of the market, even if it means risking further losses.

"When we look at 2010 and 2011, we might want to consider if we support the console," he said -- and also included the PSP as an area to re-examine. Software penetration has lagged somewhat on Sony's PSP, and analysts have already criticized the $249 price point for the PSP Go!, the download-only hardware revamp that launches later this year.

Gamasutra has reached out to both Activision and Sony for further comment on this story and will update with any we receive.

[UPDATE: Sony Computer Entertainment America senior director of corporate communications and social media Patrick Seybold responded to Kotick's comments in an email to Gamasutra, saying, "PlayStation has tremendous momentum coming out of E3, and we are seeing positive growth with more than 350 titles slated to hit across all our platforms, including many anticipated games from our publishing partners."

"We enjoy healthy business relationships with and greatly value our publishing partners and are working closely with them to deliver the best entertainment experience."]


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Comments


Kouga Saejima
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...and leave the battlefield on PSP and the PS3 to EAs Skate, and Rock Band?

Seriously what is this man talking about?

Joseph Garrahan
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He probably just wants to muscle Sony around...and being #1, he has some leverage...

Lewis Denby
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It's a pretty damn big statement to make publically. Will be interested to hear Sony's response.

Kouga Saejima
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Sorry Joseph,



but he seems out of his mind. How much money would Activision lose with such a move?

Mark Day
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Is he posturing... perhaps. But from a purely business POV he is essentially correct. If you can invest $1 million on platform A and get a return of $5 million, ($5 for every $1 invested). But on platform B, (Sony PS3), your return is only $2.50 for every $1 invested... it only makes sense to evaluate where to invest. Particularly when you are the Chairman of a publically traded company who's main responsibilites include representing the best interests of the stock holders. Will it happen... I doubt it. But it could result in a reallocation of Activision/Blizzard resources skewing more towards XBox, Wii, titles with less PS3 support if the ROI landscape doesn't shift a bit. So maybe less support... but no PS3 support... I doubt it.

Kouga Saejima
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Mark



your equation is missing one point. Competition.

Bob McIntyre
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Mark, I'm not a CEO or anything, but how does that reasoning make sense? If there's a 500% ROI market and a 250% ROI market, the sensible thing to do is to take them both! If you're big enough to handle it, there's more profit to be made for your own company, and thus less space for your competitors. I agree that Sony has been hitting some high prices with their hardware lately, and it would be good to knock that down a bit.



But I do not believe that Activision is losing money on its PS3 ports. Let's be serious here, if Activision is going to release Game X on the 360, and they're only going to be able to sell, let's say, half as many copies (I am making this up) of Game X on the PS3, then why wouldn't they do it? The PS3 version only costs as much as a port, since they were already going to make the 360 version anyway. All they need to do is port the thing and they get 50% more sales! The port will not require extra marketing/advertising. Most of the audio and visual assets can be reused. Gameplay assets like levels can be reused. The game's overall design doesn't change at all. There is some code to rewrite, and you have to make boxes that say PS3 on the outside, and deal with Sony's licensing and certification. Those things do not add up to 50% of your budget.



It seems to me like it would be worthwhile to keep some "PS3 port" studios around, places that exist purely to get that easy extra cash that becomes available by making the 360 games they were already going to make anyway.

mr jasler
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also mark. If Kotick takes that $1 he was investing in the PS3 and puts it into the the Xbox , he won't gain another 2.50 on the xbox. So Kotick is willing to stop supporting PS3 when his Call of Duty MW sold 4 million copies on it? Investing in just the xbox is not going to suddenly get another 4 million copies sold on the xbox when it has sold 5 million? His just trying to put some pressure on Sony, but in reality his logic is wrong and he would never do it.

Mark Day
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Kouga - Not suggesting that they would simply walk away from the PS3 revenue. Rather they would need to replace it. Perhaps by altering Production plans to have fewer PS3 lead SKU's. Or not invest in the PS3 versions of certain titles and use those resources for additional product releases on the platforms they feel provide a better return.



Regarding Competition... Could a publisher survive and even prosper with a strategy that only supported a subset of the hardware platforms out there? That's what makes Kotick's comments so interesting... . IMHO - It's possible... might not want to do it... but it's possible.

Andy Keeble
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But if he takes that $1 and invests it in a different game then he could be making two sets of $5.



It will also have the benefit of getting that value up to $6 maybe $7 because the people who would have bought it on PS3 will have to get it on 360 now.



I'm not taking sides. Just pointing stuff out.

E Zachary Knight
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I think he is just trying to use his clout as CEO of a major game publisher to force Sony to drop the price so he can finally afford one.



That is the only logical reason I can come up with.

Kouga Saejima
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Andy - he could, but will the different game make more money than a port of a known and popular franchise?

I can't see Activision releasing new risky IPs. Just look how they handled Ghostbusters and especially Brutal Legend.

For me his statement is a bluff with the intention to get bragging rights over something everyone already knows. Sony will drop the price this year and Kotick will step into the light and say "See? I told you so! Everything is alright again. I showed Sony the right path." Actually I'm asking myself is he looking for a new job?

Bob McIntyre
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Andy, I don't think your reasoning is solid. The 360 audience doesn't have unlimited money to buy games, so putting out more games, even if the quality level is kept, doesn't mean you keep getting money at the same rate. And besides, making a PS3 port of an existing game is cheaper than making a new 360 game. Just think about it. Modern Warfare 2 gets a PS3 port, how much will that cost? Versus making a completely different game for the 360 that comes out at the same time as Modern Warfare 2, needs completely original development and marketing, and possibly cannibalizes MW2's sales, or the sales of some other game.

Jason Manley
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chuckle

Mark Day
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Hi Bob,



I agree with your strategy of putting less priority on PS3 versions. But never underestimate the needs/expectations of a big publisher. We could be running a good business unit within that organization, generating over $20mill in revenue a year on an investment of $6mill, (I think we would both love to own and run that little company in the outside world). But within a Big Publisher environment we might be seen as failutes, not providing enough return to the company in comparison with their other business units. I could easily see a day when we are called into our bosses office and informed that the company has made a decision that the "opportunity cost" of our little profitable business is to high. They want to redirect those funds into other areas that are providing a bigger return or they believe will provide a larger growth opportunity... in fact they want to redirect our funding into a strategic investment setting up the R&D strike team to support the recently announced PS4! :)



Ooops... I have gone a bit off topic. Sorry, got to get to work. Have a great day - thanks for the thought provoking comments.

Joshua Sterns
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This move would have more bite with support from other companies like Ubisoft or EA. I don't think one publisher/developer is enough to "force" Sony to drop the price of the PS3.

Wolf Wozniak
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Kotick.



PS3 owners buy unique and risky games. Valkyria, Heavenly Sword, LittleBigPlanet.



360 owners only have Halo, and a muscle heads, and buy your next "X hero" games.



I don't buy Activision games, because I have culture.

Amir Sharar
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Bob said: "And besides, making a PS3 port of an existing game is cheaper than making a new 360 game."



You would think so, but he did explicitly mention high dev costs for PS3 development.



We are comparing ROI with fairytale numbers here (loosely based on how 360 games perform against PS3 games, but disregarding the differences in dev costs for each). While Activision has their own numbers and they've likely analyzed this to far more detail than what we have done here.



Couple this with the fact that the global recession is forcing even big name players to cut back and scale down. We are seeing many surprise moves and will see many more in the coming year or two.



Kouga Saejima: Do remember that many publishers did the same to the GameCube last generation. 2K Sports stopped making sports games for the GC, allowing EA to have full reigns on it. Despite that, EA wasn't able to sell many copies of their sports games on the GC. It was a calculated risk as publishers realized that GC owners were primarily interested in Nintendo games (this isn't the case with PS3 owners, they are open to 3rd party games), but it does demonstrate that you can leave a console, allowing the competition to run free, but still not lose any sleep over it in the end.



Personally I think Kotick's concerns are very valid. If by 2010 and 2011 there is no substantial growth for BOTH of the HD consoles, there's going to have to be some cutbacks made.



Neither the 360 or PS3 are growing in userbase in the same fashion the PS2 did. The Wii is, but publishers are having issues with it (multiple reasons...a discussion for another news item). So with the high costs of HD game development, along with the fact that HD consoles aren't as widely adopted as the PS2 was at this stage of its life, AND with the global economy in the state it is in...publishers have to rethink how they do business.



Thus a North American publisher may have to ditch the console that is last place in North America, if that console's condition worsens during the next 2 years.



While I agree with Kotick in that sense, I don't agree with making this worst case possibility public, especially when it is rumoured that Sony will announce a price drop at TGS for this Fall. Also considering that price drops during the next 2 years will put the PS3 into a near (if not at) mass market price...it's too early to speculate a lack of growth for the PS3.



Maybe it's just me as an avid fan of games, but I see a lot of value in the PS3 and 360 at the moment, and I am somewhat surprised at their slow adoption. I'm seeing cell phones sell for as much as these consoles and the mass market is eating those up. Price is only one factor here...

steve roger
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Is that a threat or a promise? Guess which one I am hopping for.

Kouga Saejima
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Amir, yes I remember the Gamecube and what happened. But comparing the current gen with last gen is not so easy because the marketshare wasn't split the same way as it is today.

I'm just completely baffled to see him saying something like this in public. If he meant it seriously and if Activision had analyzed their numbers as you say he would talk with Sony and not with the UK Times Online. For gods sake he is the CEO of the biggest publisher and not some blogger. Messages with such an impact aren't for everyone ears, especially not for the potential customers on PS3 and PSP.

Christopher Plummer
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Sony should have just responded with something like: their focus is on the launch of the PSP GO! and that there are currently no plans to decrease the price of a PS3 at this time. Just to let him know who sets the prices round here.



Kotick is so full of sh*t. They make money on PS3 ports because they came into this generation knowing that they were going to be making multi-platform HD games. The whole machine is designed around it. It spreads the risk and maximizes the potential audience. If he's suggesting that all of the PS3 customers will just buy a new current generation console to play Activision games then he's either crazy or thinking about releasing a hardware platform in the next generation.



He bluffed on the wrong flop, and I hope EA calls him on it. Sure, if it was heads-up, he'd have Sony in a position where they have to respect his play, but there's no way they leave money on the table that will essentially go right into EA's hands.



Funny thing is that this reminds me of last gen when EA got on their high horse and held out XBOX Live support from their games because the company perceived the costs/demands to be too high. That didn't last long and proved to be a mistake.

Lance Rund
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The quote that I see being missed here is "Activision has paid Sony $500 million in royalties". That is a HUGE amount of money, and is likely what is eating into the profit margin of PS3 ports of games. Activision doesn't think it's getting its money's worth. This, plus Kotick's prediction that without a price drop the PS3's market share will decline, is what is likely fueling his "throwing down the gauntlet". He's saying "If you're going to charge us half a billion dollars for permission to make games for the PS3, you'd damned well better make sure there are enough PS3 customers to make it worth Activision's while."



And from that point of view... he's right. It's not Activision's duty to enrich Sony at Activision's expense, and if Sony's royalty rates and market share make it not worth the effort, then withdrawing support for the PS3 is the correct decision. Betamax all over again...



More speculation, but I would also guess that the current royalty agreements between Activision and Sony expire in 2010 and 2011. Kotick probably doesn't want that line item to be as high as it is, and is playing hardball to try to get Sony to reduce its royalty fees.



Sony's public response, by the way, was little more than cut-and-paste and devoid of content (it didn't even mention the name "Activision"), as most "PR-speak" tends to be. The upcoming private exchanges between Sony and Activision would be MUCH more entertaining, but unfortunately we don't get to see those. Darn.

Tom Newman
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This is not the first time (recently) a statement from Activision has caused me to scratch my head...

Kouga Saejima
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Lance



"It's not Activision's duty to enrich Sony at Activision's expense..."

This works also vice versa.



"Betamax all over again..."

I beg your pardon? What kind of games were on Betamax?



"Sony's public response, by the way, was little more than cut-and-paste..."

I guess they should have said something like "Bobby... F*#k off."



PS: regarding royalties, how much did they pay Nintendo and MS?

Andrew Kim
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Lance hit it on the head there. Sure, Activision's big titles like COD are going to move units on the PS3, however, for their not so big titles and value titles (for which they have a TON of) , they have been taking a hit on the PS3 versions. 10000 units sold in a week on the X360 versions, may mean that less than 2000 sold on the PS3, sometimes even worse. Throw in those manufacturing costs, hardware costs, developer costs, and the aforementioned licensing fees, and you got yourself a loss leader. Look up the sales numbers if you want proof...it ain't pretty.

Nicholas McKay
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Wolf: "PS3 owners buy unique and risky games. Valkyria, Heavenly Sword, LittleBigPlanet.



360 owners only have Halo, and a muscle heads, and buy your next "X hero" games.



I don't buy Activision games, because I have culture."



I really hope this is a troll, because if not your fanboy-dom just came out and it appears to be uneducated. Of the top selling PS3 games of all time, at least from what I'm seeing on the Internet at the moment, Valkyria and LBP don't even make the list. Heavenly Sword checks in at 9th, and I'm unsure I define it as "unique" or "risky". #1 is Call of Duty 4, and I assume this list is US-only. Per Kotaku, in December the top selling games all-time in Japan were MGS4, another Hot Shots Golf game, two Dynasty Warriors games, and another soccer game. Again, hardly unique--hardly risky. I'll leave the "having culture" part alone. Again, if this was in jest, disregard my comments and accept my apologies.

Lance Rund
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Kouga: Betamax had content restrictions and asked high licensing royalties from people who wanted to publish movies on Beta and make Betamax equipment. VHS did not have such restrictions, and their licensing fees were much lower. This was the major factor which led to Betamax's demise. No, Beta was not a gaming platform, but there are significant parallels and similar forces at work.



Yes, it works vice versa. The conflict is that Activision thinks Sony needs Activision more than Activision needs Sony, therefore Koteck thinks he is the dominant player in that partnership. Given that the success of a gaming platform is very closely linked to the size of the software library available for it, and that Activision is such a major player, I can see why Koteck believes he is in the driver's seat. Sony, of course, will see it differently.



What should Sony have said? Something less generic. Something to the effect of "We at Sony believe that as the economy recovers people will graduate to the PS3, and with increases in PS3 sales Activision will see the value of its investment in the PS3 platform." Something that addresses the specific complaint, mentions Activision by name, explains why Sony believes what it does. The quote in question could have been attached to almost any situation. Out of context, would anyone even know the quote as intended to be a response to a publisher considering abandoning the platform? That's what I mean by cut-and-paste.



CEOs who publically tell other CEOs to "F*#k off" (or some business-speak equivalent) tend to not be CEOs for very long. Jerry Yang comes to mind.



As for other royalties, I don't know, nor do I think it's the most important question. The major question is not "how much did they pay"... it is "for every dollar in royalties to Sony/MS/Nintendo, how much profit was returned?" If they paid a full billion to Nintendo but saw ten billion in net sales to the Wii/DS, that's a well-spent billion. If they spent half a billion on the PS3 and saw four hundred million in net sales to the PS3, it's time to abandon the PS3... or at least, consider it.

jonathan evans
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Lance hit the nail on the head. Those royalties were based on the success of the PS2, when Sony was able to command much higher rates.

Z Z
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Don't lower it by 2011 and we'll pull support? Lol, they'll lower it by 2011, this isn't a threat or anything. If you're serious about it say lower it by the end of the year, max, or we'll pull support. This is just to get your name in the news.

Bob McIntyre
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"I have culture" made my day. Get a PS3 and don't buy anything from Activision, you illiterate heathens! Have some class, you uncultured proles, for Jesus Christ's sake!



I am hoping it was a joke, but it might be funnier if it's not.

[User Banned]
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This user violated Gamasutra’s Comment Guidelines and has been banned.

Christopher Plummer
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Annual report for 2008 says they spent 267 million in total on software royalties and amortization (not SONY -- everyone). It also goes on to say that they made 241 million in profit on the PS3 and 361 million on the 360, which are in line with their install bases even though the software split for the Call of Duties are more like 2:1 in favor of the 360.



This dude is feeling himself way too much. Unless he's also covertly stating that the console game space overall is too expensive and they are going to be moving away from it and concentrating on areas with more growth possibilities. Which I could see backed up by their finances, since World of Warcraft makes almost as much profit as their whole entire console lineup does.

David Rodriguez
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Sony is not in ANY position to confirm or deny anything. The comment was copy and paste I agree but other publishers are gonna hear all this and Sony can't give credit and let activision possibly start a revolt if other groups wanna jump on the band wagon (lots have expressed concern, no ones made threats)



Make no mistake, the price-cuts are going to happen eventually but Sony has to do it right. Hopefully Coordinate Date releases with a powerhouse title/titles along side the price cut.

Kouga Saejima
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Thank you Christopher for checking the numbers.

But where are that 500 millions (that are mentioned in the article) from?

Ben Versaw
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Think of it this way. Do a completely non-scientific poll, how many of you have a PS3? How many of you know someone who has a PS3?



Mine goes something like this:



Number of people I know with a PS3: 1 person

Number of people I know with a XBOX 360: 1 per family sometimes more

Number of people I know with a Wii: About every other person - and almost everyone wants one



Sony is just now -finally- coming out with some a large amount good games on the platform too that might it make it worth paying an arm and a leg for - but I don't really know anyone who likes God of War / Ratchet and Clank / other exclusives so much they will buy a PS3 when the XBox 360 can deliver a comparable (and in more than one case a -better- experience) for less money.



Also, a PS3 without game developers is just a very expensive movie player ;) . So yes, Sony needs Activision more than they need Sony.

Bob McIntyre
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Ben, why would anyone bother with that entire line of thinking?



Do a non-scientific survey to get anecdotal (read "useless") data when the sales numbers for the consoles are pretty well-known? Why? And then your last sentence implies that Activision is the one making the games that move PS3s and keep players engaged. Where is that coming from? Especially when you say things like "I don't know anyone who likes enough to buy a PS3," which is anecdotal (useless) and ignores things like the conspicuous spike in PS3 sales the month MGS4 came out.



Why does any of that line of thinking even merit consideration?



Also, for the anecdotal matter, I think the PS3's exclusives are great. Uncharted 2 looks great, God Of War has a strong history, MGS4 was good, inFamous is great, Ratchet & Clank was fun and pretty, Resistance 2's coop was solid (single-player not so much), and I heard rumors that Ninja Gaiden Sigma 2 will have a camera that shows the action instead of close-ups of walls, not to mention the online coop play. The 360 has cool stuff, too. The new Splinter Cell looks like it might be good after all this time, and Gears is cool. I'm not a big Halo player, but a lot of people like it. But the real point is that this is all made up or anecdotal, so it means nothing and should be ignored.

John Caminiti
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I can see Activision pull some PS3 support, games like Kung Fu Panda and Monsters vs Aliens tend to sell the least amount on the PS3 so I can see support for games like this stopping. Although games like Call of Duty and Guitar Hero still do very well on the PS3 so I don't see Kotick pulling support for games like these anytime soon, especially Call of Duty, thats like printing money at this point.



A for the PSP, Activision PSP games never tend to do very well and Sony requires that a PSP game has to be a certain percentage different from other consoles because they do not want a direct port (I don't remember the exact number and I may be wrong so correct me if I am but i think it was between 15-30% different). So with the additional development cost of the PSP and the low sales numbers and the high price and limited storage capacity of the PSP Go, I can see Activision dropping support for the PSP (UMD media is 900MB for single layer or 1.8 MB for Dual layer, so if games max out this storage capacity, it limits the amount of games you can download to about 17 full titles max).

Ben Versaw
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Bob - It does mean quite a bit. The PS3 is a fantastic device and it does truly have some good games - but when it comes down to it the XBOX 360 has - for the most part - the exact same library of games. While I would love to get my hands on Little Big Planet or Clank, etc.



When the only difference is maybe 10 game titles (if that) its simply not worth the price, nor the incredibly more difficult development process (which many developers have commented on). Especially when everyone is looking for ways to cut the budget - the PS3 is an obvious choice to cut.

Bob McIntyre
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It is more expensive (until Sony comes to its senses), and it's less popular. Those are true statements. As for being harder to develop for, that's just whining. Being a software engineer means learning new tricks all the time, and crying about it doesn't help. Besides, there are plenty of engines that run on PS3, including Crytek, Unreal, id Tech 5, and Gamebryo.



Anyway, some of those points are good, but doing an unscientific survey in place of using widely-available numbers seems ridiculous, and ignoring the value of exclusives seems particularly unjustified. There are reasons why someone might prefer a 360 to a PS3 (or vice versa), but what you presented above wasn't good reasoning.

Brighton gardiner
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@Wolf

Stay classy Mr. Culture.

But yah, there are more games than Halo on the 360. Just giving you a heads up. You may want to check out this thing called the internet. Its a useful place to find these things called "Facts". But I am going to guess that you are a cherry picker, and you already know your statement is a bold faced lie.

Kouga Saejima
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Christian Keichel



Because it was a different situation. Just take a look at install bases last gen an then take a look at current gen. The current generation is not a "PS2 rules them all" situation.

Joshua McDonald
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Other factors not mentioned in the many comments:



1) Many PS3 owners are also 360 owners. If the ratio of 360 sales to PS3 sales is 2:1 on a particular game, it doesn't mean that you'd lose a third of your sales to make it 360 only. Many of the PS3 buyers would have simply bought the 360 version if that's all that was available.



2)Activision could be cooking a deal with Microsoft. I could see Microsoft cutting into their portion of the profit or even paying Activision outright to get some of their big titles as 360 exclusives. Whether it would be worth Activision signing the contract would depend on how much money they thought they would lose by cutting PS3 support.

Sylvain Vignaud
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1) this guys is the head of a top game developer/publisher in the world ; he's not crazy.

2) nobody has ever made such a statement in video game history ; which gives such a statement some seriousness.

3) PS3 has higher development time&cost, high royalties level, and lower game per console sells (according to Kotaku). Thus the average return of one dollar invested in developing for PS3 is inferior to the average return on investing one dollar in developing for Xbox. This view is of course only partially true, given that the Xbox owner will not buy twice more Activision games if Activision develops twice more games.

Thus making money on PS3 games is much harder.



Bobby Kotick is asking for one thing: help me making money on your platform, or I'll drop it. And if he does, others might follow.

Sylvain Vignaud
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Doh, plz replace "the Xbox owner will not buy twice more Activision games if Activision develops twice more games" with "the Xbox owner will not buy twice more Activision games if Activision develops only (more) Xbox games."

Sylvain Vignaud
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> B N

>Don't lower it by 2011 and we'll pull support? Lol, they'll lower it by 2011, this isn't a threat or anything. If

> you're serious about it say lower it by the end of the year, max, or we'll pull support. This is just to get

> your name in the news.



Depends. Maybe he meant that today's in-development games will make it to PS3, but future games will not it there's not price cur NOW (remember it takes on average 2 years to make a game, so 2010/11 games are to start about now).

I'm quite uncertain about how to read this Kotick's sentence???

Brian Harris
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That's how I read it as well, "When we look at 2010 and 2011, we might want to consider if we support the console," to me means, "we're looking at titles that are going to come out in 2010 and 2011 and we are trying to decide if we even want to bother supporting the PS3"

An Dang
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I guess it's with an article like this that we see more consumer-site fanboyism pop up.



I wonder if the problem with Sony is that the decisions come from Japan, and they aren't paying enough attention to the larger market--not exactly sure how Sony bureaucracy works. I get the feeling SCEJ has a bunch of folks sitting in their black or dark grey suits thinking about how the Japanese consumers don't think the price is too high. Well, I guess they're probably thinking a bit more about the rest of the world.

Kouga Saejima
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Christian Keichel



When Sega gave up on Dreamcast it's install base was 2.5 million worldwide. I don't know how big it was when EA made their decision but consider this: 2.5 million against 25 million potential customers. EA didn't support the Dreamcast - Activision has already worked on the PS3 (and made good money). Three years into current gen and we have a 50-30-20% split with a total ~ 90 millions homeconsoles sold.

That's why I said you can't compare both generations.

Kouga Saejima
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Christian Keichel



then why even start with development for a platform that is

a. too complicated

b. expensive

c. came late

If a publisher can decide what platform will succed, why not from the beginning?

EA decided it from the start but Activision? In my opinion they have invested too much money and time. They simply can't withdraw and I doubt that suddenly (because of Activision) all PS3 owners would buy a XBox360 to make Activisions life easier.

Yu Ki
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Well, I think this might be totally a trick. Maybe it is Sony that wants to drop PS3's price but Sony itself does not want to make the price-cut announcement publicly and that early.

Yu Ki
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The number of PS3's potential users is huge. Just go to twitter and search PS3, you will see so many people bought PS3 because of their 360 hardware failure.:)

Brian Harris
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I'm not sure why someone would buy a PS3 rather than getting their Xbox replaced for free.

steve roger
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Stupid move. The PS3 is on the rise. More and more are gamers saying that the look for opportunities to buy for the PS3. It is the better console hands down. As the developers get used to the platform the games have gotten better and better.

Andy Keeble
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Generally a lot of people looking into getting a PS3 now are games enthusiasts who already have a capable 360 or PC. Hell, I'm very keen on getting one too just so I don't miss their very tasty looking exclusives.



But it's not a matter of how many people have a PS3... it's a matter of how many people only have a PS3. That is the only customer that Activision would lose. Now matter how many PS3s are sold, I think the number of PS3-only owners is going to go down rather than up.

Christopher Plummer
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Christian:

"This huge number of consoles leads to huge developement costs. The idea is not, that the XBox360 owner or the Wii owner will buy more games, the idea is that the potential PS3 owner buys an XBox360 or a Wii. This would be in Activisions interest. The goal would be to sell 1 game 1 million times on 3 platforms (including handhelds) instead selling 1 game 1 million times on 5 platforms. "



@Christian:

It is completely foolish to think that PS3 owners will go out and purchase a Wii or a XBOX 360 for Activision titles in any huge numbers because:

1) SONY and EA (for that matter almost every other publisher) make critcally acclaimed titles in their genres that will become more attractive since they don't require users to go out and buy another console.

2) PS3 owners have always had the choice between all 3 of those consoles and they chose the PS3. If they don't have another console already, it's because they can't afford one or because they don't want it. Activision isn't going to convince a large majority of them to buy something they've already ruled out.



The only way this threat makes any kind of sense is if they decide to pull support for the upcoming Holidays. Then SONY would have to publicly bend over. Because lets say in total there are 20-25 million HD consoles to be sold worldwide between now and the end of the year; a move like this made very public could probably swing 75-80% of those sales to the 360, as opposed to the approx. 55/45 split of last year. But is Microsoft really going to pay them $261 million for that when they are already past shooters and bundled games (hi Tony Hawk), as shown by their marketing push of the Natal since E3? I don't think so.

Ben Versaw
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I think the real issue is as stated and I poorly made an attempt to communicated (and failed drastically). Is how many people only own a PS3?



The numbers would be interesting to see (I did some searches but couldn't come up with anything). I'm willing to bet though that Activision has a pretty good idea of the numbers and its must be in favor of that most of their customer base on the PS3 also owns a XBox 360.



Its kinda like if a new ".xyz" format for word processing comes out and say 30% of the buisness world starts using it for everything. So there is this firm called "Acti-sight" that must supply buisness with documents and for a long time they supply information in both ".xyz" format and ".pdf" (or whatever).



Economic times get harsh and they are paying some poor pencil pusher $1.00 an hour to convert documents into ".xyz" for that 30% . Well the company finally decides, hey, that 30% can just go back to using ".pdf" and we can save $1.00 an hour in conversions.



Because in reality that $1.00 an hour is a much much larger number for the percentage of PS3 only gamers that are out there right now.



Also on a quick search - this isn't the first time this has came up recently. ( http://www.bloomberg.com/apps/news?pid=20601101&sid=aiHCQM2xNCmU )

Christopher Plummer
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@ Ben Versaw



The number of people who have both consoles is not significantly high by any means. I'm sure as the generation goes on there will be larger numbers of people doube-dipping but I doubt seriously if that total ever breaks into double digits.



NPD reported last year that 3% owned 2 next-gen consoles and 2% owned all 3. I'm also willing to bet that the majority of the 3% went Wii/360 or Wii/PS3.



http://www.gamasutra.com/php-bin/news_index.php?story=18107



@ Christian



Sorry about misinterpreting what you were trying to say. What I was trying to get at is that Activision either has to do it now or they really can't do it at all, because they aren't going to get PS3 owners to switch. If they wait 2 years to pull support then they're allowing the PS3 base to double and the market of prospective first time buyers in this gen to decrease by 20 million (10 million a year is pretty conservative considering SONY's plans for 13 million sold this fiscal year).



I can't see them turning down 22 million potential customers now without a HUGE incentive check that covers the profits they'd be losing. There's no way the choice to leave gets any easier for them when that number grows at the rate it is, even though that's slower than they'd like it to grow.

Paopao Saul
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Just to join in on the discussion, I think Lance got Activision's concerns spot on.



The fact that Kotick did not mention how much royalties A-B paid to MS and Nintendo, means he is not complaining about them. Which might lead us to 2 assumptions:



1. A-B is getting its money's worth with those royalties that they are paying to MS and Nintendo.

2. A-B's net revenue, after royalties, on the PS3 isn't nearly at par, or even close with those coming from MS and Nintendo.



So I guess the gist of it is that, A-B isn't making enough profit on the PS3 to sustain development, and Kotick thinks this is because of the low install base, which he thinks is the effect of the PS3's high price point.

Yannick Boucher
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Guys...



Whether a PS3 port of project is green-lit after a careful review of costs vs. revenue. Even if the return on investment on PS3 is not as high, if they're still making money, it's worth supporting. Not only that, but do you really want to make enemies with a company who, may I remind you all, currently has _3_ consoles on the market, generating revenue?



If he thinks the PS3 ROI isn't worth it, and he'd rather make Wii or 360 games with that money, that's for HIM and his company to figure out by themselves. He doesn't have to come out and be an ass about it, like he's been since Activision became "#1". But FOR SURE one dollar less on PS3 and put on Wii or 360 will not automatically generate higher ROI.



He's really just taking public what they should keep private, and I'm starting to get REALLY annoyed at Kotick and his crew; their "success" is really getting to their head. I DARE them to stop supporting the PS3, seriously. He just wants to strongarm Sony on the public place, like EA used to do, only Activision is now officially worse than EA has ever been (which frankly, I didn't think was possible).



As for Activision "not making enough profit" to sustain development... frankly, this kind of stuff is to be judged on a "per project" basis. But remember how he said he only wanted to "milk franchises" in barely veiled words not so long ago ? Define "not making enough profit on the PS3 to sustain development" ...? Technically, making 1$ makes it worth it. And again, if not, reallocate resources to where? Making a 360/Wii Guitar Hero every 2 months ? Or maybe they just wanna cut back on staff... either way, it's for him to figure out, and it has nothing to do with Sony; certainly not on the public space, at the very least.

Andy Keeble
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Alain Corre, executive director of Ubisoft, about Splinter Cell going 360 exclusive on gameindustry.biz: "But there are also a lot of hardcore gamers who have ownership of both consoles. And everyone has a PC at home. To a certain extent if players want the next Splinter Cell game they will find a way. "

Lance Rund
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It would be interesting to see what Sony's business model on the PS3 is, vs. that of the 360 and Wii. The way I see it, there are six ways you can make money on a game console (combine any or all of these):



1. Sell the console itself and first-party accessories at a profit

2. Sell software for the console developed by the console maker itself (first-party software)

3. Charge licensing fees to third-party developers (such as Activision) for permission to make software for the console

4. Charge licensing fees to third-party makers (such as Logitech) for permission to make hardware accessories for the console

5. Hosting of online services for the console

6. Collecting a percentage of transactions for any business (DLC, music, movies, etc.) sold via the console



5 and 6 are not really a large portion of the console market at this time, so we can discount that. Also, I can't see #4 being all that large a source of income. This leaves us with profit on the console, sell software yourself, and charge third-party license fees.



Maybe some of you can point to answers. Does Sony take a loss on PS3 consoles even at their current price, and are heavily dependent upon high licensing fees? What are the percentage mixes of the three main sources of console profit, and how do they differ on PS3-vs-360-vs-Wii?



Kotick may well be saying "license fees make it unattractive to develop for the PS3 given its current market share, so you must increase market share by lowering the price", but Sony may well have to reply "License fees are primarily what pays our bills, and if we lower the console cost and therefore make less/lose more money on the console itself we will have to RAISE license fees to keep the PS3 a viable project." If those two statements are both true, the PS3 may find itself in serious trouble. In the long term, both Sony and Activision have to show a profit, and the way forward is to find a way to make both sides win. Having only one or the other not win in this is not sustainable.



Incentive-based license fees may be the way forward. Tie the per-game license fee to market share and attachment. If Sony increases market share, PS3 license fees go up... but if Activision increases its market share of the PS3 software market, license fees go down. At some point there will be "sweet spots" where both companies realize maximum profit per console sold and per game developed (NOT per game unit sold), and defining the licensing structure and incentive curves so that the sweet spots coincide will be a clear victory.

Yannick Boucher
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@ Christian : I know... I know all that. But there's more to it than meets the eye. There are royalties, there are First Party relationships, and there are other considerations in there that Kotick is not talking about. Take the PSP for example. There's a reason why so many third party developers are back on the bandwagon; it's not a coincidence. I can't tell why, but let's just say Sony has sweetened the deal for them. Now Activision wants Sony to do the same thing with the PS3. Fine. But just don't do it publicly like an ass like that. Do it like everybody does, "have your guys talk to my guys".

Dan Felder
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Actually, the business strategy isn't that complicated. There's a lot of great, insightful arguments here - but I think the issues here are a lot simpler than that.



The PS3 is very expensive compared to the rest of the market. This means that fewer people will buy one and those that do will have less money left over to buy additional games. This hurts publishers doubly, since fewer people will own that particular console and those that do will have less money left over to buy additional games.



This is a problem for publishers, and it's as simple as that. Kotick is trying to get Sony to resolve it. It's similar to a person upset with his cable company's service threatening to switch providers.



As for the ROI side - it is true that the PS3 is a less attractive platform to develop for, and if that money can be better spent elsewhere... Then it's worth looking at reallocating resources. Also, just as some companies initiate price wars or incredibly expensive ad campaigns, it can often make sense for a company to lose money in the short term (perhaps by withdrawing their support from Sony) in order to set up a more attractive business position in the long run (after Sony is forced by the withdrawal to serve both its Publishers and customers better by lowering its prices).



I think that's really all there is to it.


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