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Activision: Business Is Good, And Getting Better

June 23, 2010 Article Start Previous Page 2 of 4 Next

Many Procter & Gamble executives have landed at Activision. How do you take that experience outside of video games, with packaged goods, and how have you leveraged that and applied it? How is selling something like Call of Duty like selling Charmin or Tide?

TT: [laughs] Well, we also sell, you know, beauty fragrance among other things. And Pringles potato chips, which is a form of entertainment. [laughs]

But in all seriousness, there is a lot of experience that I was able to leverage from my 15 years at Procter & Gamble, which is one of the most successful -- probably the most successful -- consumer products company. And I worked for Procter in not just the U.S., but I worked for Procter in Europe, I worked for Procter in China, I worked for Procter in Japan.

And what I've learned through all of those experiences is that no matter what you do, you always have to start with the consumer.

You don't start with your product and you don't start with the technology. You start with the consumer and really understanding what the consumer wants and what satisfies the need either through getting their shirt cleaned or getting a great entertainment experience. So, that's where you start, and that's universal.

The second thing that I learned at Procter, and they do better than almost any company, is how important execution is. The way I phrase this is it's easy to be conceptually brilliant, but all the difference happens in execution. The quality of the product, the way you market it, the way you present the product at retail -- all those things apply regardless of the industry you're in.

There are some things that are very different between a company like P&G and this business. This is a business where the creative talent is much more important. It's a much bigger people business. If you look at our assets, we have about 8,000 employees. We have very little machines [compared to a] manufacturing plant.

It's important to recognize that the creative talent, these individuals, it's not one size fits all. They have different needs, different motivations, and being able to be flexible and adapt to that as we do with our independent studio model, it's very different, for example.

So, there are a lot of things that are similar, there are lots of things that are different. And lastly, I would say I spent less time at P&G doing M&A deals. I was the co-founder of Procter & Gamble's venture fund, so I've worked a lot with startups and small companies, and a lot of those experiences have helped me tremendously as we put the deal together with Blizzard or the latest partnership with Bungie.

So, I feel like still today, after five years in the industry, I've been able to get a lot from my 15 years working for a global consumer product company.

Call of Duty: Black Ops

So, what's Activision's M&A strategy right now? I imagine you guys are always looking for something.

TT: Yeah. Our strategy on the acquisition side has been the same. It starts with, first of all, our job is to make sure we grow the business that we have. That's job number one. Second, we are in the fortunate situation, based on our strong financial performance, we have a great balance sheet with more than $3 billion in cash and no debt. Therefore, when we see great opportunities, we can add some value. We can make it happen.

We only do it if it can happen at the right price. Therefore, we don't get more than one or two done a year. I don't think that that's going to change. So, it's very unpredictable what happens in M&A-land, because a transaction takes a buyer and a seller. Particularly, if you're as disciplined as we are, we don't just throw hundreds of millions of dollars around just so that Maryanne can issue a press release.

You have a partnership with Bungie, but were there considerations of "Let's make an offer for those guys?" They're a top-tier company, they'd have a high price. Was there acquisition talk?

TT: Not really because that's not Bungie [president] Harold Ryan's team's objective. They have a very clear vision of what they wanted to accomplish and how they wanted to accomplish it.

There are many reasons we got this done. One of those was that we are flexible in how we think about things. And we bring a lot to the party here. We are the most capable company. When it comes to our line, we have the best institutional knowledge there.

We have proven with Call of Duty that we can really deliver mass entertainment products with numbers that have never been before, bigger than what Avatar and Titanic did at their launch. As a result, the Bungie guys have decided that we are the best long-term partner then.

And you mentioned about looking for ways to grow the business. Recently, [Activision Blizzard CEO] Bobby Kotick spoke about one of the ways that you guys can expand your margins: through getting more active in the used games market. One of the things that he said is to have great partnerships with retailers, and utilize new technology solutions. Can you explain what he meant by that?

TT: I can't tell you new details about this at that time. We've always been watching the market. A lot of our competitors have already executed solutions on the used games market. We've been following those. We've been analyzing those, and when we're ready to share details, we'll let everyone know.

ML: I think one of the things that we've seen is we are working closely with retailers to form partnerships with. For us, we feel that the retailers are making profits, but if they're looking to reinvest those profits in the store experience, if they work with us on an initiative like that, that's a better use of the dollars for us.

Article Start Previous Page 2 of 4 Next

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