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Activision spending $500 million on  Destiny , says CEO Kotick
Activision spending $500 million on Destiny, says CEO Kotick
May 6, 2014 | By Mike Rose

May 6, 2014 | By Mike Rose
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In the run-up to the Destiny release this September, Activision's Bobby Kotick has said that his company plans to spend around $500 million developing and marketing the game.

As reported by Reuters, Kotick put forward the figure at the Milken conference in Los Angeles last week, stating, "If you're making a $500 million bet you can't take that chance with someone else's IP. The stakes for us are getting bigger."

An Activision spokesperson later clarified that it included marketing, packaging, infrastructure support, and royalties, as well as other costs.

This would potentially make Destiny the most expensive video game to date. For the sake of comparison, Grand Theft Auto V is estimated to have cost around $260 million to develop, produce and market.

A rep told Reuters that initial engine and backend infrastructure costs "are upfront expenditures that should reduce future product development costs."

Analysts believe that the game will need to sell more than 15 million copies to break even, although they did not account for any potential DLC or microtransactions that Activision may sell for the game.


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Comments


Innes McNiel
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"Analysts believe that the game will need to sell more than 15 million copies to break even, although they did not account for any potential DLC or microtransactions that Activision may sell for the game."

Even accounting for simple things like a season pass could dramatically cut down that copies sold number. It's 2014 and analysts seem to still look at things through the lens of the 2007 gaming world a lot of the time.

Kaitlyn Kaid
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I think any lens would show a half billion dollar price tag as "big".

Alan Barton
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How many millions of copies do they expect to sell? ... and how much profit do they expect to see after spending $500M?!

Charles Dickens
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They are looking at Destiny as a new product line. IF the game does well, then so do the sequels, toys, books, and God knows what else. The 500M investment is to create all the other high profit items.

Alan Boody
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I just find it funny how Activision (along with other companies like EA) have to throw a half billion at a game while Minecraft was made on a shoestring budget, but has become a cultural icon. Do you guys ever think that Kotick or other execs look at Minecraft and get a bit perturbed?

Rob Wright
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Maybe Kotick and Company do get perturbed, but 1) this assumes that they're not working on funding smaller, lower-budget and potentially more profitable games, and 2) who says they can't do both?

Michael Wenk
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If ATVI could be assured of a Minecraft result on a Minecraft budget, I bet they would do it. The problem is they can't. Most gamers seem to buy based on graphics too. And since that's so bloody expensive in its own, and the fact that marketing costs are sky high, you get a budget that is that high.

For every Minecraft, there are dozens if not hundreds of games that were developed similarly on a shoe string, but are unknowns. They may get a enough of a following on Steam that they're profitable, but even that's not assured. And ATVI as well as the other big public company publishers needs a large amount to grow.

Dane MacMahon
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There are two ways to make a massive hit: 1) make something awesome that people love and market themselves, 2) make something you're not sure about quality wise and market the hell out of it.

Activision are hedging their bets, they've got too much wrapped up in Destiny to let it be average. It literally NEEDS to replace Call of Duty for them.

Karl Schmidt
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If it were possible to manufacture that kind of luck, I'm sure they would be trying to do it.

Dane MacMahon
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They are trying to do it, that's my point.

They might not succeed, no amount of marketing is ever foolproof, but engineering another CoD is exactly what they are attempting.

Ian Uniacke
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What about Hearthstone? Ok so it wasn't a 1 to 2 man team, but it was a pretty small budget and it's generated more lifetime revenue than Minecraft already if I recall correctly.

Alan Barton
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$500 million?! ... With that much, they could fund at least 50 indie games! ;)

$500M is one hell of a gamble. Win and Activision lives another year. Loose and its bye bye Activision.

They can't keep that gamble going with every new project, year after year. Because sooner or later, they will loose one and it'll wipe them out.

In the years to come something has to change and it'll have to be either their business strategy or sooner or later, it'll end in the collapse of their company.

Kujel s
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With $500 million they could fund 10,000 indie games, indie games by definition are low budet projects.

Mark McGee
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Bungie is a privately held independent company. That means Destiny is an indie game. Just an expensive one.

Bruno Xavier
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"Destiny is an indie game".
Best joke I read this month.

Alan Barton
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@"they could fund 10,000 indie games"

Woooshhh.... I was joking about the definition of indie. :)

(On my current indie budget, I would love to get a 1/20000th of that much money!).

@"Destiny is an indie game".

I'm sure they would like to label it an indie game :) ... (If we try to overlook Activision spending $500M on funding it! ;)

Rob Wright
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I don't know about the "bye bye Activision" part. It will certainly hurt the company if Destiny under-performs or outright bombs, but consider this -- Ghosts was widely considered the worst CoD entry in recent years and under-performed in terms of sales and critical response, and the game still sold 13 million copies in 2013 alone.

Alan Barton
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Maybe I need to recalibrate how much I imagine it'll take to sink a big company these days, (they do throw hundreds of millions around) but still, it sounds very high risk indeed.

Michael Wenk
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It is all relative. Right now Activision has a market cap of ~13.69 billion dollars. It has a cash on hand of ~4 billion, with slightly more debt than cash. Assuming that their other franchises can provide enough revenue to service the debt, they could have 8 500 million titles fail and they would be able to just shrug it off.

ATVI is huge, and while this bet seems high in reality, it is not.

Jennis Kartens
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Activision makes more money with Skylanders as with Call of Duty. They do know how to milk the masses.

Jeferson Soler
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@ Jennis Kartens - Those two franchises (especially the Skylanders franchise) may be the two reasons why Activision will recover in case Destiny fails. Still, this is a huge gamble that Activision is doing and I wonder if it would have been better for Activision to have done Destiny as an exclusive to one system to minimize the currently overblown budget.

Kujel s
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I've got a feeling Desinty is going to be a factor in the coming video game crash, this is going to hurt activision badly and other publishers will be watching closely.

Alan Barton
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When a whale dies, a lot of smaller fish get a free lunch.

Kujel s
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Only if said whale eats the same thing as those fish and in this case I don't think that is the situation. The AAA market is focused on teenage boys, the indie market is focused on the 30+ crowd.

Dane MacMahon
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Destiny would have to fail spectacularly for that to happen, which I don't see occurring. It might end up selling less than they hoped for, but I don't see it failing outright. If that ends up the case Activision will likely just try another CoD replacement out a couple years later.

Jeferson Soler
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@ Kujel s - I believe that you are right with the assumption. These super high-budget games are part of the reason why I feel that there may be a second Videogame Market Crash coming. Doing these super high-budget games is like testing the Fates and that's something that should never be done.

Kujel s
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@Jeferson Soler: exactly, the budgets are too high and sadly they are not coming down without a crash :(

Dane MacMahon
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Many franchises have shown they can make a massive ROI on those budgets, though. Companies are not going to stop making Assassin's Creeds, Call of Duties and Grand Theft Autos as long as they are making billions back on millions. That's common sense. Like blockbuster movies, one assumes the bombs are made up for by the mega-hits.

There's no need for a crash, nor is one likely as we are in a very eclectic place right now. We have blockbuster mainstream hits from corporations. We have indies on the complete other side of the spectrum, pleasing niches and making money for talented developers. Even the "middle-class" is coming back via properly budgeted games made for smaller audiences like Dark Souls. As a PC gamer I am literally drowning in games from all three groups, and consoles are catching up fast with the higher focus on digital delivery and indies this generation.

The future is eclectic, there is no need for a crash to kill corporations and "save gaming." Gaming is already saved and flourishing.

Jeferson Soler
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@ Dane MacMahon - I didn't say that there needs to be a crash. I said that there may be a crash coming and it is still a possibility for a crash to happen, because mistakes similar to the ones that led to the first Videogame Market Crash are being done again. In this particular case, just like the Warner Communications-owned Atari overestimated the supply/demand for E.T. and Pac-Man (the latter being barely like the classic arcade game), Activision is overestimating the potential sales of an unproven product such as Destiny and it doesn't help matters that the game is being sold as a multiplatform game. One mistake is all that it takes to make the "fans" (especially the vocal minority on the Internet) go crazy and send hate messages to Activision. In any case, it is a big mistake to believe there isn't a problem with the videogame industry and to assume that there won't be another Videogame Market Crash.

Dane MacMahon
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@ Jeferson

Yes but you're ignoring two things. 1) Activision has the capital to take a big hit and keep rolling. 2) Video games are a much more diverse thing than they were in the Atari days.

An outright crash is just not possible, even if Destiny sells 10 copies.

Jeferson Soler
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@ Dane MacMahon - I don't know if Activision has such big capital, but I'll admit that the Skylanders franchise and the Call of Duty franchise (especially the Skylanders franchise) could cushion Activision in the worst case scenario and there are new games from each franchise coming later this year. Still, nothing should be taken for granted. As I pointed out earlier, nobody should ever test the Fates by doing super high-budget games, and if Destiny fails, then it could spell disaster for Activision and (possibly) the videogame industry. Nintendo, indie game companies (especially when it comes to PC and mobile phone games) and PC game industry are the reasons why the videogame industry hasn't crashed, yet, but even with them being around, that still doesn't mean that the videogame industry is safe from getting crashed. By the way, you are right in that an outright crash is not possible, considering that the last crash took roughly three years before it gave full damage to the videogame industry. In any case, I really do hope that a crash doesn't happen if Destiny fails to sell big and that the worst thing that could happen is give Activision (and other western companies) a reality check about the problems with doing these super high-budget games .

Dane MacMahon
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@ Jeferson

Activision's Blizzard money on top of their CoD and Skylanders money has to mean they could take one big failure and keep rolling, or else they are one of the most grossly mismanaged corporations in existence.

Also I still do not understand why you think Activision failing would cause a crash? I see nothing that tells me Activision going away would harm other corporations' bottom lines, nor impact the strong indie and middle-class game markets on PC and new consoles.

Jeferson Soler
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EDIT:

@ Dane MacMahon - As Kujel pointed out, Destiny is going be factor to the coming videogame market crash and Activision and Bungie are behind Destiny. While there were different factors that caused the original Videogame Market Crash, a good number of those factor were connected to the Warner Communications-owned Atari. Granted, that particular Atari also dealt with home console systems and not just with home games, but still, the higher-ups from that one company made couple bad moves and decisions that led to the first Videogame Market Crash, which means that one company played the biggest role on causing the first crash. Those higher-ups overestimated the supply/demand for E.T. and Pac-Man (believing that the brand names would be enough to sell the two games that needed more time and polish to look good) and it didn't help matters that they also started to make a push to get into the computer industry, which was like them saying that the videogame market was no longer any good to them and that it was dead to them. Unfortunately for those higher-ups, the Atari computers couldn't compete against Commodore 64, Apple computers and PC computers (especially against the more accessible Commodore 64), so the shift to computers didn't help Atari much in the end.

Now, on present day, there's Activision. Aside from the facts that Activision doesn't do its own game console (yet) and that it is its own entity, Activision tends to mirror the 1980's Atari in some ways. Activision is arguably the biggest western publisher in the world, and unlike EA and Ubisoft, Activision tends to do better economically when it comes to sales. This may not be the same Activision from back in the 80's, but I still have to give the company credit for being innovative when it came to the Skylanders franchise and for expanding the audience by including different audiences and demographics when it came to the Call of Duty franchise. Activision tends to be one of the biggest key players when it comes 3rd-party publishing and there are other game companies that tend to look up to Activision, including Japanese companies (I assume). I wouldn't be surprised if Activision is part of the reason for why some Japanese game companies feel that they need to westernize (or globalize if you use Mr. Matsuda's word) their games to compete. Of course, the end result of any company trying to do the same thing or a similar thing as Activision tends to be not good. That's one of the reasons why some mainstream 3rd-party game companies tend to run into problems in these days.

As for Activision, if something were to happen to it, then the problems that are occurring right now within the videogame industry will only get worse, because a good number of game companies look up to Activision and tend to follow Activision's model. It is true that the higher-ups from other game companies, some of the shareholders/investors that don't get the videogame industry, some of the people that claim to be game fans and the game news media are also other factors that may cause the second Videogame Market Crash, but if Destiny fails, then the negative press would follow, causing a lot of problems to Activision and to the videogame industry. Even if Activision recovers (and it could with the help of its two top franchises), the negative press would be very damaging, especially for Activision and for Bungie. The two companies can't sell a game on their names alone; they will have to make sure that the game is really good and that it lives up to its hype, especially if they want to avoid a backlash from the fans and investors. As for the ones that keep on denying that there won't be another crash, instead of denying that there won't be another Videogame Market Crash, you should think about how to make sure that there won't be a crash at all. Just like the first Videogame Market Crash, there have been only bandages to prevent a second crash from happening and bandages can help for only so long.

Dane MacMahon
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I literally can't read that long a paragraph, it would kill my eyes.

Anyway I'm sure it's a cyclical argument.

Jeferson Soler
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@ Dane MacMahon - Read a couple sentences at a time, and if your eyes start to hurt, rest for two minutes and continue to read afterwards. Do this in cycles until you finished reading.

Dane MacMahon
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Or you could learn how to use paragraphs, perhaps.

Jeferson Soler
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@ Dane MacMahon - I know how to use paragraphs. It is just that when I post comments, I'm used to making comments as a single paragraph for the most part (as if it was second nature). Only in some cases I make separate paragraphs on my comments, but that depends on the situation (mostly, when it comes to commenting to multiple people). Nevertheless, I'll edit and break down the paragraph from my previous comment, but keep in mind that there are people that do write single-paragraph written works (like essays and stories) and you can't always expect those people to break down their works for your own convenience. What typed earlier was a comment, but if it was an essay designed to be a single-paragraph essay, then I would have to say "no way" to breaking down what I typed.

Marvin Papin
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"plans to spend", I'm pretty sure he is speaking about the trilogy (There are 3 episodes forseen if I remember)...

What is the most frightening for me, is that I'm pretty sure he doesn't even know what a shader is. Nor why does call of duty works.

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

Marvin Papin
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me too, the barely mmo/mp wierd aspect, the boorish aspect, the marketing (ok 3 classes and then ? not clear for most). But if they are ready to put much efforts into it. Moreover, if there are Bungie departure, (except O'donnell) it's a low amout or well dissimulated. So much people since to trust the game.

For the moment, it is not on my list.

Marvin Papin
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https://www.youtube.com/watch?v=LeDaevD7cEo

that's how I see the game yet. And heuuuuuuuuu ... sigh
ok I donno how they are trying to gather player... not appealing

Robert Green
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You're definitely not the only one. Kotaku had a big writeup about this last week:
http://kotaku.com/i-played-45-minutes-of-destiny-and-it-was-kind-
of-bori-1568127899
Personally I'm conflicted - I liked the Halo games, and I trust that Bungie will still make an enjoyable shooter, and the game certainly looks the part, but at the same time I just can't feel excited about it. I'm not even sure why not, but I guess that's beside the point - you don't really need a reason not to be excited about something, and Destiny hasn't given me a good reason to think it's anything other than Halo+Borderlands.

Marvin Papin
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Halo without the charism, and with probably a less good narrative approach due to MP (in all case, they do not seems to want to communicate on it + the fact that there's no narrative aspect in CoD MP)

And it doesn't seems to have as various situations (enemies, gameplay, scenes) as Borderland. Close maps shown in videos, same style, same elevation, sight range... If any PR i reading us, please show us we are wrong if it's the case.


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