One week before the release of Activision's holiday Trojan Horse, Modern Warfare 3, we sat down for a rare interview with Ben Graetz, the Managing Director of Activision Blizzard in Australia. No question was out of bounds as we discussed game pricing, Activision's reputation, and its future as a publisher.
“Yeah look, you know you can feel free to ask me anything,” begins Ben. “I'm a pretty open guy!”
And Ben Graetz is open. He’s also the Managing Director of Activision in Australia. Managing Directors from Activision don’t normally give out interviews, not in the past at least. They're not usually open guys.
Among those that care about video games -- those in the bleeding niche, ie us -- Activision has a bad reputation, there’s no denying it. A reputation for milking franchises, for making life difficult for its development studios, for being behind the curve when it comes to online -- considering Activision remains the number one video game publisher in the world, you’d understand if it decided it couldn't give a single solitary damn what we thought, but it does. Well, Ben does at least. Otherwise why would he be here, talking to us?
"For most people, Activision has a positive brand"
We begin our interview with a concession -- something Kotaku Australia has in common with Activision locally. Often we get tarred with the same brush. If Kotaku US does something readers don’t like, often we, at Kotaku Australia, have to bear the brunt of that. It strikes us that Ben might often feel the same way about Activision
So we ask him, does he feel the actions of Activision as a global company impact on his business locally, in a similar manner? What does he think about the perception of Activision as a brand?
“I think if you were to talk about Activision's image,” he begins, “to the majority of the population Activision's image is very good. Call of Duty is very well known and liked brand. And the company has a pretty good history of bringing innovation to the industry."
According to Ben, negative perceptions of Activision as a brand are limited to a minority and in a sense he’s right. The vast majority of the 20 million + users who inevitably buy a copy of Modern Warfare 3 won’t be aware of Activision’s negative perception, they’ll most likely have no idea about the drama at Infinity Ward, or its reputation as a publisher.
“For most people, Activision has a positive brand,” he continues, “but there are a small percentage of people who tend to be a bit more vocal. -- who have a negative reaction. So that's one of the things we've been talking about internally since I started my job this year. We want to be a great brand and deliver a great experience to fans of Activision -- we want to put our fans first. So that's actually a focus for us, delivering a great experience. We already deliver great products, we want to deliver a great experience as well.
"This sort of thing is personally important to me, and our team here as a whole. When I look around our office, at our local staff, there's a team of people there who love games, love gaming and really want to do the right thing by all of our customers. We want to do things that cement that."
Cementing a solid reputation, for Ben at least, means focusing on consumers of Activision products and building communities around a handful of key properties.
"There are things that we've started that we want to build upon," claims Ben. "At the start of this year we were charging for some of our customer phone calls -- not all of them, but some of them. So we want to do the right things by our fans, by our customers, and this didn't seem consistent with that, so we made the decision to make all those calls free, regardless of where you're calling from, regardless of how long it takes to resolve. So that's one way.
"Another example is that we have a really engaged community, particularly around the Call of Duty series. There are 30 million people playing online at any given period of time, those are some pretty good numbers. It's a pretty engaged community -- we want to do more to reach out to that community and engage them. "
"Elite is a whole new level"
When Ben talks about reaching out to the community, we suspect he's referring to Call of Duty Elite, a paid service that attempts to add a new layer to the Call of Duty Experience. The announcement of Elite earlier this year resulted in a small backlash against Activision, among fans who felt that they were paying extra for something that other games often provide for free -- but according to Ben, Call of Duty Elite takes community engagement further than any of those titles.
"Elite is a whole new level," claims Ben. "You have a great single player experience with Call of Duty, and you have a great multiplayer experience as well, but for those that want to take things further we're providing the Elite service. We think that's the appropriate model -- you're giving people something they're familiar with and building on top of that experience.
Elite is part of Activision's complimentary digital strategy.
"Take Call of Duty as an example, you'll be able to walk into stores, buy a copy of the game, go home, play multiplayer as part of the value you get in the box. But we'll also provide additional types of content that is paid for as part of a complimentary experience."
In a difficult period for the games industry as a global whole, Activision has decided to focus its efforts on what it knows will work, and use that safety net to take risks in a few key areas.
"I think if you look at our business as a whole, Activision's strategy is to focus on fewer bigger titles, and take some opportunities to break through on some other innovative titles," says Ben. "We have Call of Duty, some good licensed properties, and then we try to break through on titles like Skylanders, which is very unique."
"Look, I think we overdid it there"
We bring up an event we attended years ago, just after the success of Call of Duty 4. We distinctly remember stumbling into a retailer presentation, where Activision boldly stated that, from that point on, it would only rarely invest in new IP, and shift its focus towards established brands such as Call of Duty, Tony Hawk's Pro Skater and Guitar Hero.
Fast forward to the present, with both Tony Hawk's and Guitar Hero on hiatus, we ask Ben: is he worried about the lack of new IP in Activision's roster?
"It's interesting you mention that event," he laughs, "that is going back a few years!
"I think we are worried about that, but it is part of a strategy -- we want to enhance the properties people know and love but at the same time put some weight behind some big bets. Skylanders is a great example of that and the market reaction has been very positive. We've also announced a partnership with Bungie, that's obviously a strong developer and the future of that looks very positive. It all fits in with the theme of focusing on a couple of big things. It has to be something we believe can truly be great, a great experience."
We ask -- isn't there a worry that Call of Duty will eventually suffer the same fate as Guitar Hero?
"Look, I think we overdid it there," admits Ben. "We overdid the releases relative to the innovation we delivered. One of the things I've learned during my time at Activision is that the company is very good at learning from what it's done in the past -- both in terms of amplifying the things it's done well, and learning from areas where it could improve. Talking to my counterparts in the US, they're really conscious of that. We really want to continue to deliver innovation around key themes.
"I actually think in a lot of ways Activision doesn't get enough credit for its innovation, in many respects it's like -- well I see you have an iPhone there. An interesting thing that Steve Jobs said is that, with the iPhone, he created a device people didn't realise they needed. Look at Skylanders -- it's a similar thing -- who would have thought of toys and video games and combining them in this unique way. I give Activision a lot of credit for taking the risk there.
"I think if you are asking us if we learned from Guitar Hero, the answer is yes," he continues. "The vocal minority might question the release cadence of Call of Duty but, for the vast majority, they can't get enough of Call of Duty. We're releasing one a year -- in terms of major releases. I finished playing Modern Warfare 2 and I couldn't wait to play the next one! I think an annual release cycle makes sense. People can't wait to get their hands on the next Call of Duty.
"It's a brand that people love. We've looked at the cadence and an annual release is something our customers want."
"The Aussie dollar has been on a real tear..."
With Modern Warfare 3 now in stores, breaking sales records, it's difficult to argue with the cadence of an annual release -- consumers clearly want a new Call of Duty game every year. But do they want to pay $100 plus for the privilege? We asked Ben about the cost of games in Australia -- does he think Australians are paying too much for games locally?
"Well, the cost of most things, when you benchmark overseas, tends to be a bit high here in Australia, and there are reasons for that," begins Ben. "Speaking specifically about games, there's a number of factors -- it's not quite as simple as doing a match on exchange rates.
"I'm very proud of the fact that we manufacture locally, we're helping to create and stimulate jobs. We have options on that, but we chose to do it locally for those reasons. We distribute locally as well as through our partners -- so that's two things already that are independent of exchange rates. In addition to that, the way we go to retail is different compared to overseas, and the cost structures are different. So it's not quite as simple as looking at exchange rates."
Ben was happy to admit, however, that the sustained strength of the Australian dollar has forced Activision to look at its pricing policy.
"The Aussie dollar has been on a real tear in the last 12 months, and that does give us reason to look at this," says Ben. "So it is something that we're looking at, and it's something that's important to consumers.
"We have to make sure that we're delivering value."
According to Ben, Activision expects that the competitive nature of the local retail market will do a fair amount of discounting on video games regardless.
"I think actually that the Australian market is different compared to the US," he claims. "In the US the prices tends to be stable -- it's a very big market obviously. The retail environment in Australia, for games in particular, is quite different. For us, when we look at our pricing going into the Christmas period, we expect that our pricing on Modern Warfare will see heavy discounts, because that's the market in Australia. Consumers will ultimately get great value."
That kind of discounting, however, is less likely to occur on Steam. Activision, along with many other publishers in Australia, has been notorious for increasing the US price of its titles in the lead up to release. We ask Ben why that's the case.
"I can't speak for other publishers," begins Ben, "I can only discuss how we work. The percentage of sales for us that go through Steam is very small, and we have made a decision to price steam for simplicity at our recommended retail price. We know that, given the promotional nature of the Australian market, that consumers can get a cheaper price buying at retail, which is what most consumers tend to do.
"For us, our steam pricing we set it at the RRP for the market we're in."
"There are three key themes for our business..."
It's probably the only unsatisfactory answer of the whole interview. We push, but get a similar answer. We wonder if Activision would get better traction with its Steam sales if it either maintained the US dollar price, or kept it consistent throughout. It is, after all, the visible increase in the weeks leading up to release that irritates customers. Clearly, however, the impact on local sales isn't substantial enough for Activision to make a change locally. However, if Activision is willing to look at local retail pricing, there's a good chance it'll be willing to look at the cost structure on Steam.
But, for now, Activision is content to focus on brick and mortar retail.
"It's exciting," claimed Ben. "There are three key themes for our business. First, we want to delight our customers and create great experiences -- we'll continue to deliver great games and we want to make sure everything we're doing on a local level is consistent with that.
"The second is that we want to be a great partner to our retail partners. And the third is that we want to be a great place to work. Our team here - our jobs are pretty cool! So those are the three key themes.
"For the region as a whole I see a chance to enhance the experience our customers get at retail and augment that with an ongoing digital experience."
And with that, we end it. I leave the interview with a handful of thoughts, mostly about Activision and its future as the global leader in video games publishing. EA has spent the last year vigorously future proofing itself as a company -- investing in Firemint, Popcap -- whilst Activision appears far more conservative in its approach. Is this the right way to go, I wondered.
Then yesterday, the headline: Activision Nearly Triples Profits In Surprising Q3, another barnstorming release for Modern Warfare 3 -- Activision is now planning to increase its annual revenue forecast.
It occurs to me: regardless of what we think, Activision is doing just fine.