Activision, Microsoft, and Platforms
This post comes heavily inspired from a recent GamesIndustry.biz Podcast episode, “What now for Activision”:
Whether part of the ten-year agreement between the two firms or due to a change in strategy, there’s no denying that the break-up leaves a Destiny-shaped hole in Activision’s limited portfolio (NB: We mean Activision specifically, which is left with Call of Duty and the Crash/Spyro remakes — the wider company of Activision Blizzard is doing just fine, as is Bungie).
Matt, Chris and James ponder whether Activision will seek its next billion-dollar franchise from another third-party studio like Bungie or perhaps turn to the many developers it already owns (most of which are working on Call of Duty) to come up with fresh ideas.
To get you up to speed, Activision Blizzard recently announced the departure of a partnership with Bungie and Destiny:
Joint Statement from Activision and Bungie:
Today, we’re announcing plans for Bungie to assume full publishing rights and responsibilities for the Destiny franchise. Going forward, Bungie will own and develop the franchise, and Activision will increase its focus on owned IP and other projects. Activision and Bungie are committed to a seamless transition for the Destiny franchise and will continue to work closely together during the transition on behalf of the community of Destiny players around the world.
We have enjoyed a successful eight-year run and would like to thank Activision for their partnership on Destiny. Looking ahead, we’re excited to announce plans for Activision to transfer publishing rights for Destiny to Bungie. With our remarkable Destiny community, we are ready to publish on our own, while Activision will increase their focus on owned IP projects.
Activision Blizzard accounts for the following companies (Q3 MAUs for the games companies provided for context):
- Activision (46M)
- Blizzard (37M)
- King (262M)
- Major League Gaming (MLG)
- Activision Blizzard Studios
- Activision Blizzard Consumer Products
Activision
- Call of Duty
- Destiny
- Skylanders
Blizzard
- Warcraft
- Diablo
- StarCraft
- Overwatch
- Hearthstone
- Heroes of the Storm
King
- Candy Crush
- Pet Rescue
- Bubble Witch 2
- Farm Heroes
In 2018, that list looks like this:
Activision
- Call of Duty
Blizzard
- Warcraft
- Diablo
- StarCraft
- Overwatch
- Hearthstone
- Heroes of the Storm
King
- Candy Crush Saga
- Pet Rescue Saga
- Bubble Witch 2 Saga
- Farm Heroes Saga
There are two notable titles missing from that list, both under the Activision banner.
Now, Activision Blizzard can (and probably should) be looked at as a whole. But as a player of many Activision titles of yore — MechWarrior, Tony Hawk, Guitar Hero (and while not yore, the Teenage Mutant Ninja Turtles franchise, mi amor) to name a few — it’s difficult to separate the name from the reality. It doesn’t help that aside from Nintendo, Blizzard might have been the only recognizable gaming name to me, quality or otherwise, growing up. It’s hard to look past a name.
With only Call of Duty, is Activision still a name? If so, if not, what’s next?
Launcher Wars
Launched in 2003, Steam boasts 150 million active users and 27,000 games. The sheer number of games is in large part thanks to the Steam Greenlight and Direct developer programs. Steam has traditionally been known as a bastion for indie developers. However, the recent drastic increase in velocity of titles launching on Steam is making it harder and harder for indies to break through the noise. But it remains that Steam is the standard for PC/Mac gaming.
In 2013, Activision Blizzard launched the Battle.Net Launcher — a one-stop-shop to launching Blizzard IP Warcraft, Diablo, StarCraft, and now Hearthstone, Overwatch, and Heroes of the Storm. In 2017, this list expanded to Bungie’s Destiny 2 under the Activision banner. In 2018, Activision’s Call of Duty: Black Ops 4 was added to the launcher. Upon the announcement that Destiny 2 would be arriving on the launcher, Blizzard released a statement that there were no plans to expand to other third-party titles:
Our focus in terms of supporting non-Blizzard games is solely around Destiny 2. Aside from potentially evaluating needs or opportunities for future Activision games, we don’t have any short- or long-term plans to support third-party games with Battle.net. It’s important to us to maintain our quality standards for any experience or service we’re putting in front of our players, which represents a big investment of time and effort on our part, so this is not something we’re jumping into lightly.
With only two launchers to choose from — one with Blizzard exclusives two behemoth franchises Destiny and Call of Duty, one with everything else — it’d make sense to keep the Battle.Net Launcher tightly curated to first-party IP.
2018: Enter the Epic Games Store. Dissatisfied with the 30% cut Steam was taking from sales, Epic decided to compete with Steam by releasing their own store, only taking a 22% cut of DRM-free game sales. While the Epic Games Store is slim pickings now, Epic is home to Fortnite, arguably the biggest video game ever with 200 million accounts. As of this post, Fortnite can still be downloaded independently of the Epic Games Store launcher on Mac/PC, but I imagine in due time the launcher will be required. To add, the Epic Games Store is signing exclusive titles such as Ubisoft’s Tom Clancy’s The Division 2 and Early Access to Supergiant‘s Hades.
If I’m reading the tealeaves correctly, my hunch is that the Epic Games Store is attempting to marry the two models of Steam and Battle.net — loads of third-party content with an attractive revenue model, plus first- and third-party exclusives.
The Platform
More often than not, it seems like I can play any third-party indie title on the platform of my choosing. Let’s take Celeste as an example. I have the option of playing Celeste on my Mac, PS4, Xbox One, and Switch. I chose the Switch as the benefit of portability outweighs online community or big-screen gaming. The Switch has also become my platform of choice as I’m a big fan of Nintendo’s IP. Having all of the content I care about on a single, portable console is a huge draw. (Cue “put everything on Switch” chant.) The friction of bouncing between consoles or being couch-locked is removed.
But the Switch doesn’t have everything, nor can it. It is underpowered to run a healthy majority of AAA games released on PS4, Xbox One, and — the furthest in the power spectrum — the PC. Where HD Twins PS4 and Xbox One compete on the basis of exclusives and online communities/features, the PC competes on the basis of quantity and power; quantity curated by a slew of game launchers. I’d wager to bet most PC/Mac gamers have installed Steam — the heavyweight PC/Mac games store — Battle.Net Launcher (Blizzard) — the exclusive franchise launcher heavyweight — and, as of December 2018, the Epic Games Store — the home of the heavyweight game Fortnite. Regardless, short of a download and account setup, there is no friction involved open multiple game launchers for different titles on the same hardware platform.
If friction doesn’t exist, what’s the benefit to the user? None. So, what’s the point of a launcher? Other than a marketplace for multiple titles or first-party content, it’s a marketing opportunity. Third-party games have an opportunity to be showcased and sold alongside large exclusives — exclusives which attract a core audience to the launcher — which in turn nets revenue for both the platform and the third-party. Without a subscription service à la Netflix and Hulu, it’s effectively the same à la carte model used by the Nintendo eShop, Playstation Store, and Xbox One Game Store.
However, in the case of Battle.net, the launcher is now being used as a vehicle to attract Blizzard IP players to Activision titles. At the time of this post, the first featured image on Blizzard.com is a trial offer for Call of Duty: Black Ops. This offer is also available through the Battle.net launcher, which on a PC can launch both Call of Duty: Black Ops and Destiny 2.
Does this signaling Activision Blizzard’s next move?
Microsoft
I’m going to recall my previous post “Sometimes Failure Leads to Opportunity” with a little help from Ben Thompson:
On Microsoft’s big acquisitions announcement of studios Ninja Theory (DmC: Devil May Cry, Hellblade: Senua’s Sacrifice), Playground Games (Forza Horizon), Undead Labs (State of Decay), and Compulsion Games (We Happy Few):
The Xbox One originally lagged behind the PS4 this generation due to its misguided focus on the living room (including charging $100 more at launch because of the now-discontinued Kinect that was at the center of that effort), but the bigger problem has been a lack of exclusive titles relative to the PS4. One way to counter that is to simply produce them yourself, and these purchases augment Microsoft’s ability to do just that.
This gets at purchasing many smaller studios to begin bolstering IP.
Meanwhile, Microsoft continues taking strides away from the traditional console wars.
Truth is, as Team Xbox has been signaling for quite some time now, and as we’ve gathered from our own conversations with both people in and outside of the company, Microsoft is no longer interested in competing directly with Sony. That’s a battle it lost as soon as Xbox executives started outlining its original, odd plans for Xbox One in 2013. The PS4 has outperformed the Xbox One so resoundingly, Microsoft stopped providing hardware sales figures.
Instead of licking its wounds and trying to fight Sony yet again next generation, the Xbox division under Phil Spencer has taken a drastically different approach. What Microsoft wants most today is studios that will help boost its impressive Game Pass subscription service, its upcoming streaming platform, and its continued stabs at PC gaming. Developing big Xbox exclusives is no longer a priority for Microsoft, and in fact, the company decided in 2016 that it would release future games on both Xbox and PC. Soon enough, Game Pass will also be available on PC, and it wouldn’t be shocking to see Microsoft embrace Steam—or overhaul the Windows store—as it tries to reach the hundreds of millions of people who play video games on computers.
Microsoft embracing Steam would have been interesting as it may open doors to the Mac audience as well, but the latest signal from Microsoft paints a different picture.
Satya Nadella via Stratechery (members only):
We are in, quite frankly, the early days in all of this, but good momentum and we do have ambitions outside of this which I don’t think we covered particularly today with you all. Some things that I’m really invested in is gaming, and the simple idea there is we have as much of a shot to build a subscription business as anybody else. So we describe it as shorthand, “Netflix for games”, we have a structural position in that we have both a console business as well as a PC business which happens to be in fact bigger than the console business when it comes to gaming and the idea is to aggregate those sockets with a subscription service, we won’t be the only ones, there will be competition just like with other content, there may be a few subscriptions that will be successful, so we are going to go after it. The good news is, we have a huge back catalog, which is we have our own games, we bring not only users, we bring already a social network in Xbox Live, we bring content, and we’re going to go after it. We’re going to go after it with current sockets, and of course streaming is another element to it, because then can you plug in an Xbox controller into even an Android phone and play a Triple A game? We know that’s feasible, now the question is when does the cost curve on it going to be viable. So those are at a high level what we are trying to get done.
If we put this together, not only does Microsoft have a wealth of great back-catalog, they are investing heavily in smaller studios to continue the growth of first-party titles. If they do pull off the “Netflix for games” — like the Netflix model — the back-catalog and new first-party titles should come along with a rich collection of third-party games. I’ll be curious to see if Microsoft would/could bring this “Netflix for games” service to the Switch.
To take a step back, here’s the historical and (potentially) future lay of the land; color indicating first-party, gray indicating third-party, solid border indicating some sort of paywall, dotted border indicating free entry:
What should Activision do?
Putting aside if it needs to do anything differently, the question of whether or not Activision should do anything differently is nagging at me. If looked at on the whole, even with the departure of Destiny 2, Activision Blizzard accounts for monster franchises Call of Duty, Candy Crush, and all of Blizzard’s franchises. But I’d wager to bet that’s not enough. To me, that looks like a lot of eggs in only a couple of baskets. If I’m in Activision’s shoes, I‘m beginning to ask myself if I should get the jump on a subscription-based service in the Battle.Net Launcher.
If Activision Blizzard were to open a third-party storefront in the Battle.Net Launcher, indie (and potentially AAA) developers would have an opportunity to see their content alongside Blizzard IP. With an attractive revenue model, as much as I’d hate to see Blizzard’s catalog muddied with third-parties and King, Battle.net becomes an attractive service. To keep the water a little less murky, a tightly curated games store would help. To find the middle-ground between Blizzard IP and random third-parties, the utilization of Activision’s existing nine studios and/or the purchase of several indie studios a la Microsoft would bridge the gap. Battle.net would become a launcher for Blizzard’s first-class titles, Activision owned subsidiary titles, and collection of top-tier indies.
This is certainly a “let’s spend Activision Blizzard’s money” post, but short of spelling doom for Activision Blizzard with the rise of Fortnite, departure of Bungie, and Microsoft’s “Netflix of gaming”, Activision Blizzard needs a model that will continue to drive revenue in a PC world without the friction of a hardware platform. If the battle is lost, Activision Blizzard titles join the ranks of third-party titles vying for the top-spot on other launchers and platforms.