Q&A: More on how Activision Blizzard's merger impacts its studios

Q&A: More on how Activision Blizzard's merger impacts its studios
Michael French

By Michael French

July 18th 2008 at 9:17AM

CFO Thomas Tippl discusses strategy and plans following the creation of a publishing and development giant

Our sister magazine MCV continues it's tradition of bagging big-name interviews with top publishing execs - and things have been no different in the wake of the Activision Blizzard merger.

Most recently, the magazine spoke with Thomas Tippl, CFO of Activision Blizzard, to find out more about how the new giant publisher's strategy - and what the inevitable 'business overlap' from the Activision-Vivendi merger will mean for its games development teams.

After bosses Bruce Hack and Bobby Kotick confirmed that some cuts would be inevitable last week, it makes for interesting reading.

Here, we've collated key games development-related highlights from the MCV interview (the piece in full can be read through this link):

Looking forward, have you got your eye on any studios – and could you even be pushed to buy out a fellow publisher?

Our acquisition strategy is not going to change as a result of the merger. We have been very disciplined in the past and we haven’t been a really prolific acquirer because we had very tough criteria for assets that we would like to add to our portfolio.

We look for proven IP, proven developers with a strong track record, assets that have global appeal and we need to get those on terms that create value for our shareholders. That’s a tall order, and we’ll keep that in place – it has fared well for our shareholders over the last five to 10 years. Some of our competitors arguably have not been quite as a disciplined, and not fared quite as well as a result. We’ve seen both sides of the strategy – and we like ours a lot better.

You made no secret of the fact that your acquisition of Bizarre Creations could plug a gap in your portfolio when it came to racing titles. Would you say anything’s lacking from your portfolio now?

Racing was the largest segment that we were not competing in, outside of sports. It was a $1.5bn market we were missing out on for many years, but we knew we didn’t have the development capability to put out a top game and there were not many external options around. We knew Bizarre was the only way with which we could take on Need For Speed.

It took us a while, and fortunately the Bizarre team thought joining us was a great opportunity for them too. We’re looking for opportunities in the rest of our portfolio – and, of course, sports is the largest segment we’re not really competing in.

However, sports is a business where if you do not have the top licences, it’s difficult to make financial sense competing there – Take 2 has proven that for many years. If the top licences came available and we could get them at the right terms, there’s no reason for us not to participate.

How much autonomy is Blizzard going to retain – and is there scope to use Activison and Vivendi’s licences within that division?

Blizzard has established the most successful business in all of video games. It’s not like we need to go there and fix something. Blizzard will continue to operate as they have done in the past – fairly independently.

They have a top notch management and development team and we have a very high degree of confidence that they know how to run the business and a track record to prove it. In addition, they have an extraordinarily strong product pipeline, with Starcraft, Wrath of the Litch King and Diablo 3.

It’s tremendous, and it would be a big mistake for us to distract them with new ideas. But there are some opportunities we will be exploring, especially relating to their expertise in Asia. If you consider that Guitar Hero is not in Asia yet and that the only way to create a business there is figuring out ways to work in internet cafes, etc., we hope to benefit from their expertise.

What’s going to be the main effect of the merger on your studio network?

It’s not about the size, but the quality of the developers. If you look at Vivendi Games, Blizzard is top notch, and within their business, there’s some very good development talent there that can complement what we already have. We’ll be going through a portfolio review process and the idea is to come out with a stronger team than each company had on a standalone basis.

What about the publishing teams? The Sierra label isn’t perhaps in the same league as Activision and Blizzard at the moment. What are its future prospects?

We are currently finalising our operational reviews, then we have to sit down with the Board and review the portfolio changes we recommend. With our own portfolio, we’re providing a ‘screen for success’ criteria that we hold against our own studios and our own intellectual properties. This will be no different in any other parts of our businesses.

I anticipate that there will be franchises, brands, games, projects and studios that will meet those criteria and there will probably be a few that won’t. That shouldn’t be surprising – it’s good business practice. We’ll come out stronger.

Is there a message you want to send the European staff of Activision and Vivendi about their future prospects? Are you planning to reduce headcounts at these HQs?

We don’t have a formal plan at this point. With every merger, there is overlap and redundancy, and so the same will be the case here. Of course, we’re going to go to our customers with one face. We obviously don’t need two sales forces.

There will be overlap that we will have to address. Having said that, if you look at our industry, it’s rapidly growing – last year it grew 30 per cent. And we’ve been growing more than three times that speed. In fact, over time I fully expect our headcount to grow. But in the short term we will exterminate some of our overlap through redundancy – but we will treat people fairly and respectfully in that process.

Is it more likely those overlaps will come on the Vivendi side rather than Activision – or vice versa?

We will try to put the best team together – the all-star team. We’ll update both companies’ skill and experience levels and become a formidable company through it.