IG: In terms of the DLC, is there a certain goal in mind for how much you're looking to produce on the Guitar Hero franchise over the next 12 months?
MG: DLC is an attractive part of the business model. We'll really be guided by what the consumer appetite is and what kinds of music they want, and we typically look at smaller packets of information to be delivered in that vehicle because of bandwidth speeds and so forth. We've typically been successful selling three songs at a time, or even an album at a time, but we have historically focused on the full 50 to 85-song packs that we've sold at retail.
IG: What's your take on the royalty structure in these games? I know Bobby Kotick had some comments for the head of Warner Music a while back, and there was a bit of back and forth because I think the music industry feels it's not getting the amount that it deserves for its contribution to these games. So how is that relationship between the music industry and the video game industry played out recently?
MG: I think it's in all of our interests to keep driving this and I think most of the music publishers recognize that. We've got a great relationship with most music publishers; Universal Music is owned by Vivendi which is also the majority shareholder in Activision, and that relationship has helped a tremendous amount in understanding the music side of the business and in building relationships with other music publishers. But we're seeing and they're recognizing that consumers that are exposed to music in Guitar Hero are then purchasing that music or other music by the same artists either in stores or through iTunes, and we consistently show that the music that's in Guitar Hero experiences an uplift in normal music sales. Publishers recognize that and the artists are especially recognizing that and we are getting more and more requests from artists to participate in Guitar Hero. So I think most of us, broadly speaking in terms of Activision, the artists and music publishers, see this as a very positive development in the music world.
IG: Let's shift gears for a minute and talk about Tony Hawk. The franchise was, for a long time, seen as THE staple franchise for Activision and then it had 'franchise fatigue' and the innovation in the series slowed down to a trickle. So what is your viewpoint on the reinvention of Tony Hawk and the new board that was created to take advantage of that?
MG: I'd say, first of all, I don't believe in franchise fatigue because that implies that there's just something inherent about a franchise that becomes fatiguing. What I do agree with is that we let the consumer down on Tony Hawk with inadequate innovation. We had a great run on Tony... nine years, more than a billion dollars in sales, countless millions of satisfied consumers BUT we lacked breakthrough innovation in the later years and the game got harder and harder to play in order to satisfy the hardcore audience. In doing that we inadvertently left the mass audience behind. So we knew we had to step back and reinvent the franchise. We took a year off, looked at a lot of different ways we could accomplish this, and in the end, determined that this cycle's willingness to engage in physical interface gave us a great opportunity to reinvent the franchise by adding a board controller with very sophisticated electronics that have precise movement detection, and infrared sensors to know if you're hand is grabbing the board.
We can recreate the skateboarding experience in the living room and we took a page out of the Guitar Hero handbook for this; where Guitar Hero lets you feel like a rock star even though you can't play a single note in real life, the board in Tony Hawk: Ride lets you feel like you're doing all these fantastic tricks that Tony Hawk can do, even if in real life you can't, but you're stepping on the board and you're making all the right motions, controlling the skateboard around the screen, and you're pulling off these tricks and you feel like Tony Hawk does, and it's a great experience... Robomodo did a great job bringing this experience of living Tony Hawk's experiences vicariously and that's really the new innovation that we've brought to Tony with the intention of reengaging this to be a mass-market brand, and I think they've succeeded.
IG: With the state of the industry right now, with the console wars, it seems like a lot of people were looking forward to or expecting a price drop for the PS3 and it didn't happen. From your standpoint, as one of the biggest publishers out there, were you disappointed in that?
MG: I think [pause]... the consumer wants to see better value on that platform. So it's really up to Sony what they'll do with the price.
IG: From my understanding, the North American guys are tied by the corporate side in Japan with the profitability mandate that they just can't lower it until they reach a certain level for the price of the components.
MG: History would say they'll get there.
IG: In terms of their other major announcement, the PSP Go, which is completely digital and dropping the UMD, what is Activision's take on funneling digital content onto the PSP?
MG: We want to deliver our titles to consumers in the way they want them and if the consumer is voting that they want them digitally through the PSP Go, we'll enthusiastically support that and make our titles available. We really watch what the consumer wants to do and we like to publish on as many platforms as possible;, that makes the most sense for us and it helps us reach as many consumers as possible, so as long as the installed base becomes large enough to be viable, we'll be there.
IG: Another major selling franchise for you of course is the Call of Duty franchise. What are your expectations for the upcoming Call of Duty title, Modern Warfare 2 in terms of sales? Do you have a figure that's your goal? It certainly looks phenomenal.
MG: We have goals for all of our titles. It would be surprising... well, let me put it this way: we fully expect Modern Warfare 2 to be one of if not the largest title in the industry this year. When you look at when Modern Warfare 1 was launched in 2007, it had a substantial jump in users engaged in the Call of Duty franchise. World at War, which was launched in Holiday 2008, saw that more than a fifth of its purchasers were first time users, so all those new purchasers are ready for the Modern Warfare 2 experience because they haven't historically been in the franchise.
We also look at Modern Warfare 2 and where it's strongest on the next-gen platforms of PS3 and Xbox 360... the installed base from the first Modern Warfare to the second one will be nearly double. So you add all those elements up – the greater installed base of consoles, the greater consumer base that was generated by World at War – all those things suggest that Modern Warfare 2 is set up to be more successful than any other Call of Duty we've launched so far.
