IG: Getting back to the Tony Hawk product, one of the things that popped into my head was some of the lessons learned for Activision in terms of the big retail packaging that comes with the Guitar Hero games; now you have another fairly sizable piece of hardware that comes with Tony Hawk: Ride. Is that something that you've learned from all the Guitar Hero bundles in how to appropriately work with retail on something that size?
MG: Yes, but what it really comes down to is if the consumer demand is there, the retailers will enthusiastically embrace it, and you see the trend at retail today to expand the video game space at the expense of other forms of entertainment. That trend's continuing and we expect there to be more space allocated to video games this year than there was last year, and if there is a title that is capturing the imagination of consumers, retail will embrace it and support it. We feel pretty confident about our abilities in that way, particularly the capabilities that we've put in place with our sales force over time.
IG: How would you say Activision's Wii strategy has evolved over the last year or so? A lot of publishers have been grappling with how to handle the Wii, because it is such a unique platform, but in terms of processing power, it's significantly less powerful than the others and it seems to have a slightly different audience. I've been hearing from publishers that want to get more mature content out to that audience to see if that will succeed, so I'm curious what is your thinking from Activision's standpoint?
MG: We've been successful on the Wii; we're the largest third-party publisher on the system and we find that success on the Wii is driven disproportionately by a few titles, and Guitar Hero is the kind of title that has done well on the Wii with its own physical interface, which is very complementary to the Wii expectation. We think Tony Hawk also has strong potential on the Wii. I think our title Bakugan coming up is well suited to the Wii. So one, we've been the most successful third-party publisher on the Wii, but two, we think our success is driven by pushing a few titles to be really successful on the platform and that's what we'll continue to do.
IG: It's interesting that you mention that Tony Hawk game on the Wii. A lot of people would have thought that perhaps Activision would choose to use the Wii Balance Board which already has an install base of 15 million instead of spending that money to invest in a separate peripheral, which also increases the price of that game itself. Would it have been a better strategy to ship a game that takes advantage of the peripheral that's already out there and doesn't cost as much for the consumer?
MG: It wouldn't have been nearly as exciting an experience. We looked at it, and the Wii Fit board is designed to play the Wii Fit game very well and some other related things, but our board has so much precision measurement in there and the ability to detect hand movements, to rock up and rock down, and as we looked at it, it was an artificial experience when we applied the game to the Wii Fit board and I don't think it would have been successful. This makes it an authentic skateboarding experience.
IG: Is Activision going to look at the sports category ever again? It seems like that's something that EA has a monopoly on and the 2K Sports guys are up there as well. Is that a category that you're looking to again?
MG: It certainly has the characteristics of a category that would be interesting to us, but we would have to convince ourselves that we could enter successfully, accomplish leadership and that we'd have something new and different to bring to the party; right now the barriers to entry there are pretty significant, but it is certainly the size of a category that we would be interested in.
IG: And on the online side, with Blizzard being part of the company now, that gives you a huge boost in resources with their knowledge and know-how about MMOs and their access to Asia as well, but how much of that is applied to the non-Blizzard games? In terms of the technology and the resources being applied to games that are built at Activision's other studios, is there any online assistance from Blizzard?
MG: Blizzard is focused on the Blizzard business and every ounce of their energy and capacity is driving their businesses. What the Activision side gets out of that is an incredible leap forward in institutional knowledge, understanding of the markets, understanding what doesn't work that they've learned the hard way, access to relationships, particularly in China and Korea, that we would have a difficult time uncovering without their long history. So should we find a model that we think would apply to the Activision side of the business, tapping into the Blizzard institutional knowledge and relationships would give us a big leap forward, so that's really how that relationship is leveraged.
IG: Speaking of China and Korea, the free-to-play model is pretty huge over there. I realize that Blizzard is one of those companies that doesn't do that because of their very successful subscription model, but it does seem like the free-to-play model in the online sector is something that's taking off. I think a lot of the publishers are trying to do more of that in North America and support it with ads and micro-transactions. How much is Activision pursuing something like that; are you researching it or looking to get involved?
MG: I can't speculate specifically about it except to say that we're always looking into interesting new opportunities. That free-to-play model does not have any precedent of success in the Western world, and in the Eastern world... we'll be driven in the future by successful business models and if that can be the foundation of a successful business model, we would have no predisposition for or against it.
IG: You guys have a big presence here at E3 and I've spoken with Mike Gallagher about Activision possibly rejoining the ESA. From you vantage point, is that something you'd like to do now that E3 is back to normal?
MG: I think that's something that we'll have ongoing dialogs with Mike about and it certainly is always under consideration if our interests will align.
IG: What was the issue when you left? Was it the member dues or what was the reasoning behind that?
MG: Really, just our priorities were not lined up at that time with the ESA's priorities. We were in the midst of pulling this large merger together with Blizzard and we had limited capacity. So I think if there becomes a time in the future where our priorities line up well, we'd consider joining again.
IG: Thanks for your time Mike.
