Activision Aims for Sweet Spot

Although the video-game industry is about to undergo one of its periodic -- and often disruptive -- console transitions, Activision (ATVI - Cramer's Take - Stockpickr) CEO Robert "Bobby" Kotick thinks his company is in the right place at the right time.

Thanks to key franchise titles such as Tony Hawk and Call of Duty, the past console cycle saw Activision grow from a struggling company to the industry's second-largest games publisher behind Electronic Arts (ERTS - Cramer's Take - Stockpickr). Still, Kotick thinks the company's best days are ahead, and he has a plan to ensure that.

First, though, he will have to navigate the tricky changeover from publishing games largely for Sony's (SNE - Cramer's Take - Stockpickr) PlayStation 2, Microsoft's (MSFT - Cramer's Take - Stockpickr) Xbox and Nintendo's Game Cube to producing titles for those companies' upcoming PlayStation 3, Xbox 360 and Revolution machines, respectively.

In the first of a series of interviews from last week's Electronic Entertainment Exposition, Staff Reporter Troy Wolverton spoke with Kotick about the coming console transition, Activision's competition and a stock sale that raised investors' eyebrows.

Q: The conventional wisdom of what happened in the last console transition was that people were too quick to abandon the previous generation of consoles and too quick to adopt the new generation. As we go into this transition, how are you going to be allocating your resources between older console games and those for the next generation?

You have to bear in mind that the prior history of transitions was such that that was sensible. Most people needed to put most of their resources on the next generation, because the prior generation didn't afford really any financial opportunity. Sony's done a better job than anybody in extending the life of the devices. I think everybody was a little bit surprised at the duration.

Companies today, like us, are in better positions because we have more resources, we can manage the franchises a little bit differently than we probably were capable of the last time around. And I think the key there is franchise. Our strategy has evolved to the point where, today, we do have a stable group of franchises that it makes the most financial sense to exploit across every platform; whereas in the last console transition, you could criticize us not just for abandoning the old platform too early, but for not dedicating enough resources to the new platforms, because we just weren't in a position to do either well.