Activision Aims for Sweet Spot

Q: How do you reach the next level of sales and earnings?

When you look at how we go to where we aspire to go -- so let's say, somewhere down the road, over $3 billion in revenue and 20%-plus operating margin -- it's going from the 10 franchises. First, take those 10 franchises and instead of being 2- and 3-million unit sellers, make them 6- or 7-million unit sellers. That's the easiest thing. But the second thing is to then add [additional] franchises.

At a certain point you get ... benefit of scale that we're just starting to realize. And leverage across product development investments. We're sort of in the early days of being able to do that. We've made the investments and the commitments where we're now starting to see the benefit of centralized studio organization. Then the general benefits of scale. So, we don't have to add a huge amount of staff in HR or administration or finance if we add a few hundred million dollars in revenue. So, G&A as a percentage of the total will continue to come down.

Those are just simple, little things that will enhance the operating margin pretty easily.

Q: You've been talking a lot about advertising. When does that become a meaningful portion of Activision's sales and the overall industry's revenue?

Not for a long time. I think between five and 10 years you start to see it move the dial. It took cable 20 years, so I feel five years -- that's a pretty reasonable time frame.

Q: You had a big stock sale earlier this year that came right after you were on CNBC. Your stock took a dive after that. I know a lot of investors were questioning the CNBC appearance. Can you talk a little bit about what you were thinking there?

There's never a great time for management selling. Nobody likes to see management selling.

If you look at our history after earnings, we talk to every news outlet that's available to us, and that's to widely disseminate the information about our results. There's no relationship between when management sells and our dissemination of our quarterly financial results.