E3 Conference: Activision Blasting Ahead with Bruce Willis

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By Cory Johnson
Staff Reporter

ATLANTA -- Shorn, red-eyed and beaming that

Moonlighting

smile,

Bruce Willis

stands in front of me, answering questions about his new video game

Apocalypse

, to be released by

Activision

(ATVI) - Get Report

for Christmas.

"Bruce, what's the difference between

Apocalypse

and

Diehard

?" asks a reporter.

"Uh, well," says Willis. "I think

Apocalypse

has a higher body count."

Standing in the shadows behind him is Activision CEO Bobby Kotick, doing a body count of his own -- counting the members of the press counting the VIP game designers in the back of the room that he has yet to schmooze, and counting the millions that he and his company could make from this game if it becomes a hit. But the thing that Kotick counts on most is his ability to get and keep "talent." And now, realizing the company's Hollywood ambitions, that talent has expanded from computer programmers, artists and musicians to include the likes of Willis.

A half-hour later, downstairs at Planet Hollywood, gold-selling rock 'n' roller

Poe

-- a cross between

Courtney Love

and

Barbie

-- is belting out her hit single "Hello," and diving into the mosh pit in front of the stage. Poe stars with Willis in the game (which will be on the

Sony Playstation

platform), and each spent a few days having their "moves" digitally photographed by the Activision game designers.

Their talent will be captured by another talent, game producer John Spinale. He's coming off the heels of a big hit,

Mechwarriors 2

, and is suddenly a hot commodity in the game industry. After his title was such a smash, the board game company called

Fasa

, which owns the name Mechwarriors, pulled its license from Activision. But Spinale decided to stay with Activision.

"WHAT CAN I SAY," he hollers in my ear over the strains of Poe. "THEY TREAT ME RIGHT. IT DOESN'T GET ANY BETTER THAN THIS."

"WHAT?" I say.

"IT DOESN'T GET ANY BETTER THAN THIS!" he says.

"I WAS JUST IN THERE; THERE'S NO LINE, BUT THE WASHROOM ATTENDANT IS ANNOYING!" I say.

Later, after it's quieted down some, Kotick is explaining how he managed to convince star programmer John Carmack to give Activision the rights to

Quake II

, the hotly anticipated sequel to one of the best-selling games of all time. The Activision booth at the

E3

convention at the Georgia World Congress Center this week has been mobbed, and the lines 10 deep waiting to play the

Quake II

demo have been the talk of the show.

"I guarantee you that they got a bigger offer from

GTI

(GTIS)

, but we'd established a relationship with them that's about more than money," says Kotick. Indeed, the good news for Activision shareholders is that the company is winning the talent war with things that don't hurt gross profit margins. Carmack, the lead programmer for

id software's

Duke Nukem

,

Doom

and

Quake

, told

Time

magazine last week, "There's only so many

Ferraris

I want to own."

Carmack is one of the only sure things in the industry, because every game he's touched has turned to gold, regardless of the title. But few on Wall Street can figure out who's who, they only know what's what. So when Fasa denied Activision the rights to

Mechwarrior 3

, the stock took a dive, although the entire

Mech

team stayed with Activision. Now that same crew is working on

Apocalypse

and a groovy, '70s-retro race car game called

Interstate 76

and the sequel, announced here at E3,

Interstate 77

.

"And we have a guy, Mitch Lasky, whose entire job is to manage relationships with talent," says Kotick. "His motto: Service the shit out of our third-party developers." Now that service is coming to fruition with certain hits like

Quake II

. Activision has built a reputation for coming up with creative, new and exciting games, while even competitors take a smart idea and let it sit.

Just across from the Activision booth is

Eidos

(

(EIDSY)

EIDSY ADR), which has had a blockbuster hit with

Tomb Raider

, by a team from the English developer

Core Design

. The game's curvaceous heroine,

Lara Croft

, has taken the game world and Great Britain by storm, even appearing on the cover of

The Face

, England's

Vanity Fair

.

But Lara's Dr. Frankenstein, designer Tony Gard, quit Core as soon as the game came out, and now Eidos is pinning its Christmas hopes around an uninspired knockoff called

Tomb Raider 2

created without the help of the original genius Gard.

Kotick hopes that Activision can avoid such stagnation by locking in the talent rather than titles. And his financial results show that success is paying off. In the quarter ended March 31, Activision reported revenue of $28.9 million, up from $21.7 million a year earlier. Net income actually fell to $4.3 million, or 30 cents per share, in the recent quarter, from $6.3 million, or 43 cents a share, one year earlier. But in the all-important Christmas quarter ended Dec. 31, where video game makers show their mettle, Activision saw revenue of $31.4 million, up from $17.6 million the year before. And net income rose 116% to $4.1 million, or 28 cents per share, from $1.9 million, or 13 cents a share, a year earlier.

"We've got a meeting with game designers every 30 minutes of this show, and we still have 30 to 40 people coming to the booth asking for a meeting," says Kotick. "We'll talk to as many as we can, because we know that the great work comes from great talent, and if you don't take care of that talent, you won't have anything left to take care of."