Activisio Essay, Research Paper

ActiVision, Inc., is a developer and

publisher of interactive entertainment software. As one of the industry’s

first independent, third-party developers, ActiVision has produced numerous

hit titles for companies such as Atari, Nintendo and Sega, and for personal

computers. Some of its best known titles include the Zork and

MechWarrior series, and Spycraft: The Master Game. ActiVision

is a multi-platform developer, producing software compatible with various

gaming consoles as well as for use with personal computers.

Early

History

Following its founding in 1979, ActiVision’s

early success was meteoric. As developer and publisher of a series of

Atari

hits such as Pitfall!, Kaboom! and River Raid, ActiVision

soon became the largest video game software company and the fastest-growing

company in American history. During its peak year in 1983, ActiVision

attained revenues of about $150 million. Faced with intense competition

from Sega and Nintendo, and the rise of the PC as an alternative platform

for games, Atari collapsed the following year and took ActiVision with

it.

ActiVision declined steadily throughout the rest of the 1980s. In 1988

the company changed its name to Mediagenic and undertook an ill-advised

foray into personal and business computing software. Publishing word processing

software, paint packages and applications for Macintosh, Mediagenic failed

spectacularly in a business and personal software market that tends to

be dominated by a few firms. Accumulating losses that eventually totaled

$60 million, the company was virtually insolvent by 1991.

During its decline, Mediagenic made some good moves that would serve

its later recovery. Not least of these was to sign license agreements

with Nintendo of America (in 1987) and with Sega of America (in 1988).

These agreements opened up significant mass-market possibilities. Mediagenic

also published the first interactive entertainment on CD-ROM, a game called

The Manhole, thus beginning a move toward the kind of high-tech,

multi-platform production that would be essential in the 1990s market.

The main architect of ActiVision’s comeback was software entrepreneur

Bobby Kotick, who along with partner Howard Marks and casino mogul Steve

Wynn, led an investment group and management team that filed a plan

of reorganization for ActiVision. Kotick’s group filed their plan

on the same day, October 4, 1991, that Mediagenic was placed into prepackaged

bankruptcy. The company, again under its original name ActiVision, began

its impressive recovery in short order.

Reorganization

and Recovery

Kotick, who was 30 when he took the reigns at ActiVision, has been described

as resembling Woody Allen

in both speech and personality. In 1983 he and Marks had run a software

company out of their dorm room at the University

of Michigan. They obtained financing for their small operation from

Steve Wynn, the legendary developer of the Las Vegas Strip. Kotick pitched

his idea to Wynn at an exclusive party to which he and Marks had managed,

by some subterfuge, to obtain an invitation. The 52-year old Wynn recalls,

“They were so fetching and cute, I wanted them to be my sons-in-law.”

Although the venture flopped, Wynn maintained confidence in his young

colleagues and backed another of their enterprises, a company that translated

packages and manuals for overseas delivery. This operation turned out

to be more successful, netting $2 million on $12 million sales in 1991.

In 1985 Kotick and Marks turned down an offer from Sony

to write software for new CD-based entertainment system because they believed

the base of CD players was then too small to support the effort. Only

a few years later the time would be right for ActiVision, under Kotick’s

leadership, to take the industry lead in publishing titles for CD-ROM.

Kotick and Marks had been eyeing ActiVision for some time because of

its broad licensing agreements with Sega and Nintendo.

The two were able to acquire a 25% stake in ActiVision for $500,000, and

then were able to boost their share to 54% by folding in their computer

packaging business. With $5 million of additional backing from Wynn, Kotick

set about adopting ActiVision to the new multimedia, PC-based environment.

He based his faith in ActiVision’s future on a belief that video

games could and would be made to appeal to more than the segment of the

young, male population “that can’t get a date on Saturday night.”

He therefore gambled that the market would reward investment in superior

technology and creativity.

Using

the Hollywood Formula

Kotick’s plan was to upgrade the level of audio, video and programming

technology as well as the artistic imagery of ActiVision’s games.

He began by recruiting a core of the highest caliber programmers, selected

both for their creative and technical competency. Production methods were

borrowed from the Hollywood movie industry, and the company was relocated

from Menlo Park in Northern California to Los Angeles in order to take

advantage of Hollywood’s talent base.

Kotick suggests that his formula for ActiVision relies more on Hollywood

creativity than on advanced Silicon Valley programming technology, and

has noted that the budget and creative team for one of ActiVision’s

high-level multimedia games is comparable to those for a low- budget motion

picture. Accordingly, ActiVision’s new generation of games are often

based on television and films, using cinematic sequences in conjunction

with advanced 3-D and color graphics as well as overdubs from live actors.

Kotick’s first project was to update ActiVision’s old Zork

games. Whereas the classic adventure game had users type in responses

to questions on a monochrome screen, Return to Zork used digital

sound and video with 3-D color graphics to bring the imaginary empire

of Zork to life. With sounds and images of actors from TV shows

like Twin Peaks

and The

Wonder Years, Return to Zork was an immediate hit which

has generated a series of equally successful sequels and spin-offs. Recently

the relationship between ActiVision’s games and Hollywood’s

films has been reversed as the company has signed deals to base film and

television programs on the highly successful Zork franchise and

on their espionage game, Spycraft: The Great Game.

Spycraft arose from an unlikely but fortuitous collaboration.

One day at an informal lunch, Kotick told a literary agent that he was

working on an espionage game. The agent suggested Kotick contact former

CIA chief William

Colby, who happened to be one of his clients. The master spy was soon

on a visit to ActiVision’s L.A. headquarters where he proved a quick

study and original strategist on a CD-ROM-based version of Return

to Zork. At one point, when Kotick suggested Colby take the opportunity

to eliminate a troublesome adversary, Colby replied, “Let’s

not kill him now. We may need him later.”

Kotick’s collaboration with Colby soon assumed historic proportions

when Colby’s one-time adversary, former major-general of the KGB

Oleg

Kalugin, was enlisted to participate in the project. The final product,

for which Colby and Kalugin both served as consultants and played themselves,

embodies unprecedented levels of authenticity and production values. Taking

place in a partly-fictionalized post-Cold War world, Spycraft

contains over 100 cinematic sequences, and is based on events about which

we can only speculate.

ActiVision has continued to update and extend its most popular titles,

and has produced and published a continuing series of innovative and successful

products. Recent years have seen the latest in the highly successful Zork

and MechWarrior series as well as many new and original games

that are playable on all currently popular platforms including PC, Mac,

Sony PlayStation and Sega Saturn.

Noteworthy among recent additions are futuristic sports game Hyperblade,

Muppet Treasure Island featuring Tim Curry, Kermit the Frog and other

Muppet characters, Sacred Ground, second in a series of Santa

Fe mysteries, Power Move Pro Wrestling, Blast Chamber, a futuristic

life and death game in which players can compete against the program or

real opponents, and Blood Omen Legacy of Kain which uses classically-trained

actors in a gothic adventure for mature audiences. The year 1996 also

saw the release of action games with unprecedented network capabilities,

including MechWarrior 2: Mercenaries which permits up to eight

players to compete simultaneously over the Internet.

Survival

and Growth into the Next Century

ActiVision remains one of the most proactive game publishers with respect

to the ever-changing technological environment. The company had reprogrammed

two of its top titles for DVD-ROM technology, using

MPEG video compression technology

which will offer “an unparalleled visual experience.” With respect

to the growing global market, ActiVision has been increasing its presence

and now has operations all over the world.

Video game software is a highly competitive industry with what many analysts

consider “too many” companies vying for shares of a limited

market. In a war of attrition against other firms specializing in game

software as well as against media giants like Viacom,

Time Warner and Disney

who are moving into software development, margins are becoming increasingly

thin.

Inspite of increasing revenues, ActiVision has reported shrinking net

profits and some quarterly net losses in recent years because of the high

cost of product research and development. With its established record

of successful titles and its dynamic approach to the technological environment

and the international market, top industry analysts consider ActiVision

to be one of a small group of entertainment software development firms

best positioned to survive and grow into the next century.

References

Author not attributed. “Mediagenic Announces Confirmation

of Plan of Reorganization: Will Renew use of ‘ActiVision’ Name,”

Business Wire, December 19, 1991.

Author not attributed. “ActiVision Signs Agreement

with Universal Pictures to Develop Feature Film Based on Acclaimed CD-ROM

Espionage Thriller Spycraft the Great Game,” PR Newswire. June 19,1996.

Author not attributed. “ActiVision OEM Sales, CD-ROM

Titles Bolster First Quarter Revenues,” PR Newswire. August 9, 1996.

Author not attributed. “ActiVision’s Mech Warrior

2 Mercenaries Explodes Onto North American Retail Market. PR Newswire.

October 9, 1996.

Author not attributed. “T’was the Month Before

Christmas and All Through the Land, ActiVision’s New Games Lay Waiting

for Shopper’s Hands,” PR Newswire. November 14, 1996.

Author not attributed. “ActiVision Unleashes Crystal

Dynamics’ Blood-Sucking Epic Adventure, ‘Blood Omen Legacy of

Kain,’ Across North America,” PR Newswire. November 18, 1996.

Author not attributed. “Spycraft The Great Game and

the Muppet Treasure Island DVD-ROM Offered Initially for the OEM Channel,”

PR Newswire. November 18, 1996.

Author not attributed. “ActiVision Pile Drives Power

Move Pro Wrestling Onto Holiday Retail Shelves Throughout North America,”

PR Newswire. November 18, 1996.

Ginsberg, Steve. “CD-ROM Video Games Technology Gives

ActiVision a New Lease on Life,” Los Angeles Business Journal,

Vol. 16, No. 2, January 17, 1994.

Hamit, Francis. “New Imaging Opportunities: Grabbed

Real-World Images Invade Interactive Games,” Advanced Imaging,

Vol. 9, No. 10, October,1994.

Lohr, Steve. “Market Place: Home Software’s

Treasure Hunt,” The New York Times, December 28, 1993.

Palmeri, Christopher. “Let’s Not Kill Him Now,”

Forbes, January 31, 1994.

Schonfeld, Erick. “Robots on the Rise!: Videogame

Rivals are in the Midst of a Shootout. Here are the Likely Victors,”

Fortune, December 9, 1996.

Snyder, Bill and Valerie Rice. “Busy Going Hollywood:

ActiVision Chief Executive Bobby Kotick,” PC Week, Vol.

10, No. 47, November 29, 1993.

Sundius, Ann. “NBC Private Financial Network Interview

With ActiVision (ATVI) Chief Executive Officer from the Gerald Klauer

Mattison Interactive Entertainment Conference,” NBC – Professional,

October 28, 1996.

Yee, Bernard H. “This Time You Fight for Money: ActiVision’s MechWarrior

2: Mercenaries War Game: Software Review,” PC Magazine, Vol. 15,

No. 21, December 3, 1996.