Activision branches out, but it's a long way from "the next Disney"

Activision Blizzard is a company on a journey. Since its formation in one of the largest mergers in the history of the games industry, which brought together Activision and the faltering Vivendi Games (whose ace in the hole was its largely independent subsidiary Blizzard Entertainment), the company has occupied an immensely successful but oddly traditional position in the industry. The division between Activision and Blizzard remained clear despite their twinned billing in the company's name. Blizzard kept the flame burning on its immensely successful PC MMO and gradually pushed PC follow-ups to Diablo and Starcraft out the door. Activision built up and heavily exploited a handful of industry-leading franchises on consoles, most notably Call of Duty, Skylanders, the recently launched Destiny and the once-retired, even more recently resurrected Guitar Hero.

Compared to the struggles being experienced by the firm's biggest rival, Electronic Arts, Activision Blizzard looked like a bastion of stability; EA was battling to turn its strategy around, to figure out a place for itself in an expected future where paying up-front for a game in a box to play on a dedicated gaming machine (be it PC or console) would only be one niche of a much wider industry. As EA's strategic turnaround stretched from a three-year project to a five-year one and beyond, ultimately costing the strategy's mastermind, John Riccitiello, his job, Activision Blizzard chief Robert Kotick sat comfortably at the top of an empire that wouldn't have looked out of place in the industry of ten years ago.

"Robert Kotick has a track record that proves that while his strength is in short-term management of an enterprise, he's wise enough to keep an eye on the horizon"

Analysts and commentators, myself among them, fretted about the company's future - it lacked a coherent mobile strategy (as recently as 2013 Kotick was publicly dismissing investor concerns over mobile by claiming that mobile gaming had no sustainable franchises and generated little or no operating profit) and seemed broadly disinterested in exploring new platforms, new business models and new audiences. To date, the firm's only success story with mobile and F2P comes from the Blizzard side of the business, and while the nature of the organisational divide between Blizzard and Activision isn't entirely clear to the outside world, it seems unlikely that experience and know-how gained by Blizzard in creating and launching its mobile phenomenon is easily accessible to Activision at large.

Yet muttering darkly about Activision's future has always seemed like little more than an exercise in cheap doomsaying, even to those of us doing it, because while those concerns are real and substantial, the company was really, really good at executing on its existing business - squeezing ever more cash out of its existing audiences, franchises and business models. It's hard to sing "there may be trouble ahead" and be taken seriously when everyone's attention is distracted by the sales of a Call of Duty or a Destiny.

Nevertheless, the concerns were reasonably founded. Activision's great strength in traditional console and PC games will be the company's backbone for a long time, and its faith in the console market has been richly rewarded by the record-breaking sales of the new generation of consoles - but a publicly quoted company of this scale needs to find new opportunities for growth on an ongoing basis, and while traditional gaming platforms and business models are under no serious threat right now, they're also not presenting great opportunities for growth. If Activision wanted to remain a valuable, growing company, it eventually needed to address the concerns people have been raising about its strategy for many years. Kotick is a smart man; I don't believe for a second the idea that all people who rise high up in big business are smart people, having met far too many breathtaking idiots in very expensive suits to hold even the guttering remains of a candle for corporate meritocracy, but Robert Kotick has a track record that proves that while his strength is in short-term management of an enterprise, he's wise enough to keep an eye on the horizon.

"I'd wager that videos about Minecraft alone remain a much bigger market, both commercially and in audience terms, than eSports as a whole. "

He will have known that even the addition of new console franchise "tentpoles" to Activision - Destiny being a good example - isn't enough to satisfy the markets long-term. Franchises fail and fall out of favour, and all it would take is a poor reception to a new franchise launch coming alongside the fading out of an old stalwart like Call of Duty to send the firm's stock crashing as investors row away from the inherently high risk profile of console development. To avoid that, the company needs to be more broad-based.

We now know what Kotick's strategy for achieving that aim looks like. In the past few weeks alone, the company has announced major expansions into three new areas. A new eSports division will be headed up by the former head of ESPN; a new movie and TV production studio division will aim to bring Activision's IP to new mediums; while the biggest headline of all, the eye-wateringly expensive acquisition of Candy Crush Saga creator King, puts Activision firmly into the mobile business which Kotick was so recently unimpressed by. The three moves will cost a lot of money, but their objective is clear; an Activision Blizzard that is diversified, capable of exploiting its IP across a wide range of platforms, mediums and audiences, and positioned to capitalise upon new developments in videogames over the coming years. "The new Disney" is a phrase being bandied about so suspiciously often that I'm sure it must have originated with the company's corporate PR people (who, in that case, deserve a raise), and although it's a long way off the mark, it's a reasonable way of thinking about Activision's new objective, albeit not its present position.

I'm not entirely a fan of the King deal, as I observed last week; I think Activision has paid an extremely high price for its earlier reticence on mobile, and while some observers have noted that the company would have had to invest billions in building up an effective mobile capability by itself anyway, I think that ignores the high risk of failure inherent in the King deal. Mergers are tricky; King's track record of sustained success is better than most in mobile but still fairly poor (Kotick wasn't entirely off-beam when he noted the lack of sustainable franchises in the space), it may never duplicate the success of Candy Crush Saga and integrating its undoubted talent and knowledge with Activision's operations will be a fraught process. Nonetheless, it's a big part of the strategy; it is the most clear demonstration of Activision's new will to be a much bigger, broader company, the most concrete step towards that goal.

The other two moves are arguably more interesting and far, far more risky. eSports is an intriguing field that is undoubtedly growing dramatically at the moment; it attracts increasingly large audiences, makes increasingly big stars of its best players and has captured a pretty impressive amount of sponsorship and advertising money in recent years. It is, however, merely one corner of the much wider market that might somewhat nebulously be termed "videogame streaming"; I'd wager that videos about Minecraft alone remain a much bigger market, both commercially and in audience terms, than eSports as a whole. People who are deeply bullish about eSports' commercial future tend to be of a specific personality type - highly competitive people who are "killers" on the Bartle scale - who are somewhat blind to the notion that what motivates them about videogames might be quite different for the vast majority of other players, but that doesn't necessarily make them wrong about the potential for major audience growth.

"I throw up a little bit in the back of my mouth whenever some executive lets the words 'cinematic universe' slip into the room like a noisy fart"

What's important for Activision, I suspect, is to make sure that if the bullish predictions about eSports are correct, the company is there and waiting to collect upon that success. Having paid through the nose for missing out on the beginnings of mobile, it will be very keen to make sure that it's on board with eSports early enough to be a major player in its own right. Its involvement may even become a self-fulfilling prophecy to some degree; bringing in people with deep experience of sports broadcasting to guide an eSports-focused division will be a major boost to the sector as a whole as it struggles to break out beyond its existing niche in the coming years.

The movie and TV studio effort, too, is all about wanting to break out past a niche - and is the most clearly "jealous of Disney" aspect of the firm's evolution. While Blizzard's crown jewel, Warcraft, is already in the hands of another studio (the Duncan Jones helmed Warcraft movie is out next year, and while it's wrong to judge a film by its trailer, it's hard to see it having much appeal beyond the game's hardcore fans - although there are well over ten million of those, so that might actually be fine), a TV series based on Skylanders is in the offing, as is a "cinematic universe" based on Call of Duty.

I confess that I throw up a little bit in the back of my mouth whenever some executive lets the words "cinematic universe" slip into the room like a noisy fart, as though a single one of the half-baked imitations of Marvel's extremely carefully managed universe have been anything other than creative and commercial disasters - but Skylanders on TV feels like a no-brainer, and given the ability of the Call of Duty games to attract serious acting talent like Kevin Spacey (if not to actually give them anything worthwhile to say or do), there's no question that the franchise has some cinematic potential. I won't hold my breath for the Call of Duty Cinematic Universe (ugh, there's that horrid taste again), but there's certainly merit to the company pushing its IP into new mediums, especially in the era of streaming services like Netflix. If it gives the Call of Duty game franchise a new lease of life, all the better.

None of the new ventures from Activision are easy wins, or low-hanging fruit. None of them will really demonstrate their success, if success it is, for several years. Activision Blizzard is a stronger company for having made these moves all the same. It will remain primarily a console and PC company executing on well-established, successful, traditional franchises for a long time to come - but now at least it's also got a clear path towards the kind of cross-media, cross-platform future it imagines for itself. If Activision ever does become the "next Disney", a goal which remains a very long way out of reach, this month's dramatic expansion of its vision into new sectors may well come to be seen as the start of that journey.