Activision Mobile VP: Tablet games will see "more premium price points"

Greg Canessa is the Vice President for Mobile at Activision, and he's been handed an enormous challenge. "It's definitely been no small task, starting the mobile division for the world's largest game publisher," acknowledged Canessa. "It's an exciting task and a bit of daunting one as well, but one I'm having a lot of fun with it."

Current events in mobile hardware are making that task more complicated. Amazon's Kindle Fire announcements, for example, have brought a new price/performance to the tablet market, and rumors persist of a new iPad Mini that may be under $300. Canessa takes a broader view of the issue, though. "When we look at the mobile space, no one can ignore what's going on in the space. It's a disruptive time, and an exciting time, for the industry as a whole, the games industry as well as the larger tech industry. From a device penetration standpoint, you're looking at 1.5 billion smartphone and tablet devices by the year 2015."

Of course, the sheer size of the market doesn't necessarily mean that great games can be created for it, but Canessa feels the technology is improving. "With the tablet devices what you're seeing is computing power from a CPU and GPU standpoint reaching that of a current generation console device within the next generation of tablets. You're seeing these devices, incredibly powerful, high resolution displays, very powerful processing capability, seamlessly connected to the Internet. And what you're seeing from a user behavior standpoint is that our customers are actually spending time when they're at home, maybe watching TV, surfing the net, playing a videogame on their consoles; we see them have an iPod or a tablet device on their lap. We're seeing users spend minutes of their entertainment time at home actually called away from the PC and the TV in some cases in favor of the tablet."

"Competition is a good thing, and competition specifically targeted at the leader in the space can often yield innovation for everyone. I think that's the case with tablets and smartphones"

Greg Canessa

Activision can't afford to ignore a market when it's starting to take time away from core console gamers. "For a company like Activision whose focus is on building those entertainment franchises, it is absolutely a no-brainer that we need to invest in the mobile opportunities," Canessa stated. "What you're seeing with Activision Mobile, the creation of this group over the last year, is a really specific and dedicated effort on the part of Activision to extend our entertainment experiences and franchises to tablets and smartphones to address that emerging market opportunity. It's one we're excited about, it's one we think is here to stay. It's an 'and' not an 'or'; we don't think console is going to go away... we think console is still a huge and growing opportunity, particularly for that hardcore gamer base. But we think tablets and smartphones will continue to be a significant market and a significant opportunity for companies like Activision and for Activision itself in the future."

Apple is clearly dominant now in the tablet marketplace, but the new Kindle Fires start at $159 and could provide a serious challenge to Apple's market share. Canessa has nothing but praise for Apple. "Apple has done a tremendous job from a device penetration and an innovation standpoint with the iPhone and again with the iPad, extending the reach and scope of these devices beyond the tech enthusiasts and making them truly mass-market devices. I think they've done a phenomenal job of that, leading the charge from an innovation standpoint. I just have such tremendous respect for Apple. What they've done in terms of seamlessly integrating hardware, software, and services into a unified experience that customers can enjoy, and then creating a vibrant ecosystem of apps and content around that... they have been and will continue to be dominant industry players in this space, and our partnership with them is alive and healthy and great and we continue to support the iOS platform with every product we release. Every product we've released this year has been on iOS first."

Activision may be impressed with Apple, but that doesn't mean they're going to ignore Amazon's bid for the market. "Our partnership with Amazon is a really interesting one that we believe to be a tremendous opportunity for Activision," Canessa said. "Around the Kindle Fire, we see a huge opportunity. One of the keys to Apple's success has been the ubiquity of login, when you think about how easy it is to buy an app. I think Amazon's strategy with Kindle Fire is definitely going after that market. Amazon is able to lead with a lower cost. I think that's a great strategy, and one that is healthy for our industry. Competition is a good thing, and competition specifically targeted at the leader in the space can often yield innovation for everyone. I think that's the case with tablets and smartphones."

Canessa believes that Amazon is making the right moves to be able to sell a significant number of tablets, and Activision plans to be there in force. "Amazon is making a dedicated effort to create a more curated ecosystem around apps, to make a more integrated device that ties hardware and software and services together in a very seamless fashion, and then leading on price, bringing the magic and wonder of these devices to a new audience that maybe can't afford some of the higher priced devices. Bringing it down to $199 or $299 for a high-definition device, I think that's tremendously beneficial to our industry and healthy. From Activision's perspective, we love it."

Activision has definitely developed a close relationship with Amazon. "As you can see from our Skylanders announcement we've made a dedicated effort on that platform with in-app toy purchase for the first time ever," Canessa noted. "We brought that innovation to the Amazon platform, and this is just the beginning of what we hope will be a long and fruitful partnership with Amazon in support of Kindle Fire."

"From an absolute dollar standpoint in the household, of course there are limited dollars to spend and parents have to make trade-offs"

Greg Canessa

The pricing of the Kindle Fire might make this more accessible to kids. "I absolutely agree," said Canessa. "We think Amazon's got it right, taking the success they had with the first-generation Kindle Fire hardware and improving it. At the price point you're talking about, many households might be able to afford one device for each child. That gives us an opportunity to address a lot more family members with Skylanders products."

It's not just the price point of the new Kindle Fire line that appeals to Canessa. "Amazon's innovations around parental controls, to customize how much time kids can spend reading versus playing games, I think it's really awesome. It's an indication that they are making this a family entertainment device, and that underscores our belief that Amazon will be a really great partner."

The pricing and capabilities of the Kindle Fire tablets may mean that parents could be deciding whether or not to buy a tablet instead of a console this Christmas. "I think as families manage their budgets and they have a limited amount of disposable income to spend on entertainment devices for their kids, I think that thought certainly crosses many people's minds," Canessa admitted. "Of course tablets are a little different from a handheld console like a 3DS or a console proper. We think the value proposition around the tablet is different in that it's a multi-purpose, multi-use device. In the household, it can be used for a lot of different things. We don't think the direct comparison is going on with dedicated consoles; consoles are still sit-down, immersive entertainment experiences. Consumers understand those are pretty different."

Still, Canessa concedes that tablets are a new competitive threat. "From an absolute dollar standpoint in the household, of course there are limited dollars to spend and parents have to make trade-offs," Canessa said. "I think there is a tradeoff that parents are making against a limited entertainment budget and the value proposition around gaming content for a dedicated gaming device at a higher price point, and the emerging opportunity around tablet devices in the hands of their kids. As long as they can regulate that entertainment experience, whether it's the transactions or the time spent playing games, I think that's a consideration. There's some real competitive pressure there."

Up to this point, tablet and smartphone games have generally been more casual, with a shorter play time than on consoles where people often spend hours in a play session. Canessa thinks we'll see games being designed for tablets that are intended to be played in long, immersive sessions. "We think that tablets and smartphones are different. Smartphones are more about that 5 to 10 minute experience. Casual games map very well to that customer base, given the fact that they're easy in, easy out light entertainment experiences - time-wasters, if you will, that are in-between activities throughout the day. We think that tablets are different," Canessa said.

"The usage patterns and behavior we see from our customers that own tablets is that they are more used at home, and the average play session on a tablet is 45 minutes rather than 5 minutes. From the technology side, you see the processing power of those devices accelerating even faster than smartphones. So yes, we do see the opportunity and we believe that more immersive entertainment opportunities will be appearing, particularly with the tablet audience. Higher production quality, bigger campaigns, longer play value in terms of hours spent in the game, bigger brands... we think that all of that's going to emerge on tablets. With that will come more premium price points."

Canessa's portfolio is mobile; broadly speaking, tablets and smartphones. Yet we're starting to see a crossover between those operating systems and smart TVs, and newer tablets and smartphones may have HDMI output, either wired or wireless, as well as devices like the Ouya console and other Android boxes that connect to TVs. Are those opportunities going to be in Canessa's division, or will they get punted over to the console developers?

"You're actually asking a very insightful question," Canessa responded. "The shortest answer I can give you is 'We don't know.' Most companies now have a mobile group, and they have dedicated folks building smartphone and tablet games, as is the case with our group. For now, while you have an emerging market there are specific skills you need to build internally. There's a very different approach from console development with these games, whether it's running games as a service, or live operation support, the use of data analytics to drive decision-making and game design decisions. They're smaller development teams, they're quicker development times, so there are a variety of characteristics for mobile game development that are different than console games."

"As you look forward and you think about emerging opportunities such as smart TVs, and you look at the evolution of console and the evolution of mobile, do these converge? Are we playing games on tablets someday with a controller connected up to a TV, and that's a console? None of us have a crystal ball, and we'd all like to know where that's headed. I can make arguments on either side, that they'll converge or these markets will stay separate and complementary. The truth is we just don't know. Depending on what happens in the industry I think companies like Activision will organize against the opportunity and if it turns out that we build larger, more immersive experiences that look like console experiences, the knowledge and expertise that we have currently in the mobile group will exist with our console studios."

"I think what's happening in our industry now is you're seeing mobile lead the charge, and you're seeing some of these methodologies flow back into console development"

Greg Canessa

Canessa stressed that Activision is ready to adjust to changes that occur in the market. "One of the core components of our mission statement in Activision Mobile is 'nimble and agile.' That's how we like to think of ourselves internally and externally. We must remain nimble and agile because the market is fluid. You launch and then you learn, which is very different from how we launch a console game, which is you pack all the features in, make a world-class AAA experience, launch it, collect some revenue and move onto the next one. They're different products."

It's not just the platforms; it's the business model changes that make mobile games a more difficult development proposition. Free-to-play has implications that extend through the design, and Canessa acknowledges this. "It''s very complex in one regard, but it's liberating in another regard. One of the things that's challenging about where our business was before this came along, it's that there was a lot of interpretation of what the customer wants and needs, and how the customer is using the game. There was a lack of metrics, a lack of analytics, and a lot of second-guessing the customer going on. I think what's happening in our industry now is you're seeing mobile lead the charge, and you're seeing some of these methodologies flow back into console development. We have a much better sense now, through the connectivity of the Internet married with data analytics capabilities. We have the ability to track what the customer is doing from a behavioral standpoint. Also, we've provided mechanisms for the customer to tell us what they'd like to see in the game."

Canessa sees the development process changing. "Whether you go and spend an incredible amount of money on a bet, or bet a smaller amount of money and understand and listen, and then adapt the game to the customer's needs and wants... In a way, as a game creator, that's liberating, that you're able to address customer needs and wants and marry that with an inspired creative vision. It's not just color-by-numbers based on what the community wants. Oftentimes the user doesn't know; they can't articulate to you what they're looking for. There is a creative component to it that has always existed in our business and continues to exist.

Canessa is optimistic about the future, even though it's uncertain. "Over the long term, as we manage through this transition, which is a challenging transition for a lot of companies and will continue to be for a number of months and even years, once we emerge through the other end of this I think we'll be a healthier business overall."