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Technology Stocks : Activision....Returns!
ATVI 94.420.0%Oct 13 5:00 PM EST

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To: Mike Fidler who wrote (763)12/22/1997 4:33:00 PM
From: Jim McGrath  Read Replies (1) of 1992
 
IBD Interviews Kotick...

Game 'Engines' Can Put Brake On R&D Costs

Date: 12/22/97
Author: Nick Turner

Computer-game makers have seen their budgets reach new highs. A
hit game once cost a few hundred thousand dollars to produce. Now,
the cost can reach $3 million to $5 million.

Even those prices don't guarantee a hit. So how do players in this
high-stakes game limit their risk? One answer is to reuse game
''engines.''

An engine is the basic code that powers a computer game. Software
developers can take the engine, dress it up with a new story line,
different visual effects, more music and -presto - they have a new
game. This is a common way to produce sequels. And increasingly,
engines are reused to create games with entirely different themes.

The engine from ''Quake'' - a popular shoot-'em-up game involving
aliens - was licensed out to a number of companies. Developed by Id
Software Inc. of Mesquite, Texas, ''Quake'' and sequel ''Quake II''
are distributed by Santa Monica, Calif.-based Activision Inc. In
addition to distributing the software of other companies, the company
develops its own games and engines.

Activision CEO Robert Kotick recently spoke with IBD about the use
of engines.

IBD:

How much mileage can developers typically get from an engine?

Kotick:

I think you can get a fair amount of mileage out of it. ''Quake'' is
probably the anomalous example because it has such extraordinary
technology. There were five or six products that were built around the
''Quake'' engine. Id licensed the engine to a number of developers,
who then created their own products. But Id wasn't particularly
satisfied with the ''Quake'' engine. So that's why they developed a new
engine (for ''Quake II''), which also will be licensed to a few people.

IBD:

How does Activision use engines?

Kotick:

What we've tried to do is take the core technology that we've
developed in four or five different categories, and then make
incremental enhancements and improvements to those engines. We try
to use them internally. Our developers would rather start with an
existing technology, build the prototype, and make enhancements and
improvements than start from scratch.

IBD:

Do you see that becoming the model for the industry?

Kotick:

We're one of two companies that have the kind of internal production
capabilities that you need to have to manage engine technology. Other
than us and Electronic Arts (Inc.), no one else can do it with that
level
of sophistication.

IBD:

Do you license out your engines?

Kotick:

Ordinarily we don't. From time to time, we get requests for licensing
our engine technology in nonrelated businesses. For example, there's
the underlying engine that we used to develop ''Zork Nemesis'' and
''Zork Grand Inquisitor,'' called ''Made.'' It's a terrific multimedia
authoring tool. It's been something that's been in development for
almost nine years. We see (engines) as a big proprietary advantage.
They allow us to make product more efficiently than our competitors.
You don't have to reinvent the wheel every time.

There's also the ''MechWarrior'' engine that we developed. That
engine, with significant modifications, formed the basis for
''MechWarrior 2: Mercenaries'' and for ''Interstate '76.'' And then we
did a radical overhaul of that engine for ''Heavy Gear'' that just
shipped. And we're also using it for soon-to-be-released products
such as ''Battlezone.''

IBD:

How much flexibility does one engine offer?

Kotick:

It's really not one engine. Each time you make these modifications,
they're significant. Engines are a good foundation to work from,
though.

IBD:

What's the cost of producing a hit game these days?

Kotick:

Somewhere between $1.5 million and $3 million. But we've seen our
costs come down significantly by employing better development
processes and leveraging the engine technologies more.
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