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Technology Stocks : Activision....Returns! -- Ignore unavailable to you. Want to Upgrade?

To: Asymmetric who wrote (1264)	10/10/1998 3:06:00 PM
From: Tom Caruthers	Read Replies (3) \| Respond to of 1992

Peter...good work :) As an aside...what do you all think about this? headline.gamespot.com I've always maintained that sports games are the one thing that consistently sells well and has a loyal following. And the one thing that ATVI doesn't have. Kotick has said in the past that they have focused on primarily on action/strategy games for the teen male generation. This however, was when ATVI had limited resources and needed to focus on core brands. The problem with this segment is that many of ATVI's own games cannibalize sales from each other....ex: Hexen II, Quake, Heretic II, etc. because they feed on the same group of consumers. To counter this and to move with market trends, ATVI is now branching out to the casual gamer population and likely will need to expand its presence in other game genres as it strives to be the dominant games company. Witness the Head games acquisition (Cabela, etc.) and the Jack Nicklaus golf game. ATVI is unlikely to move into children's games which is now dominated by TLC. Sports games are dominated by Acclaim and ERTS. However, with Disney looking to hawk the ESPN license and given Disney's previous agreement with ATVI on the next several Disney games (This reminiscent of when iD left GT to go to ATVI...), I would not be surprised if ATVI made a bid for the license. An interesting article in USA Today a few days ago: search.usatoday.com talked about how ESPN was Disney's crown jewel....about how it generated I believe 15% of operating profits for Disney and how it had a tremendous number of viewers. Disney has paid up the wazoo for exclusive rights to NFL football for its ABC and ESPN networks, as well as NHL hockey rights. Imagine the co-branding possibilities and the marketing possibilities of an ESPN/Disney/ATVI game? Since Disney has a large stake in the success of any ESPN titles (in order to maintain the elite nature of the brand and to help pay for the 9 billion dollars they shelled out for NFL over the next 8 years), perhaps they would be willing to co-market the game, especially TV ads on its ESPN and ABC stations. Starting game production from scratch would be difficult especially since ATVI has no experience in this area. Perhaps this is where acquisitions could be useful...and here is where shareholders should be willing to undertake a sizeable dilution to their holdings. Risks: Initial start-up costs associated with game production will be sizeable...probably $6-10 million for 2-3 games...Within the 2-3 years it may take to develop the games...the Playstation and N64 consoles will have hit their peak and with strong competition from ERTS and Acclaim, there can be no assurances of being able to milk the games for all they are worth. Also...royalties and licensing fees will probably cost a pretty penny, making these games less profitable (but in sports...co-branding is incredibly important...Tiger Woods Golf, Wayne Gretsky Hockey, Madden football, etc.) Dreamcast, on the other hand, looks really sharp...I've seen some of the screenshots and specs for this platform and they are by far better than the PSX and at a glance...superior to N64 graphics. As ATVI is doing with Vigilante 8...making it the first auto-combat port to the N64 and assuring a strong inital showing...perhaps ATVI may have a way in here....very risky on an unproven platform...but ATVI was too conservative (perhaps rightfully so) in its development for either the N64 or the Sony PSX. It will be interesting to see how this turns out. Tom C.