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Kotick: WoW Servers to Close Incrementally, New Series Title on NATAL

2010 has been touted as a wonderful year for gaming. Titles like Final Fantasy XIII, God of War 3, Mass Effect 2, and a noticeable rise in indie games as well as several other top notch games yet to be released will find their way into the hands of gamers. There is however a standout among the crowd of rising starts as Activision can’t seem to get a break from being pimp smacked by life in general.

Earlier in the year the bold and enigmatic fiasco with Infinity Ward that left the fans concerned over the fate of Call of Duty and Activision worried about where fan loyalty will lie. Now, shortly after Activision filed with the SEC, Activision / Blizzard are rumored to be closing over half of the World of Warcraft servers by September 1, 2010 and adopting a new server structure powered by none other than Sony’s PS3. This news comes just a month after Activision labeled the game as a “risk factor”. With growing concerns that the title will become obsolete and the fear that they’ve become too reliant upon the top earning title Activision has announced a new direction for the IP that is hoped to retain the WoW crowd and expand their base while allowing unrestricted lateral movement within the gaming industry.

World of Warcraft netted Kotick and Co. well over $711 Million dollars by itself at the end of 2008, and $896 Million in 2009 (according to SEC filings). However Mike Morhaime (Co-Founder, Blizzard), stated, “What ended up happening here is relatively in line with a popular phrase by the late Christopher Wallace – ‘Mo Money Mo Problems’; Kotick set a $1.4 Billion profit goal after Guitar Hero III was the first game to break a billion and with WoW, we’ve never been able to reach that goal. For all intents and purposes the game should easily do this. He’s [Kotick] not, shall we say, ‘enthusiastic’ about how this has turned out.” Morhaime continued, “I can’t say I’m looking forward to the potential of being manhandled out of my office and being kicked from a title I worked to create.”

Others in the industry believe that the lack of goal meeting ability found within World of Warcraft comes from the total lack of ‘title pimping’, a pejorative marketing term to describe when a publisher makes a progressively larger profits on titles that get progressively worse over time. It works primarily on the premise of branding and leading gamers to believe something has quality on name alone, like Apple Inc., Louis Vuitton, or Mercedes-Benz. In short, a hollow status symbol to fit a social status quotient; being a ‘poseur’ – like a tween looking confused when they’re told that Misfits were a band, as they’re hanging out in a Misfits branded piece of apparel (next it’ll be the belief that NOFX is some quasi-joke reference to the Nintendo Wii). Prime examples of “Title Pimping” are found among many Electronic Arts titles to include Madden, NCAA football, Need For Speed, Medal of Honor and Battlefield.

Title pimping isn’t something that always works; take for example a game franchise also on the chopping block: “Guitar Hero”. Between Guitar Hero and Rock Band, the two can’t ever seem to really compete on even grounds and have pushed themselves and each other into obscurity, if not irrelevance as being a platform for associated artists to push their music to gamers and sell MP3s than to really be a ‘game’ of self-sufficient merit. This was something noticed after Harmonix left developing Guitar Hero due to acquisition my MTV and Activision acquired RedOctane who handed it over to Neversoft. Joel Jewett of Neversoft explains, “Back in 2006, right before Activision took over publishing Guitar Hero we were all invited to a premier screening of X-Men: Last Stand. That day changed the company forever. I believe that Kotick took the movie to heart when the next day he [Kotick] sent a mass email stating that the goal for Guitar Hero was to have a yearly point release in which new controllers and lineups would be a part of a boxed media push alongside competitive track DLC numbers, and he closed with a very disturbing “I’m the Juggernaut, b*tch”.”

So what does the future hold for Bobby Kotick and Activision? It’s hard to tell from the rough start they’ve had in 2010.

I had the chance to speak to Kotick via conference call earlier this morning. The conversation was an interesting if not a morbidly enlightening (read: sobering) one.

wow1 Kotick: WoW Servers to Close Incrementally, New Series Title 
on NATAL Powered by PS3 Based ServersShawn Gordon(SG): I appreciate the time you’re taking, you’re the biggest man in Acitivision, and faced with many problems –

Bobby Kotick (BK):[cuts me off] I prefer the term “festively plump” and I’ll actually be addressing that problem later privately.

SG: Well, I mean you’re a large figure within the company, a company that has been fraught with a lot of industry criticism brought to head by your SEC filing earlier this month and the Infinity Ward fiasco –

BK: [cutting me off again] Can we move past my weight? I don’t see how this is relevant.

SG: It isn’t, but now that you mention it, it’s sort of uncanny that you share initials with Burger King…. Which is to say that like the King of Burgers you’re… the… King of Activision and… you… both have it your way(?)

BK: … You know, I can just hang up the phone and end this now if you like. I’m a busy man with a lot of things going on. Either ask the questions you emailed my secretary, or crawl back to your hole.

SG: (clears throat)…So, I hear Activision is working on a new direction for the WoW IP?

BK: Yes. We’re always trying to come up with new, exciting things in terms of games. Right now we’ve got Activision / Blizzard working on a NATAL exclusive title called “World of Warcraft Ancients: Well of Eternity System NATAL”, or WoW WoEs

SG: WoW is a strong IP, and it sounds like you’re just expanding upon it with the motion control gimmicks?

BK: Well, the title will have the story line of the World of Warcraft MMO and the setting, characters and what not, but the mechanics are totally different due to the platform and game timeline. There’s also going to be little side things that players can do to increase their character stats and so on, for example, a character that uses a sword has to be physically strong right? Well, instead of only being good at the game and understanding how to be effective in combat or spell casting, players also have to physically train their characters using NATAL. What this does is adds the element of exercise to a group of people more and more doctors see as a target for obesity.

SG: So, you’re adding a Wii Fit / EA Sports Active side to it?

BK: Yes. The idea is to find that happy medium where players can play their game and still get healthy exercise.

SG: EA Sports Active was more or less a failure and Wii Fit while it sold well isn’t something you see people talking about or doing a lot of, especially in light of the BMI faults.

BK: Well, we’re using NATAL so there’s no balance board or other peripheral. We also have more movement based activities, like jogging and swimming without a traner or someone else telling you how to do the activities. I think that because the physical activities propel the player characters into being better, players will see this as the competitive underpinning and be able to mentally move past the idea of ‘work’; players will talk about how many more pushups their character can do (which is essentially how many pushups the player can do). There will be items that give ‘help’ to players too, like potions that make pushups done count as double.

SG: If I said “bloated”, would that mean anything in context to this conversation?

BK: …I’m going to give you benefit of the doubt and assume you’re not talking about my waistline again and patiently wait for the next question.

SG: Tell me about World of Warcraft. Rumor has it you’re planning on scaling it back based on its “Risk Factor”, fear of obsolescence, and talk of being too reliant on the success of the title. What makes it a risk, how do you fear it will be obsolete, and do you personally feel Activision relies too heavily on the income from the game?

BK: World of Warcraft is a great franchise, but it relies on popularity. If people lose interest in the game then we’re still spending the same amount of money to maintain servers. Over the past few years we’ve seen increase in profits but have still fallen short of our goals. There’s not a single reason that our goals weren’t met in 2009 other than we feel the title is losing popularity – not much, but if it trends down then it could be very bad.

SG: So, you do rely on WoW pretty heavily?

BK: We rely on it in terms of what it is. If I woke up one day and found that everyone canceled the account, we’d take a big hit but it won’t tank the company.

SG: Let’s just say you did wake up and found the game servers void of paying people?

BK: That won’t happen, so I don’t think about it. Hypothetical situations are fine in moderation, but let’s not get outlandish.

SG: Well, what I’m getting at is do you feel Activision / Blizzard is too reliant upon WoW and how so?

BK: Like I said, we rely on it based on what it is. I think the level of reliance has merit in context to the titles financial contribution and level of popularity among gamers. But, if the popularity trended down and player numbers decreased, then we’d have to adjust our stake in it and retool the business plan concerning the game.

SG: Like you’re doing now?

BK: No. What we’re doing now is simply taking the title to a new platform, adjusting cost structure and developing the game to fit the upcoming generation of gaming. What you see as devolving is what we in teh industry call "progression."

SG: Do you feel that NATAL is ‘the wave of the future’?

BK: I think NATAL is a wave of a future, but not the wave of the future. It’s a good concept, and like most ideas their merits are dependent upon when solid execution has been realized. This is why we chose NATAL over the Wii. The Wii is a good idea, but lacked a lot of core execution aspects that make is attractive to anyone above a mediocre group of entry level developers.

SG: Did I just hear you right in that you more or less called the Wii “***” and that the only people who develop for it are ‘losers’?

BK: I’m just saying that the Wii could be more. Nintendo sold the world less than their best, and there’s nothing wrong with pointing that out.You heard "A Pig is a Pig is a Pig", right? Call the Wii what you want, see it how ever you choose, but it's a Pig regardless.

SG: And the ‘losers’ part, didn’t Activision port “COD: MW Reflex” to Wii?

BK: Activision and other developers and publishers have trouble realizing a product on a system that stunts development beyond conceptual plans. That doesn’t make them losers as developers or people, but it’s a losing endeavor. If you look at Call of Duty: Modern Warfare, it was at the time ‘near perfect’ on PC, XB360 and PS3. The version released on the Wii was rated far below what we’d accept as ‘good’ with between a 70-80%.

SG: All things considered 70/80 isn’t bad. Why put that down?

BK: People rely on this line of work to live and allowing ourselves to accept less than the very best we can do is unwise. Scores like 70 and 80 are what you’d shoot for with a kids game or if it were the first game that someone developed on a major console. [COD: MW] Reflex was more of a fan service port.

SG: So, you did it all for the nookie?

BK: What?

SG: The nookie.

BK: What?

SG: The nookie.

BK: I don’t know what a ‘nookie’ is; I’ve never seen one.

SG: Um, ‘nookie’ is a kind of… a “target area” serving as a sort of strategic goal for a particular “target audience”.

BK: Oh, then yes, we did it with a certain group of people in mind.

SG: Right, so going back to WoW: WoEs – if you don’t feel that Activision / Blizzard has become too reliant upon WoW, why are you scaling back the servers?

BK: As I said, World of Warcraft is a great franchise but our 2009 profit goals weren’t met. We’re going to have to increase the subscription fees despite the server closings to maintain the profit margins and we’re looking into porting the title to consoles in early 2011. In the meantime, with the losses at Infinity Ward, we expect a large financial hit and we have to be prepared for that. We’re in a place where we need to stop relying on World of Warcraft too much. We’re not relying on it too much, but we need to avert the chances of it, you understand.

People like to believe that we’re in the business of games and that gaming is a culture. We’re not and gaming is no more a viable culture than the International Association of Beef Inspectors. Let me be clear on that. I love video games, but only because they make money – if topiary made as much or more money, then I’d all about selling shrubbery. Isn’t that why people make and sell games, for the money?

SG: But, what makes it a risk?

BK: Do you play World of Warcraft?

SG: I was taught to say no to drugs.

BK: Never even tried it?

SG: Drugs or WoW?

BK: WoW.

SG: Single player campaigns on physical media are my anti-drug; that, and quality.

BK: Well, it’s a risk because continuing investment in games that rely popularity via the community interest level is always a risk. What if the game becomes stagnant or a publisher other than Activision or one of our subsidiaries dilutes that particular genre? Can you see how that’s risky?

SG: Yes, in a way. What about the adage “build a better mousetrap”? Couldn’t Activision just, I don’t know, make the game better – more quality instead of quantity? There’s a handful of add on packs for World of Warcraft, but they haven’t added much honest substance to the game. What incentive does anyone have after they reach the level cap, the carrot no longer dangles, right?

BK: Are you mentally deficient?

SG: I prefer the term “practical thinker”.

BK: Tomatoe, tomato.

SG: So your point is that WoW is a risk because Activision/ Blizzard is unwilling to ‘build a better mousetrap’ and that the philosophy is that it’s better to “Sherman’s March”, destroying all in your path than to build upon and redefine or expand upon working dynamics or listening to what the people who invest and play your games have to say?

BK: No, not at all. Like our competitors we take developers and other publishers under our protective wing and help direct them during the process of top quality games. We don’t see problems in what we do because numbers don’t lie. 12 Million copies of [Call of Duty:] Modern Warfare 2 sold in record time – and while people complained about glitches and what not, they still bought it. There’s no reason to change what we’re doing with those kinds of numbers. We hand pick people from our audience of players and invite them to provide feedback, and hours upon hours go into to caring. This costs a lot of money and nothing says “care” like money. See, we listen to them, but at the same time it’s important to understand that they don’t know what they’re talking about. We do, so more often than not we take into consideration that player experience is only about 10% of what needs to be thought of. The other 90% is what you get the player to believe they’re experiencing aside from what they’re actually experiencing. Take MW2 for example; players believe they’re having a grand time playing WITH each other, but the game isn’t designed for team play – in truth they’re playing AT one another but ‘multiplayer’ is sort of this abstract noun that obfuscates the line between AT and WITH. They don’t care what they’re doing… all they know is that they have this game that everyone else tells them is fun or supposed to be fun. They go buy it and hit the snooze button on reality in order to keep that dream alive. You can’t tell me that this isn’t a great idea – it is. 12 million people can’t be wrong.

When we’re talking about World of Warcraft, fear of closing down what millions upon millions of people play daily, have devoted years of their lives to, invest thousands upon thousands of physical currency towards will reignite interest. Telling someone that what they want will go away creates urgency and I expect to the see Internet full of our supporters anxious and supporting of the move to NATAL in an effort to hold on to the dream of WoW. We can’t afford to keep those servers up and still bring them the established list great franchises we have. So what we’ve done is we’re cutting the servers down by 50% and increasing the subscription fee. This also allows us to be less reliant upon the title so that if it does eventually fold and we close shop on it, we’re making up potential losses in advance and keep us from becoming too reliant on the title.

SG: Tomatoe, tomato. Still, do you honestly think this won’t result in a counter-campaign by fans of other popular MMOs like Final Fantasy XI / XIV, Guild Wars, and so on?

BK: What they [fans] don’t get is that WoW is the model MMO that so many other franchises have desperately tried to aspire to and succeed. It redefined any and every thing about the genre. We’ve got the market by the balls in several areas, MMO games being just one of the few.

SG: Are you afraid that it will eventually serve the purpose that MW2 and Guitar Hero does, and become a shining example of what NOT to do.

BK: I really don’t get where you feel that we destroy things or how we did wrong with MW2. I can’t really comment about the mess with Infinity Ward and what’s happening with MW2, but everything we have people want. I think you’re confusing producing poor titles and pigeonholing the consumers into buying it with supplying peoples’ demands. MW2 is heralded by consumers possibly the best game ever made, despite its problems and known errors it continues to sell. How can anyone argue with that? Where is the lack of ‘cool’?

SG: I’m of the opinion that it was a busted game out of the box. It could be hand delivered to me by the Playboy model of the year, wrapped in crispy bacon and soaked in Crown Royal XR and still not be awesome. Not because the game couldn’t be fun or that it isn’t fun, but because you published a largely unfinished game riddled with defects, glitches and imbalances, and then had the audacity to be proud of it. The technical aspects lost impression over the flawed surfaces. Even a couple of days ago the "Stimulus Package" was broken. Was that some kind of political message, releasing it broken? Let’s all celebrate mediocrity! It totally contradicts your previous statements about the Wii. Isn’t that a sort of double standard?

BK: Like I said Shawn, we publish what people demand; perception is context, right? Sales numbers indicate that the game was awesome, or awesome enough to continue to outsell any other major title to date contrary to your opinion. As for politics, I don't get involved. Money in, money out - that's my primary concern.

SG: You recently moved to stop further production of the fan made King’s Quest, but also announced a sequel to DJ Hero. If perception is context I have to ask, why in the hell would you return to something that is the music version of Tony Hawk Ride (Bravo on that by the way) and shitcan something that helped define an era of PC RPG titles?

BK: Well thanks, not many people liked “Ride” as we had hoped, but we’re working on making that IP better over time. I’m glad you enjoyed it.

SG: Actually, I didn’t enjoy it. I think they call what I did “sarcasm”. I’m not sure.

BK: Are you sure you don’t mean “Nefarious”?

SG: No, I meant ’sarcasm’, at least that’s my perception of it. Perception is context right? You just called the Wii a "pig" and said that it is a "pig regardless" in context to what other people thought (sigh).  So, what’s the point of canning a great title and promoting one that is, for lack of a more fitting friendly term, a “subpar” title… in context to other IPs that Activision oversee?

BK: As I stated earlier: numbers don’t lie. The DJ Hero numbers emasculated the numbers for all of the Kings Quest game sales, ever. The series [King’s Quest] officially ended in 2002 when the series lost popularity. It’s a huge risk to bring it back. With RPG games having evolved over time, it’s not going to adequately compete with other popular RPG franchises. Even if it [King’s Quest] sold well, how do we wean people back off of it? It could potentially cost us more money to wind it back down than to wind it back up, thus it’s just a poor investment. With DJ Hero the game is still fresh in people’s mind and a lot of people see potential for it to grow and get better. There’s an established set up using modern technology. Building on to something is a lot cheaper to do than to blow the dust off of an old idea that a group of fans tamper with; it’s just harder to retain control and direction, so we clamp down on it. Aside from that Sierra owned the IP for King’s Quest, and through our merger with Sierra, we own that IP. If we want it stopped, we stop it – end of story.

SG: I guess that makes sense, but-

BK: [cutting me off] But the math works, and that’s what we’re going to do. It’s [DJ Hero] a premium title that brings exposure to other industries, companies and artists. And to get into the emerging culture of gaming they’ll have to be funneled through us. Let’s move on from this back to the NATAL WoW: WoEs.

SG: I apologize *cough* Caligula *cough*.

BK: I have to go here in 10 minutes so let’s wrap this up.

SG: Okay, I only have a few more to go anyway. Your cost structure for WoW WoEs; you’ve hinted at increasing the subscription fee. If you’re also decreasing the number of servers how can you justify increasing the price to play?

BK: Well, as you know, I’d prefer to charge the absolute maximum I can get away with for about anything we have. Money is the name of the game and I make no apologies about this mindset. It’s what has fed the family of thousands of our employees. If Microsoft can charge a fee to deliver normally free third party services, Apple can tack a full dollar to add a digital CD booklet and a marginal audio difference then we should be able to do the same. Most of this is all social experiments and pushing it as far as people allow you to. The market won’t ever allow a company to charge more than can be afforded, so if we push hard enough we’ll immediately know our boundaries and operate within the largest area possible.

I’d love to charge a subscription fee of $100 a month. Some people can actually afford that, and WoW has been around long enough, contains enough users who’ve spent enough time and effort into a character that people would honestly choose to pay $100 a month to play a game. Not only does WoW generate real revenue for many players, but the popularity continues to generate massive wealth for Activision/ Blizzard. By injecting a higher price, we encourage competitive markets. We live in a time of ‘pass / fail’, and people will have to not be willing to win, but not be willing to lose.

SG: But can you really charge $100 a month? I’m fairly certain there’d be a massive user uprising and boycott, and that would have great affect on server hosts.

BK: We’re not going to charge $100. That’s too abrupt of a jump from the current cost structure and consumers wouldn’t make a leap that large. It would be like jumping over a manhole to jumping the Grand Canyon in a single step progression; you have to build up to that kind of thing over time. Realistically we’re looking at a quarterly and yearly subscription closer to $150 a year and $50 a quarter and getting rid of the monthly structure because a monthly structure doesn’t retain people as well as yearly and quarterly.

SG: But you’re also removing 50% of your servers which means less physical space and much smaller bandwidth to carry an unchanged footprint. I’m still a bit confused here, could you explain it a bit better to me?

997953812 dda51f4600 o Kotick: WoW Servers to Close Incrementally,
 New Series Title on NATAL Powered by PS3 Based ServersBK: Some of that has to do with the kind of servers that will run the NATAL version of WoW. We’ve opted to use servers powered by stacked PS3 consoles. You’ve seen the Warhawk server stacks right? The PS3 has a ton more computational power than the 360 and since we’ll avoid the 3.21 FW update it’ll be a just as secure as any Linux server since we’ll install  Novell SuSE. On top of that, buying a couple thousand  250GB PS3 is a lot cheaper than renting out dedicated servers. Our bandwidth cost will be decreased because we’ll be paying for bandwidth used, not bandwidth and hardware.

SG: You don’t find it ironic that a PS3 will be powering a largely PC title, on an XB360 – and – ‘couple thousand’?

BK: Data is data, wires don’t care what they’re connected to and on a base level all consoles and computers receive the same data. The difference is their interpretation of the data and how that base data is compiled, decompiled and then recompiled. linux is flexable and a great median OS to talk between the two different frameworks.

We’ve already acquired the PS3 consoles for our servers back in November of 09.

SG: So, we can blame Activision for the current PS3 console shortage?

BK: There wasn’t a shortage when we placed the order and we have no control over the manufacturing process of Sony and their products, so I don’t think we can be held accountable for that, no.

SG: Fair enough. I guess as long as it works and is stable, the end user won’t much care, but what about Sony and Microsoft, won’t they have an issue with this?

BK: Hey, money talks. Why do you think we over charged for the MW2 stimulus package?

SG: So, part of the subscription price hike covers the license to do this as well as bloated DLC prices?

BK: Well, in a manner of speaking yes, but it’s not the front end purpose. If people want the game to live on and expand it has to be adequately funded. A secondary purpose is the manner of delivery, which has a high cost as well.

SG: Are you planning on eventually moving the series to a PS3?

BK: At this time, no. Sony’s version of a motion controller “Move” doesn’t mesh well with the mechanics of the NATAL version, so at this time NATAL is what we feel to be the best option. If we moved it to the PS3 we’d have to actually take a step backwards, and thus have a much harder time justifying equal pricing.

SG: This is all somewhat confusing. I think the audience will have a hard time wrapping their mind around what you’ve said here today. Could you maybe expand on the point of a PS3 run server?

BK: Unfortunately, no. I can’t. I have a meeting with Mike Morhaim, so that’s all the time I have for you. I enjoyed the time; maybe we can do this again in the future. Have a good day, bye now <click>

Kotick, as much as I really don’t get a lot of his ideas and plans, actually sort of makes a lot of sense in a business mindset. Though, I’m disturbed that to a degree gaming as a culture doesn’t exist to him – we’re like a mirage as a culture, but very tangible as a source of tappable income – “tools”, if you will. More distressing is that a growing number of people in his position or close to it tend to believe that as long as we’re distracted by the illusion of the gaming culture and moreso by the illusion of their genuine concen, we won’t catch their sleight of hand tactics. If this is true, they’ll eventually be correct in that gaming culture is a myth. In the end, we’ll have no one to blame but ourselves.

Still, the advent of WoW: WoEs, is… marginally exciting. I’m not a huge proponent of the motion control technology and see it as a failed gimmick that the industry won’t let go of because of the money and time already invested (like 3D), but the concept alone, being able to translate an MMO RPG into something that people physically do is neat. On the other hand, it’s not much more than being charged to ARP (since players aren’t really doing anything “live” I can’t very well call it LARP).

I think I’ll have to sit on this for a hot minute and contemplate the rationale behind this… there’s got to be something I’m missing in the tags…