Activision’s 2010 fourth quarter earnings call made for some very interesting listening this past Wednesday (Feb 9th).  With cancellations, job cuts, a new studio formation and refusals to be pinned down on release dates for its biggest games, the mega-publisher has most certainly provided food for thought as to what the future holds for itself and the industry in general.
So, what exactly did they announce?  Firstly, its music division is no more.  The planned 2011 release of a new Guitar Hero game has been scrapped and, along with DJ Hero, the franchise has been culled until further notice.  High development costs and licensing fees, combined with a slump in the popularity of the music game genre, were cited as the reason for the cuts. 
Guitar Hero in particular has been underperforming as of late with the latest iteration, Guitar Hero: Warriors of Hero only managing to ship 86,000 units compared with 2007’s Guitar Hero 3 which moved 1.5million copies in its opening month alone.  While the numbers may demonstrate that the decision to drop the franchise is a no-brainer, it must be extremely humbling for Activision to announce the death of one of gaming’s most famous brands and one that helped create and sculpt not only a new genre, but a new way of consuming music.
Two other games that had been expected this year, True Crime: Hong Kong and a new entry in Tony Hawk franchise have also been canned.  Presumably the latter finally succumbing to the year on year drop in critical and commercial success while the former going the way of the Dodo because “continued investment was not going to lead to a title at, or near, the top of the competitive open world genre… to be blunt, it just wasn’t going to be good enough”; unusually strong words from a publisher with such high visibility in the industry.
Unfortunately, these cuts and cancellations have led to Activision announcing it will be reducing its work force by roughly 7% – around 500 of its 7,000 employees.
It’s not all bad news however; the company expects to get back to the 7,000 staff mark by the end of this year as a result of new projects and the finalising of existing ones.  Included in the existing projects category are three (at least) from Blizzard – namely, Diablo 3, StarCraft 2: Heart of the Swarm and an as yet unnamed (non-World of Warcraft based) MMO.  Activision refused to give release dates for any of these projects, effectively stately that they’ll be finished when they’re finished and that if 2011 fails to see a Blizzard game then 2012 will see at least two.
I guess there’s no rush to release a new money spinner when you’ve got 12 million monthly subscribers under your belt.
What they did confirm though was the formation of the “new wholly-owned development studio, Beachhead, which will lead the creation of our all-new digital platform for the Call of Duty franchise.”  Beachhead’s goal is to create “a best-in-class online community, exclusive content and a suite of services for our Call of Duty fans to supercharge the online gaming experience like never before.”  What exactly that means is rife for speculation but it may be associated with the other Call of Duty announcement of the day which is that a free-to-play online, micro-transaction based edition of the game is to be launched in China. 
It would seem that Activision are (finally) going through a maturation process; indentifying what is and isn’t working, highlighting areas of growth within the industry as a whole and making the necessary changes to the their product models to take advantage of them. 
These changes are clearly focused on providing a greater amount of digital content (an area that banked them a cool $1.5billion last year, a 20% increase over 2009), relying on talented teams to produce great games (as with the Blizzard games and the as yet unseen Bungie project) and publishing a number of relatively cheap to produce movie/TV tie-in products with a view to generating a quick profit; this includes their confirmation that 2011 will see game tie-ins for the Transformers 3 and new X-Men movies alongside new Spider-Man and Family Guy titles.
This triple threat of focus seems to make sense from both a creative and commercial standpoint.  Creatively, good ‘AAA’ titles such as those from Blizzard and Bungie go down well with ‘core’ gamers and – by refusing to be nailed down on release dates – Activision has seemingly given them freedom to explore and test ideas, implement the desired features and give them every chance to craft the finest game possible. 
While it may be annoying that no Blizzard or Bungie titles have been confirmed for 2011, it’s also heartening to know that such a hefty PLC is dedicated to bringing us quality games; even if that means we’re going to have to wait.  This is in stark contrast to Activision’s usually conservative mentality of releasing branded titles ad nauseum year on year; 14 Guitar Hero games since 1999 is simply too many – over-saturation probably playing some part in its fall from grace.   
Commercial success will likely come from all three areas of focus.  Firstly, good games have a great chance of making money.  Secondly, game tie-ins of popular existing IPs make sense because they’re relatively quick and cheap to produce and they tend to do fairly well commercially despite their general lack of critical acclaim.  Profits from such ventures should keep the shareholders happy and can be ploughed into other, more ambitious, projects.  Thirdly, the digital gaming arena is growing incredibly quickly and is an area all developers and publishers (big or small) are going to have to concentrate on in the very near future as method of distribution and a means of squeezing further profit from big-budget games.
By streamlining their output to concentrate on these three areas and cutting off other, failing, parts of the business, Activision are showing that they have a clear idea of where they believe the industry is headed and that it’s important to keep up with audience expectations – even if that means beheading two of the industry’s most recognisable brands in Guitar Hero and Tony Hawk’s Skateboarding.
It’s also good to see them take the initiative and stopping True Crime: Hong Kong hitting the shelves.  All too often games are released despite their obvious lack of quality, the publisher trying to overcome that hurdle by bombarding us with flashy advertising campaigns that suggest otherwise (think Haze or Lair). The money already invested in True Crime is gone forever but at least the public is saved.
Perhaps the announcement causing the biggest stir throughout the gaming community is Project Beachhead. With AAA game development budgets getting forever grander, publishers and developers are constantly looking for new ways to claw back costs and further monetise successful titles.  Currently, there is no franchise more successful than Call of Duty so, creating “an all digital-platform” was always more inevitability than possibility. 
Just how that platform will operate is what’s intriguing.  Will it be the same free-to-play setup that is launching in China?  Will Beachhead be tasked with creating new in-game content every month for existing COD titles?  Is this the much touted FPS MMO that will revolutionise the way we think about online shooters?  Or, is it something else entirely… a fancy stat tracking system in the vein of Halo Waypoint, perhaps?
Activision must surely be of the mindset that it’s plausible to get COD fans paying a regular fee if they can provide enough value.  EA’s Battlefield Heroes has demonstrated that the micro-transaction model does work for online shooters. 
Would such a system work for COD?  Yes, probably, but much of the appeal of COD comes from RPG-style levelling up and the regular reward of new perks and toys to play with.  Under the current Battlefield Heroes model this would be made redundant by players ‘buying’ their way to the top and bypassing this addictive system altogether.  By charging a subscription fee and adding extra layers of depth to the experience (whatever they may be), Beachhead can add to the current experience rather than undermine it through micro-transactions.
With a new Modern Warfare game already confirmed, anything from Beachhead would act as a supplement to, rather than a replacement for, the current COD model – at least in the near future.  If Activision can garner the same COD presence in the digital space that they’ve established with disc-based products then that really would be something to get excited about; both for them and for fans of the series. 
Just how excited the fans are will depend in part on any associated fees.  Despite insistence from Activision and COD’s development studios that online components will remain free, the fact that Beachhead has been set up to provide “exclusive content” surely points towards a paid-for service.   
My take on it is that they aim to create a dual-tiered system in which much of the content is free to access but premium services/content are offered to paid subscribers only – in much the same manner as PlayStation Plus.  What will be interesting if such a system is planned, will be whether or not players from each tier will be able to play with/against each other.  My bet is that they will allow that function where plausible (i.e. on shared maps), thus creating an ‘aspirational’ desire within the player playing for free to get their hands on the premium content they’re seeing all around them but have no access to.
Of course, this is all speculation.  Beachhead may be something else entirely.
No matter what happens with Beachhead, or when the Blizzard and Bungie games do arrive, it seems clear that Activision are adapting to the changing face of the industry. 
They’ve seemingly accepted that shoddy products do not sell well and so developers should (within reason) be given time to spend their development budgets wisely.  They understand that the digital realm is becoming increasingly important, both as a distribution platform and as a means to add value to existing products.  They also know that tie-in/spin-offs titles may not be loved by everyone but they do bring in a quick cash injection that can be used to develop quality games and grow the business.
A large publisher and a clear focus are usually mutually exclusive so it will certainly be interesting to see where Activision goes from here.  Our hope is that they’ll offer a wide range of methods for players to consume their favourite games. Our fear is that wallets are going to take a big hit as a result.  Games as platforms sound like a great idea but, given the level of upkeep and constant iteration required, they don’t tend to come cheap.

Paul Younger
Founder and Editor of PC Invasion. Founder of the world's first gaming cafe and Veteran PC gamer of over 22 years.

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