Activision is finally swinging for the fences in mobile games (interview)

Activision Blizzard is pretty late to the mobile gaming market. It mobilized its team of 75-plus developers last fall, far behind rivals such as Electronic Arts, who bought Jamdat in 2005 for more than $680 million. But the world’s largest independent publisher of video games is making up for lost time with its activity in mobile games this year. Last week, it announced support for the Amazon Kindle Fire HD platform, and it is considering expanding to more platforms.

Greg Canessa, the vice president of mobile at Activision, said the recently launched Skylanders Cloud Patrol game has had well over a million downloads on iOS (Apple’s iPod Touch, iPad and iPhone). And all four of Activision’s major mobile game releases — Skylanders, Wipeout, Pitfall, and Call of Duty: Zombies — have made it into the top three paid apps rankings. Activision has also set up Activision Mobile Publishing in a partnership with Flurry to publish third-party mobile games. Here’s a transcript of our interview with Canessa.

GamesBeat: Tell us about your mobile strategy, including your support of the Kindle Fire HD.

Greg Canessa: You probably saw that we were featured as part of the press conference with Amazon and Jeff Bezos. We were the only game that was up there. And Jeff, at the time, had an opportunity to demonstrate our product. That was really cool. There’s a couple of components to the story. One of them is Activision’s partnership with and support of Amazon and the Kindle Fire platform, with a particular emphasis on the new Kindle Fire HD device.

We’ve been working in partnership with them for the last six months on this project. Skylanders, as you know, is a powerful new phenomenon in the video game space, one of the most successful brands out there at this point. The opportunity to bring that Cloud Patrol product — which is the initial expression of Skylanders on mobile devices, we released it back in April — over to the Kindle Fire, with what we consider to be significant new innovations.

It will have the first-ever in-app toy purchase. The user not only will be able to play through the Cloud Patrol game — which is optimized for the Kindle Fire HD in various ways, optimized for their display, optimized for the GameCircle technology that they’ve brough up, the service that they announced yesterday — but it also features the ability for customers to purchase the digital version of the toy, and a featured physical version of the toy, to be fulfilled through Amazon. The user will actually get the digital version of the Skylander immediately upon purchase for play in Cloud Patrol, while the physical product is fulfilled through Amazon and arrives on your doorstep two to three days later.

The final feature, which is actually is not being well-publicized, is the fact that we’ve done a custom-decorated version of one of our Skylanders, exclusively for Amazon. Our toy, the Flameslinger, which of course ties in with the Kindle Fire. … [Laughs] There are lots of collectors that consider the toys not only fodder for gameplay but also collectibles. We’ve had a couple of examples of custom-decorated versions or custom-painted versions of Skylanders as exclusives for various events or opportunities, like Toy Fair. Or for the 3DS, we have the Dark Spyro. Those have been really popular as collectible items. So we’re doing that as part of the partnership with Amazon. We’re offering them an exclusive custom-decorated toy, the Flameslinger. That will be available periodically through the Cloud Patrol app.

Every day we’ll be changing the offer in the app, and so customers will have to go back into the app every day, into Cloud Patrol, to check and see what the toy of the day is. The rare Flameslinger toy will be featured on a periodic rotation through that. We’re pretty excited about this. If you take a step back and think about Activision and its leadership position in the video game space, and then you think about Amazon and their leadership position in not only devices and tablets, but also more broadly in terms of digital commerce, this is a great marriage of the two companies and our strengths. Physical meets digital in one app.

GamesBeat: Since you guys are also late to the mobile business, this is somewhere you can get in on an equal footing with everybody else.

Canessa: We were definitely not first to the party with mobile. You’re not only seeing this through words now; you’re seeing this through actions and products. We are making a dedicated effort toward increasing our mobile footprint. We’ve released Cloud Patrol on iOS. That’s been really successful. Of course, Black Ops earlier in the year. Pitfall, the success we’ve had around Pitfall about a month ago. We released Wipeout last Thursday, and that has been number one on the iPad and iPhone charts for the past week solid. We took the number one position from even the editor’s choice. We were not featured in editor’s choice. We took that away last Friday and we’ve been there ever since.

Each of those products is past four and a half stars. Ninety percent rated reviews. So the products are high-quality. They’re performing well financially. They’ve been promoted by Apple in various forms. It’s been great. With more than one or two products coming from Activision, now you’re seeing a trend line of high-quality products that are well-received by the customer base. You’re seeing a definite sign from Activision that we’re dedicated to bringing those world-class entertainment experiences that we’re known for over to the mobile platform. We see a huge opportunity around Amazon, and not just in terms of our partnership and our standing relationship with them. With Amazon’s approach being very similar to Apple’s in some ways, with a highly curated experience and a managed experience through the operating system and the software of the device, we’ve also seen that the engagement and enthusiasm in the user base for the Kindle Fire devices provides a significant opportunity for Activision in partnership with Amazon. We’ll be able to bring our titles to that platform and address a new audience of customers. We’re really excited about Kindle Fire.

GamesBeat: It seems like you’re putting a higher priority on this than some other platforms that are out there, then.

Canessa: Like we’ve talked about before, our partnership and relationship with Apple is very important to us. You’ve seen all our releases this year come out on the iOS platform. It continues to be a priority. Our partnership with Amazon and Kindle Fire certainly is a priority platform for us. If you take a look at the industry…you look at the highly curated experience of Apple and the iOS platform. That’s been a big part of Apple’s success, in terms of their app ecosystem. If you look at Android, with the huge installed base and device penetration, particularly on the smartphone side, that continues to be an opportunity for Activision, but in particular with Amazon in our partnership, given that curated experience. We think it’s more akin to the iOS experience in some ways, and that provides a tremendous opportunity to us as well. There are also issues of piracy of games that plague the Android market in a more general sense. We believe Amazon has a better handle on that, given the operating system they have and the curated user experience they deliver. So we think, for all those reasons, that Amazon is absolutely a focus platform for us.

GamesBeat: How about Windows 8?

Canessa: Windows 8 is another very interesting opportunity that we’re looking into. We haven’t announced anything specific yet around Windows 8, but our partnership with Microsoft, of course, is very strong and healthy as it always has been. They’re a very important partner of ours on the console side. With Windows 8, we believe it’s a very interesting opportunity, given Microsoft’s strategy of venturing into the tablet and smartphone space from the direction of the PC operating system. Coming at it from the perspective of 500 million PCs with Windows 8, and then a seamless extension down through Metro to the tablet, and eventually, we hope, to the smartphone. That is a very interesting opportunity for us as a gaming software company, to provide our entertainment experiences on that platform as well. So while we haven’t announced anything specific, I would also put them on the short list of platforms that we’re very excited about and monitoring very closely as expansion platforms for our mobile strategy.

GamesBeat: How well have the other apps done at this point?

Canessa: They’re all doing very well. We kicked off the year with Call of Duty: Black Ops Zombies. That title continues to chart in the top 100 on the iOS side. It’s been very highly reviewed. Still has a four-and-a-half-star rating and still continues to sell very well. We don’t break out specific sales volumes by mobile title as a matter of Activision policy, but it continues to sell very well. Cloud Patrol has been a great success for us. We recently announced that we had well over a million downloads, and that was quite some time ago. We’re significantly beyond that now. We have a large, growing, and pretty loyal base of Cloud Patrol users. Of course our announcement with Amazon is an additional expression of the success of that title. We obviously wouldn’t be investing and working to bring that to the platform if it wasn’t our best title. It’s another four-and-a-half-star app. It’s got over 5,000 reviews on the App Store. It also does very well in terms of microtransactions, indicating that we have a loyal audience of users that continue to play the game. And on that one, we continue to invest. That title in particular. We launched in April, and we’ve tracked towards one update a month, a significant content update. We’ve added new levels, new monsters, new backgrounds. We added 33 new Skylanders powers. We added new Skylanders to the game. We’ve done five different Black Ops updates, and we have more planned. That’s another expression of the success of that title. We’ll continue the updates. We’ll grow the installed base well into the seven figures.

Pitfall is about a month old now. It came out about 27, 28 days ago. It’s had a great start. That title got Apple’s editor’s choice when it came out. It’s our first title from Blast Furnace. They’ve been a tremendous pickup. Four-and-a-half-star reviews on that title as well. It continues to do very well for us. Again, very strong in the in-app purchase department for that product. It’s still early days with it not quite a month old, but the early sales are very good. We talked about Wipeout, but another title we released last Thursday is the Activision Anthology. We basically did a free-to-play game, Activision’s first true, out-of-the-gate free-to-play game. It’s a compilation of all 45 of our original Atari 2600 products, in their original form. It’s really cool. We geeked out a bit on this and re-created all the original boxes, packaging materials, product manuals, all the original cartridge box art. … We have tips from the original designers like David Crane and Bob Whitehead. All of that’s included in the compilation.

You download it for free and you get Kaboom! Then, if you like it, you can either buy packs of 11 games for $2.99, or you can buy the entire collection for $6.99. It’s been out for a week now. It’s seen some Apple promotion, new and noteworthy. … We’ve seen a tremendous pickup on that game. Not just from a free download standpoint, but also from a conversion standpoint. It’s converting really well, and it seems to be resonating really well. We have over a four-star review average on that product. To put a fine point on it, Wipeout is number one currently. Pitfall made it up to number two on the App Store. Cloud Patrol was easily in the top three. We’re talking about the top paid apps. And Call of Duty: Black Ops Zombies hit number two. So in terms of top paid, we have hit top three with all four of our releases so far, in terms of paid releases.

GamesBeat: Do you see more of a shift to free-to-play at some point in the future?

Canessa: The way I look at it, I don’t think the entire world is going free-to-play. I think the market is sizing up into three market types, in terms of mobile games. There’s the premium price point, which is the Infinity Blade/Call of Duty type of model. There’s a big brand behind it, there’s a loyal set of customers behind it, and there’s a really high-quality, high-production-value type of value proposition behind the product. I think that’s centering in around the $6.99 price point. Maybe in some cases $5.99. I think that’s archetype A. Archetype B is the more casual, accessible game at the $.99 or $1.99 price point with some microtransactions. And then the third archetype, the C archetype, would be the free-to-play model. We think that works really well for certain game genres, but not others. As examples, I think resource management games, casino games, other types of games that have full microtransaction [uncertain? – 19:40], or have a casino-like mechanic of buying chips or coins, I think that works really well in free-to-play. But I think there are other game genres, more linear level-based games for example, I think they’re better at a $.99 or $1.99 price point , and those premium experiences, as I mentioned, are at a higher price point, and should be at a higher price point.

GamesBeat: I was interested to see that Square Enix game that was at a $30-dollar price point.

Canessa: Yeah, yeah… The World Ends With You is at like $18 dollars, and then it’s $20 dollars for the iPad version? Square Enix customers are loyal. I give them a lot of credit for what they’re trying to do there.

GamesBeat: How do you look at the general state of the industry, everything else that’s going on?

Canessa: I think it’s still a very disruptive and dynamic time for our industry. As Activision Mobile, being definite students of the industry, we’ve learned a lot and we’ve all contributed a lot over this last year. There’s still a lot of fragmentation. There’s still a ton of content. App discoverability is still a challenge for our industry. Piracy is still a challenge on the Android side in particular. But also on the iOS side. We have issues with piracy even on the iOS side. Customer acquisition costs, user acquisition costs are rising as we go. The rising cost of customer acquisition is affecting all of us. I think what that means to a company like Activision is the importance of building and maintaining a community of users, so we can cross-sell our apps. A key component of our strategy is to make all of these games, whether they’re audience attractors or more highly monetized games or premium titles or really sticky titles… We can build a community of users across all of those. Up to and including not only our first-party games, but also our Activision Mobile Publishing titles that we’re publishing in partnership with Flurry. Once we build that ecosystem of first- and third-party titles within the Activision family, we can aggregate that community and we can leverage that community to keep user acquisition costs low amongst our titles. I think that’s a key strategy. A lot of us would maybe love to see a world where the industry calms down a bit. [laughs] We do see a bit of consolidation, and we’re starting to see some players at the defined price points emerge. We’re starting to see a bit of that, the price point archetypes emerging, which is encouraging. But it still remains a pretty dynamic, disruptive time. We’re continuing to monitor it closely and identify opportunities for the company to build great experiences and deliver great value for our customers.