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TVTranscript
00:01They launched in the late 70s with little money and lots of ideas.
00:07There were four guys at Atari who decided they wanted to start their own company
00:12and publish games that were independent of Atari.
00:15Their success broke records.
00:18Activision in 1983 when it went public was the fastest growing company in the history of American business.
00:25And some of their decisions backfired.
00:27I can't figure out where they came up with that name or why they decided in 1988 to compete against
00:33Microsoft.
00:34It just really did not work out for the company.
00:36But a young video game executive was confident that the failing company had a future.
00:42And everybody was asking me whether I was mad. Why was I going off and doing this?
00:47While other game companies have struggled to survive, Activision has continued to dominate.
00:52It was something that started gradually building but never subsided and just continued to build and build.
00:59This is the story of a company that continues to lead us through the video game revolution.
01:04It's the compelling story of Activision.
01:24The story begins in 1979 when another company is making headlines.
01:31I'd like an Atari 2600 system please and everything that goes wherever is unusual.
01:35Warner Communications introduced the first Atari 2600 which was just an enormous success.
01:41I can't tell you how many tens of millions of machines they sold but it was a lot.
01:45But it was a controlled licensing model.
01:47If you wanted to make games for the Atari 2600 you had to do it through Atari.
01:54Atari vets Alan Miller, Bob Whitehead, Larry Kaplan and David Crane have a plan.
02:01There were four guys at Atari who decided they wanted to start their own company and publish games that were
02:07independent of Atari.
02:08But Atari filed suit against the fledgling company Activision in May 1980.
02:13Charging unfair competition and conspiracy to appropriate trade secrets.
02:17Undaunted, Activision begins shipping titles for the Atari 2600 just weeks later.
02:25They built games like Pitfall and River Raid and Kaboom.
02:32The red hot game developers hit it big.
02:36By March 1981, revenues exceed $6 million.
02:41Activision was the original independent third party game publisher back in the early 80's.
02:47A lot of success on the Atari 2600.
02:50In December, the lawsuit between the companies is settled.
02:53Activision becomes an official Atari licensee.
02:55And success continues.
02:57The thing that made the company most successful at that time was that they had a very consistent track record
03:03and history of very high quality products.
03:07With ten successful releases in a row, sales are predicted to reach $150 million by the end of 1982.
03:14The biggest challenge is keeping game cartridges in stock.
03:18And Activision in 1983 when it went public was the fastest growing company in the history of American business.
03:27Zork, a groundbreaking text adventure game, is topping charts and being developed by a company that Atari will soon be
03:34very familiar with.
03:36Infocom.
03:38But are the successes of Atari and the entire video game industry too good to be true?
03:43There is this perception that Atari was a fad.
03:46You know, people were comparing the 2600 to the Pet Rock and that it couldn't be duplicated and probably a
03:52lot of your viewers wouldn't even know what a Pet Rock is.
03:54But you had a lot of companies that had emerged overnight after Activision's success.
04:01By late 1983, Atari's sales of the 2600 and revenues of the entire video game industry slipped into a tailspin.
04:12Taking Activision along with it.
04:14Even though it has five of the top 20 video games, in November, Activision is rocked by massive layoffs.
04:22A still struggling Activision acquires game developer Infocom in 1987.
04:28A turnaround seems possible.
04:31Infocom actually, in a lot of ways, was really the first true video game company they had gotten started in
04:38the late 70's.
04:40When computers, you know, like the Apple II were first coming into the market or the TRS-80 from Radio
04:45Shack.
04:46It was before there was an IBM PC.
04:48And Activision joins forces with international game giant, Telecomsoft.
04:53Incredibly, the newly merged company abandons an all too familiar name.
04:58I think it was something in the water.
05:00For the life of me, I can't figure out where they came up with that name.
05:04They changed their name to Mediagenic.
05:06They started to get into business application software along with video games.
05:11And Mediagenic goes head to head with a computer giant.
05:14I can't figure out why they decided in 1988 to compete against Microsoft.
05:19You know, that was, the decision was to go compete against Microsoft making word processors for the Macintosh.
05:24And they never fully abandoned the heritage of the company.
05:29Even though they changed the name, they were still making games under the Activision banner.
05:34It just really did not work out for the company.
05:36Indubitably.
05:38In spite of the turmoil, in 1989, the company publishes the first interactive product on CD-ROM.
05:45Manhole.
05:47The CD-ROM had only been around for a couple of years and it wasn't really a mass market technology.
05:53And the guys who developed the manhole went on actually for another company to create Myst.
05:59Sales fail to match the game's glowing reviews.
06:02By the fall of 1990, the once mighty game giant seems doomed as stock in the company drops to 50
06:09cents per share.
06:10It will take a video game warrior to save the collapsing company.
06:17Everybody was asking me whether I was mad.
06:19You know, why was I going off and doing this?
06:21And, you know, what was it that was attractive about Activision?
06:24Why would it be so crazy?
06:26Robert Kotick, a young video game executive, takes on the daunting task.
06:33He had the foresight to see that this was an area of tremendous expansion and that by buying Activision you
06:40did have a brand name that resonated with the traditional gamer.
06:44He didn't have to start something from scratch and build it up.
06:47It was a little bit of a leap of faith and I think it was also some great foresight on
06:51Bobby's part.
06:52He knew what he wanted to do and he followed that plan.
06:57They lost the culture of quality and when we came back to the business, the first thing we did was
07:02change the name back.
07:03And also eliminate all of these ancillary product lines.
07:07We stopped making word processors.
07:09We stopped making databases.
07:11We just focused on doing games really, really well.
07:14And the mantra, it's a little bit different today than it was 10 years ago, but the mantra has always
07:19been a small number of really great quality games done incredibly well.
07:23But with a staff that has been devastated by layoffs, how will these games get made?
07:29At that point in time when we were a small company, it was very hard to go out there and
07:34recruit the best developers in the business at that time and say, hey, let's go with Activision.
07:39So we took a little bit of a different strategy.
07:42There really wasn't a plentiful supply of development talent.
07:45This was a pretty new business.
07:47And so we felt that in order to keep the quality objectives that we set for ourselves, we had to
07:51do all of the development at our own company.
07:56We took lots of very young, bright, talented people who may not have necessarily had a lot of gaming experience,
08:03but really were passionate gamers and wanted to make games for a living.
08:07And we brought them into Activision. We helped teach them how to make games.
08:12We had to hire the programmers and the artists and the animators and manage them because we really didn't have
08:16third parties that could provide that capability to our quality level.
08:20It used to be 100% of our products had to come from our own internal studios.
08:24The addition of Kodik helped bring Activision back to life and doing what they do best, creating games.
08:30But his next endeavor would be the riskiest of all, reinventing the wheel.
08:46Activision has given birth to revolutionary games and proven to be the reigning king of the video game industry.
08:52But this new thought of recycling old games for newer audiences may be the toughest obstacle yet.
08:59When we first took over the company, we had a very small revenue base to take some of the old
09:03franchises like Zork and Pitfall and Shanghai and create new versions of those products for new hardware.
09:14The first to receive the update is the Activision classic Shanghai.
09:18The new game Shanghai 2 Dragon's Eye is unveiled in May 1991 to glowing reviews and brisk sales.
09:27Shanghai was a very important franchise for the company.
09:32The game also helped establish Activision as a producer of games for many markets.
09:37You know, it was one of the company's staples and it was the kind of game that you could release
09:43on multiple platforms that you could put into an arcade.
09:46And there was just a tremendous amount of interest, not just in America, but globally for Shanghai.
09:53So I think it also helped the company in markets like Japan in terms of establishing a presence for ourself
09:59in Japan because Shanghai was very popular there as well.
10:02And it just, you know, it just really allowed the company to have this steady stream of revenue.
10:09Shanghai is only the first step in Kodak's plan.
10:12Bobby and his team recognized that there were a lot of assets in the Activision library that were just going
10:20to waste.
10:21Properties like Pitfall or Riverade or Kaboom or Zork that go back many, many years that really captured the hearts
10:29and minds of gamers.
10:30And what we thought is you have a combination of great intellectual property, incredible development technology.
10:36We had to take those treasures and make them into new great games.
10:41And those memories are updated in thrilling and successful new versions of longtime Activision favorites, including Pitfall.
10:50The original Pitfall, due to the graphical limitations of the early 80s, it was basically Pitfall Harry, a stick figure,
10:57going across a puddle, two dimensional, on a vine, which was just a straight line.
11:02And now all of a sudden it's 10 years later and you can just imagine what we can do to
11:06create waterfalls and crocodiles and lush environments to really bring Pitfall Harry and his adventures to life.
11:16And Zork.
11:16Zork in many ways is even more remarkable because it was a text adventure game, nothing but text.
11:23And so in certain ways it's almost like taking a book and turning it into a movie, you know, being
11:28able to take the written word and turning it into a 3D action adventure game.
11:49In 1992, the newly rechristened Activision relocates from Northern California, the home of many video game companies, to Los Angeles.
12:00We ultimately opted to move the company to Southern California because we really did feel that ultimately we would be
12:06able to benefit from the Hollywood creative community.
12:09And that creative product expands when seven titles were released in late 1993 for the red hot Super Nintendo Entertainment
12:16System.
12:17The offerings include updated favorites such as Shanghai 2 and an intriguing new robot combat game named Met Warrior.
12:25That was a mega hit that allowed us to take advantage of all the new 3D technology and so it
12:30became a huge bundle item.
12:33And it was allowed to go into all these bundles with all the 3D cards and computers that were coming
12:38out at the time.
12:38And I think at that point we started to get more diversity in our games and started on our path
12:45to where we are today.
12:45Risk sales of Met Warrior, updated classics and new titles, convince Kodik that the future of Activision lies in a
12:53mix of the past favorites and brand new franchises.
12:57Yet the emerging company is at a crossroads.
13:00We had the challenge of competing against other smaller hundred million dollar companies like us for development talent, for marketing
13:09talent, for sales talent, for intellectual property rights, for technology talent.
13:15And our fear was that at much less than 500 million dollars, we wouldn't be a big enough company that
13:21we could have predictable operating results.
13:23In the mid 90's when we were growing and always trying to get to the level we are today, we
13:29always had one hit, one big hit that really kept the company moving forward.
13:35So we went into sort of this mad dash mode to go from 100 million to 500 million in 3
13:40or 4 years.
13:41Had we not done that, I'm not sure that we could have remained an independent company today.
13:45In April 1995, Activision enters an agreement to develop titles for Sega Saturn, Playstation and Nintendo Ultra 64.
13:55Strategic alliances with third party game developers also increased their success.
14:00Through an agreement with id, the blockbuster game Quake is created.
14:04And once we were able to start working with id, I think other people said,
14:09Wow, you know, if id likes working with Activision, maybe we should start talking to Activision.
14:14I think our whole approach to the development community is to be a partner with the developers.
14:19And this is what we really said to id, your success is our success.
14:24What is redemption PS2?
14:26What it's really about is trying to make the consumers happy each time they buy an Activision title.
14:32Every proposed title must make it through a demanding approval process.
14:36We have a very extensive green lighting process where we look at the market potential as a genre growing or
14:42declining.
14:42How strong are the competitors?
14:44It does a lot of things.
14:45It makes sure that the development is on schedule.
14:48It makes sure that we share this common vision.
14:51It allows us to identify any issues early on in the process so that we can correct them.
14:56And we make sure that we really hear what the entire world is saying about our games.
15:01Those making it through the green light committees undergo incredible in-house testing of games.
15:06And then testing our games all along the way with consumers.
15:10Are gamers interested in the concept?
15:13Are they interested in the idea and the gameplay?
15:15And then importantly as the game evolves, do they think it's fun?
15:18Do they understand what the objectives are?
15:20Is it easy to play? Is it intuitive to play?
15:23Is it something they want to continue playing?
15:24New versions of MechWarrior, Quake, and Pitfall titles continue the winning streak in the 1990s.
15:32Yet all the testing in the world can't guarantee success.
15:37The much anticipated release, Spycraft, The Great Game, had a thrilling espionage plot.
15:43And we wanted to make it as realistic as possible.
15:46The CIA is a hard place to duplicate without having some inside information.
15:50So we figured we'll go to a former CIA director.
15:54And it boasted the latest in technology.
15:56It was a time where people expected the CD-ROM could in many cases replace video game systems
16:02as the primary place that people would play games.
16:05And that ultimately turned out not to be the case.
16:08Spycraft was a lot of fun.
16:09We definitely learned a lot about what you want to do right and what you could do wrong.
16:15Spycraft misses with bands, but Activision has no time to grieve.
16:18They're busy signing Bruce Willis to a multi-million dollar deal to star in Activision's Apocalypse.
16:23But the internally developed game is beset by production problems.
16:27You know, again, it was another excellent learning experience for Activision
16:31to learn about what it means to work with a big celebrity who has very particular ideas
16:37about how he should be portrayed in a video game.
16:41To make sure it was right and to make sure we captured the essence of Bruce Willis was not very
16:47easy.
16:48I'll see you in hell.
16:50And luckily for us, we found Eversoft, who came along and made that game for us
16:55when we were having some other problems with it.
16:57The much anticipated game premieres on PlayStation, but falls short in more ways than one.
17:02We've had games that we've had higher expectations for, and then as the game has been,
17:06in the course of being developed, we've perhaps reduced our expectations
17:09because we found that consumers aren't as interested in it
17:13or the gameplay didn't come along as much as we'd expected.
17:16But the budding relationship between Activision and Neversoft
17:19would lead to one of the most profitable franchises in video game history.
17:36By 1996, Activision has grown from a small California game developer
17:41into an international video game giant.
17:44There's only one other company that has, like we do,
17:47in excess of $700 million of revenues, and that's Electronic Arts.
17:50And that's probably the reason why you see both of us as competitors,
17:55the two most consistent operators and the two most consistent
17:59and operating results of all the publishers.
18:02In 1999, Activision acquires Neversoft,
18:05a company that leads them toward a brand name that will make them millions.
18:09I think everybody was surprised about how successful it was.
18:14We all knew it was going to be successful, but the magnitude,
18:19it is one of the top-selling franchises ever.
18:22We didn't think that we would hit it so right on the first try.
18:27To get the highest-rated video game in the history of the PlayStation on your first try
18:32in a new category was a surprise.
18:37As we did concept testing, we found out that skateboarding is not about racing.
18:42It's about tricks.
18:43And so that is what started us on the track of making Tony Hawk's Pro Skater the first one,
18:48and subsequently all of them, about tricks.
18:51I guess we really captured the entire action sports lifestyle elements
18:56and put them all together in a product with the right developer in Neversoft,
19:03the right athlete in Tony Hawk, and the right type of music,
19:09the right type of environments into something that turned into a really special game and franchise.
19:16From the very beginning, Activision knew Tony Hawk would be bigger than life.
19:22When we presented E3 and you get the excitement from the industry and from retailers,
19:26it was something that started gradually building but never subsided and just continued to build and build.
19:33In June 2000, Activision releases hits such as Dark Rain 2, Vampire the Masquerade Redemption,
19:43and Chicken Run Fun Pack.
19:44But it's their agreement with legend Matt Condor Hoffman that has fans really psyched.
19:52We actually knew it was going to be a great game.
19:56The gameplay behind BMX is a lot of fun.
19:59At this point, it's the number five PlayStation game since it's been released,
20:03so we're very happy with its success.
20:10Incoming torpedoes.
20:12And the hits keep coming.
20:14Activision releases Star Trek Invasion in September 2000,
20:18the first game that fans feel truly captures the magic of Star Trek.
20:28What we've been able to do with the Star Trek license is to essentially return it to two things.
20:34Both true to the brand, so that it's not outside the realm of what people believe Star Trek is and
20:40should be,
20:41and importantly, to improve the game quality.
20:47One of the things about Invasion is that it was a console game.
20:50Most of the Star Trek games are PC games.
20:53I think console games are a little bit quicker, a little more action-oriented.
20:58By late 2000, Pro Skater 2 is number one on the U.S. retail charts.
21:04Sure, well, I mean, Tony Hawk has had all the attention because really,
21:07I mean, we've launched Tony Hawk three different versions now across multiple platforms,
21:11but we're in the process of launching all of our action sports.
21:15They're under an umbrella brand called Activision O2.
21:18And it's our extreme sports brand.
21:20Other extremely popular athletes soon join the Activision O2 bandwagon,
21:25like Sean Murray and Kelly Slater.
21:28Kelly Slater's pro surfer.
21:29Kelly Slater is probably the most recognized name in surfing,
21:33and we'll be launching a game with Kelly Slater this summer.
21:37Sean Murray on wakeboarding will also be coming out wakeboarding.
21:41Less known than a lot of the sports, but it's a lot of fun.
21:44Now that we have the scoop on the athletes, what's the scoop on the consoles?
21:48As a third-party publisher, Activision hopes all the first parties succeed
21:52because the more hardware that's out there, the more software will sell.
21:56So we're excited to see someone with the strength of Microsoft
21:59and the resources of Microsoft enter this industry.
22:02PlayStation 2 has still sold more game units this holiday season than anybody else has,
22:07so they're certainly a factor that no one can forget about.
22:10Sony has established a wonderful franchise in PlayStation,
22:13and the PS2 is a great machine and has arguably some of the best games,
22:17certainly the most games out there right now.
22:20Activision is one of the most highly regarded game companies in the world.
22:24They've created video games that have changed the industry
22:26and managed to prevail over every circumstance.
22:29And they have no plans of slowing down.
22:34We just know we have to take it to the next level.
22:37What do we got?
22:38But it's no harder to do that in the future than it was in the past.
22:41You're always trying to push the envelope of game playing.
22:44You're trying to have the latest and greatest visual technology and sound technology.
22:50And at the same time, you want to be innovative and fresh
22:53and give something new to people
22:56because they don't want to play the same thing over and over again.
23:00All right, I've got to go back to work.
23:02Not easy.
23:05But a lot of fun.
23:09Well, actually, the industry is poised right now to take off
23:14and grow significantly over the next couple of years
23:16with the introduction of the new hardware.
23:22And we have several things sort of up our sleeves.
23:24We've got expansion of our current franchises, led by Action Sports.
23:36Where we'll be launching titles in all of our Action Sports franchises
23:39in the upcoming year.
23:42Today, being over $700 million in revenues,
23:46we have the luxury of enough product flow,
23:49enough of a revenue base, enough of diversity of businesses
23:53that we can afford today to look at every one of our products individually
23:57and say, these products need to be the highest, greatest products in the market.
24:03And we won't put a product out into the marketplace
24:05unless we feel that it will accomplish that objective.
24:08You're going to have to stay tuned
24:13for some of the things that we've got cooking here.
24:25Here we go in.
24:26Here we go in.
24:29Here we go in.
24:37Here we go in.
24:42Oh
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