Explain the corporate rationale of Activision to me, please

In My Humble Opinion (IMHO)
1

There’s a lot of background to this issue, but I’ll try to shorten it for those who could care less about the video game aspect of this. I’m trying to understand the logic of these actions from a business standpoint.

Both Activision and Harmonix have current versions of music-based games (Guitar Hero III and Rock Band, respectively) that operate on the Playstation 3 (as well as other systems, but the PS3 is the focus of this issue). Both games allow up to two players to play guitar simultaneously, but each game “bundle” only comes with one guitar peripheral. The only way to get a second guitar for either game (outside of eBay and its ilk, of course) is to buy a second bundle.

Activision’s Guitar Hero bundle is less than half the cost of the Rock Band bundle. Due to some confusion and misinformation provided by Harmonix when Rock Band was being developed, many Rock Band buyers were under the impression that they would be able to use their Guitar Hero III guitar with the Rock Band game. Many who were not already owners of GHIII were willing to go out and buy GHIII in order to have the second guitar (and get another cool game at the same time – a win-win). However, once Rock Band was released, it was discovered that the GHIII guitar did NOT work with Rock Band. There has been much wailing and gnashing of teeth by Rock Band owners and potential owners in the month since the game was released because Harmonix won’t have individual guitars for sale until February, if then.

Well, Harmonix recognized the inconvenience to its Rock Band fans and set about working on a solution. They developed a downloadable patch for the game that would allow the game’s owners to use GHIII guitars with Rock Band. And yet, as they were set to release that patch, Activision put a halt to Harmonix’s plans. After lots of finger-pointing from both sides, Activision has come out today and stated clearly that they should be compensated by Harmonix in order to allow such a patch to be released.

Here’s what I don’t get: if Activision had allowed the patch to be released, there would be a large number of consumers running to stores to buy Activision’s GHIII bundle in order to play Rock Band the way they want to. In other words, Activision gets to make money from people who aren’t even necessarily interested in their game, and potentially develops new customers/fans in the process. Instead, Activision has raised the ire of many Rock Band fans, some of whom are swearing off of Activision products altogether. And should Harmonix continue to refuse to pay Activision, the issue becomes moot in a month or two since Harmonix will be able to sell their own peripherals to the public at that point.

It feels to me like Activision is missing out on an odd and unique opportunity to make money from an unexpected source. But I’m not a business person or a software developer, and I have to imagine there is some sensible reason why a company would take the stance that Activision has. The Rock Band message board I’m on has a lot of angry people shouting that Activision is essentially a big bunch of poopy-heads, but they’re a good-sized company which has been around a long time, and I assume there’s a more logical reason behind it all.

Can someone with some business sense help me understand the potential issues involved here?

By the way, some examples of articles about this little controversy can be found here and here.

2

I see a couple of possibilities. First, they may have just decided that anything good for Rock Band is bad for them. So if Harmonix wants to add support for the GHIII controller, Activision should try to stop them.

Second, they might be looking at it as some kind of property issue. That is, they object in the same way they’d object if Harmonix wrote a patch to let you import the GHIII songs or characters into Rock Band.

In either case, I doubt that they expected the kind of response they’re getting from the community.

3

I thought of something else - you can buy add-on tracks for Guitar Hero, right? Maybe Activision is more concerned about that source of revenue than the initial game purchase. They might view the game itself as a loss leader for the downloadable content, like some consoles are loss leaders for the games.

4

Interesting, but how does getting Guitar Hero into more people’s homes make it less likely that they’ll sell DLC? Our household is a good example. We saw Guitar Hero III once at a friend’s house, and we weren’t impressed enough to buy it since we knew Rock Band was coming out.

However, if we had the patch that let us use the GHIII guitar, then we think, “Well, we can maybe splurge on the $70 for the GHIII bundle.” And GHIII has songs that Rock Band doesn’t, so maybe we play GHIII when we get bored. And if GHIII has DLC that Rock Band doesn’t, we’ll spend a few dollars here and there. So over time, Activision potentially gets somewhere in the neighborhood of $80 - $100 from us as an indirect consequence of us wanting a second guitar.

Now, however, they get nothing but disdain and anger from us. No money, and no desire to support them in the future. I don’t see how this benefits them in the short or the long term.

5

But if GH3 is a “loss leader” (I kind of doubt that), then why would Activision want people to buy GH3 for the controller? Every sale loses them money!

Even if your contention that “maybe people will DL songs for GH3 when they’re by themselves” is correct, how many songs will it take for Activision to make up on money lost on the game? 20? 40? Do you really believe that a person who buys a $70 game for a mere controller is going to bother paying an extra $40-60 for songs for a game that’s being played irregularly?

There’s a fair amount of “if’s” in that last paragraph and “if” I were running Activision, I wouldn’t care to bet my company on them.

6

Anyway, I disagree with the contention that Activision is “compelled” to help Rock Band because Harmonix screwed the pooch as badly as they have on the extra guitar issue. Activision didn’t release GH3 so that Harmonix purchasers could get an extra guitar for their game, and Harmonix

  1. Shouldn’t have intimated that GH3 guitars would work with their game.
  2. Should have planned production so that extra instruments would be available earlier.
7

This is Activision’s problem. As you pointed out, GH3 is not a compelling purchase by itself because of Rock Band. Activision’s suggested motive of getting GH3 into more homes and possibly making fans of it is pretty weak: Anyone buying GH3 to get an extra guitar to play Rock Band is pretty well sold on the whole musicsim video game genre. Anyone who would not buy GH3 without the patch for Rock Band is not going to spend much time playing GH3.

Activision doesn’t want to play rhythm guitar to Harmonix’s lead. They purchased the Guitar Hero franchise after GH2 (no doubt for lots of cash), and fully expected to milk it for lots of money. Then they find out that Harmonix is developing a strictly better product. At this point, the writing is on the wall for the (solo) guitar game. The full band experience is going to trump the single instrument version for sure.

At this point, Activision is going to get what it can out of GH3, and depending on the code base, either reload with an upgrade pack with more instruments, (GH3.5), or they’re going to try to get Guitar Hero IV out ASAP, with extra instruments, of course. The worst thing that could happen to them is for people to buy GH3 just for the guitar and let Rock Band get all the love.

Anything that stalls their major competitor helps their plan of coming out with a real rival to Rock Band before Rock Band has gained total dominance. Rest assured that Activision was all set to experience a sudden about-face change of heart in a few months, once they want to use their new game with all the existing Rock Band parts. The public distaste for this plan may lead them to change their minds sooner, but I bet that they insist on a reciprocal compatibility agreement from Harmonix.

I seriously doubt that the Guitar is a loss leader. The first Guitar Hero game (which was very profitable) sold for about the same price and didn’t have any added content. And if anything, the guitars are probably cheaper to make after a few years experience, higher volume, and the general trend of electronics getting cheaper over time.

8

Well theres another eason I can think of. Suppose you are trying to decide whether to bu Rock Band. Is it a more or less attractive purchase if you can get a second controller through GHIII. It is a more attractive purchase, so Activision wants to reduce the appeal of Rock Band. Another reason, once Harmonix is allowed to use the guitar controller, anybody else can and that would eat into Activision’s potential market as well. I mean can you see down the line there being a dozen guitar based games if they can all use the GHIII controller, which would undercut Activisions presence in the space.

9

I think Activision has claimed that their guitar is better than the Rock Band guitar design-- easier to use, more responsive, whatever. They see it as a unique selling point of their game. If you can suddenly use their (supposedly) better guitar without playing their game, that advantage doesn’t exist.

10

Activision has to protect their work on the guitar. If they let other companies use the Activision guitar without compensation, they will have no recourse when someone develops an entire series of games that use the guitar.

11

slight hijack:

That’s really odd because down here we can get wireless guitars for Guitar Hero for all the consoles without a problem.

They’re $80 retail (for the PS3) so you’re saving about half ($170 for GH3 & Guitar for the PS3) maybe you should ask a small computer retailer to see if they can get one in for you?

I can’t see one for Rock Band, but that could be because the game hasn’t been released down here yet.

12

One of the things I find strange about this whole thing is that I’ve read Rock Band guitars don’t work with Guitar Hero III at all and somehow Activision is still the bad guy.

Basically, Harmonix changed how Rock Band processes the musical information from their Guitar Hero days (because of “extras” they might add down the line) and everyone seems to be siding with them because they’re the little guy.

There’s no other explanation that makes sense.