Despite a late-year release of the lucrative "Black Ops" version of the "Call of Duty" franchise, Activision Blizzard announced yesterday its profits had fallen below the conservative estimates it issued to analysts and it would cut costs.
First on the cut list is the division that develops the "Guitar Hero" music game and about 500 jobs, out of a global workforce of about 7,000, company officials said on an earnings call yesterday.
The cost of licensing music and cost of the fake-guitar game controllers made development too expensive, according to Activision Publishing Chief Executive Eric Hirshberg.
"We simply cannot make these games profitable based on current economics," he said.
He didn't specifically address the perception among gamers that the promotion cost of Call of Duty: Black Ops – the latest in the CoD series, which was released in November and has generated more than $1 billion in sales so far – might have stripped promotion or development costs from other titles.
Estimates for the cost of developing Black Ops range from $18 million to $28 million, though the Los Angeles Times estimates cost of the previous title, CoD2: Modern Warfare, was between $40 million and $50 million.
Mike Kotick, CEO of the parent company Activision Blizzard, called promotional costs for Black Ops Bobby Kotick “the biggest investment that we’ve ever made in a launch of a title.”
He must have liked the billion he made back on it, though. Along with announcing the elimination of Guitar Hero – adored by air guitarists, musician wannabes and late-night intoxicated rock fantasists everywhere – created a separate, internal studio to develop a new online gaming platform and additional services for Call of Duty.
"Beachhead will create the 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," Hirshberg said. "The platform will support in-game integration and bring online experiences and console play together for the first time. The platform has been in development for over a year, and we're very excited about the increased value it can bring to the community."
Despite CoD and WoW, Activision Blizzard somehow lost $230 million during the fourth calendar quarter of 2010, despite the November release of the fastest-selling video game ever. Its final numbers showed a profit of $410 million for 2010.
Guitar Hero won't go away, but Activision won't put out any more music or updates, so it will get stale quickly.
Looks the basement tribe are back to watching VoD reruns of Bill and Ted or Wayne's World.