February 10, 2011, 11:08 AM — 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.
Nor did he address any problems that came following (or that caused) a shakeup that saw the CEO of Activision Publishing resign in April, to be replaced by Hirschberg.
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.
