During a year when leaving home could be perilous, some people preferred to travel to the future to fight foes in Overwatch or run raids in the realm of Azeroth with new virtual friends. When lockdowns descended in March, video game sales worldwide leapt by 63 percent as people sought safe, home-based entertainment — and perhaps a healthy dose of escapism — according to Statista.
That was good news for Activision Blizzard, the California-based video game company that owns titles like World of Warcraft, Call of Duty, Overwatch — and Candy Crush, after a 2016 acquisition of King Entertainment. An additional benefit: the 2020 holiday season saw the release of highly-anticipated new gaming consoles like the PlayStation 5 and the Xbox Series X, which generated excitement about new games through co-marketing campaigns and product bundles.
“We’re actually a net beneficiary from social distancing tailwinds,” says Ken Wee, Chief Strategy Officer of Activision Blizzard. “There is this obvious question of how much this [surge] is a one-time…temporary change where people are stuck at home, versus how much of this is an actual generational shift in consumer behavior. And I think we definitely land more in the latter camp.”
In a recent interview with InnoLead, Wee shared insights on the pivots occurring in esports; why the company is focusing on its biggest franchises; Activision’s “free to play” strategy, which brings in new players and revenue; and more.
Pivoting to Fully Online Esports Tournaments
The stay-at-home era hasn’t been all positive for Activision Blizzard — especially when it comes to esports, a form of live competitive gaming between professional video game players. The company had to pivot its approach to its Overwatch League and Call of Duty League, professional leagues that the company owns and produces live events for based on its hit games.
“Esports is probably the one area that the pandemic did hurt us,” Wee says. Prior to the pandemic, the company envisioned that the future of esports would be local: “Local, franchise-based teams, that build up local audiences, that rely on local ad sales and sponsorships,” he says. “[The goal is to] create this fan affinity that takes a page out of your traditional sports teams’ playbooks, as far as how they’re set up and how they’re organized.”
A few local events were held before the pandemic hit, and Wee says he was excited by the level of engagement occurring at the local level — which made the shutdown even more painful.
“It was a big negative for us, because our team franchises and our partners have been investing a lot to turn on this local, city-based format this year, and we weren’t able to do so. It’s also unclear what the timeframe to [start the in-person events again] is,” Wee says. “So, you combine that with a lot of heavy lifting and investment to have our moment in the sun, which didn’t materialize.”
For now, the company and the teams are making do with virtual tournaments, but Wee is hopeful that his vision for the future of esports will come to fruition down the road.
Focusing on the Biggest Franchises
The company’s decision to focus on the company’s biggest franchises, rather than acquiring a lot of smaller ones, has been a “multi-year” journey, Wee says.
“We’ve made the deliberate choice to focus on our biggest franchises. … As gaming becomes increasingly mainstream, audience engagement is going to be increasingly concentrated in the top franchises,” he says. “We’ve deliberately gone on to build the biggest franchises that we could. I would say Call of Duty, with the record deployments that we’ve had, is a great example of what you’re able to do when you really focus all of your efforts on the biggest franchises.”
But that focus constrains other activities. “I would love for us to be able to work on a lot of dormant intellectual property that we have,” Wee says. “I would love for us to do a lot more incubation and prototyping than we are. And the truth is that we do do that, but we do so in a very prudent way, because we know that our resources need to be focused against our biggest franchises.”
Leveling Up Accessible Gaming
To help these franchises reach their full potential, access is key — especially to new gamers who don’t own the latest, high-end consoles or a powerful gaming computer.
There are a few traits that Wee uses to describe the perfect Activision Blizzard game franchise: It is fun, it is “massively” accessible, it has a “strong social layer,” meaning connections with others, and it is available on multiple platforms. This is a big shift away from certain games that were popular among hardcore gamers a decade ago — single-player, narrative games that people would play through on their own, “like reading a book,” he says. Multiplayer games have long existed, and the single-player market still endures, but it’s shrinking according to Wee. And so is Activision Blizzard’s focus on games with a high barrier-to-entry, like expensive computer technology or a big time commitment upfront to learn how to play it.
A few years ago, a Call of Duty mobile app would have been unimaginable. It’s difficult to translate first-person shooter games onto a small screen, where there is less precision than you’d have with a PC or console controller, but investing in creating a strong mobile game for Call of Duty has paid off, Wee says.
“It has brought in a lot of people who…love Call of Duty on PC and console, and they’re looking for more ways to play it,” he says. “But surprisingly, [it’s also doing well] in geographic markets where there hasn’t been a strong PC or console audience. There’ll be markets where we’ve never really marketed or sold Call of Duty before because there isn’t a big PC-installed [customer] base or console-installed base, where people are kind of skipping those [devices] and going straight to phones and playing it in a big way.”
Activision has seen growth in the Call of Duty mobile app in Latin America, Brazil, India, and other Asian markets, he adds.
Another move toward making gaming more accessible has been building out “Free to Play” modes, which is also now available for Call of Duty. This mode allows users to start playing the game without any upfront costs. Instead, the game gives the user opportunities to make in-game purchases throughout their time playing, which has been a winning formula for Activision Blizzard. In its Q3 earnings call, leadership noted that the company brought in $1.2 billion in downloadable content and microtransactions, up from $709 million last year.
The free option, Wee says, serves as “an incredible funnel to have people engage both in that free to play experience, as well as give them a sense for what it’s like, to see if they want to kind of buy the full game.”
But will gaming continue on this growth trajectory during 2021’s summer months, or after the large-scale rollout of a COVID-19 vaccine?
In 2020, video game sales continued to top 2019 sales each month — even throughout the summer, when it was safer to spend time outside and in small groups. The pandemic may be creating a bigger population of gamers, the World Economic Forum suggests, and Activision is hustling to capture its share.
