Business; Face value;Top of his game;

Bobby Kotick of Activision Blizzard has helped the video-game industry grow up;

Like many teenagers, Bobby Kotick was drawn to video games when they first appeared in the 1970s. He had an Atari, with its chunky plug-in cartridges and blocky graphics, and he liked to play “Defender” at the arcade. The young Mr Kotick also had an entrepreneurial streak: he sold bagels and soft drinks to people waiting in line for petrol during the 1979 energy crisis. How appropriate, then, that he has ended up as the boss of Activision Blizzard, the world’s largest publisher of video games.

So did Mr Kotick and the industry grow up together? Not quite. It would be more accurate to say that Mr Kotick was one of the people who helped the chaotic games business grow up, by applying a more rigorous approach to management. Many gamers dislike him, complaining that his bean-counting approach stifles creativity. But there is no denying his ability to get results: earlier this month his firm reported impressive sales and higher than expected profits of $195m for the three months to June.

Mr Kotick's big break came in 1983, when he was a student at the University of Michigan. He was about to leave for New York to meet potential investors in a firm he was setting up to make software for the Apple II computer when he met Steve Wynn, a casino tycoon, at a party. Mr Wynn was also heading to New York and offered Mr Kotick a lift in his private jet. “I went with him on the plane, and asked him how he got started,” Mr Kotick recalls. Mr Wynn explained that early in his career he had been helped out by E. Parry Thomas, a legendary Las Vegas banker, who helped finance Mr Wynn's takeover of the Golden Nugget casino. Mr Wynn had promised Mr Thomas that he would, in turn, give a helping hand to a young entrepreneur some day. He offered to invest in Mr Kotick's new company, and ended up writing him a cheque for $300,000. Mr Wynn became his mentor, and was involved in 1991 when Mr Kotick took over Activision, a failing games publisher founded by former Atari employees.

The problem with the video-game industry at that point, says Mr Kotick, was that it lacked discipline. “We needed a balance”, he says, “between people who would be creative and entrepreneurial, and people who knew processes.” He brought in managers from packaged consumer-goods firms, including Procter & Gamble and Pepsi, to oversee the development of new games and to provide expertise in consumer testing and marketing. But he realised that it was also important to maintain a creative environment for designers. “In our business the key is that certain things lend themselves well to process, and certain things don't,” he says.

Through both growth and acquisitions he built Activision into a gaming giant. Today it is known for the “Tony Hawk” skateboarding games, the “Call of Duty” series of military shoot-'em-ups, and its “Guitar Hero” games, in which players must press buttons on a plastic, guitar-shaped controller in time with blaring rock music. Each of these is a brand in its own right and has spawned numerous versions and sequels. This has led to criticism that Activision's approach is too dependent on exploiting and re-exploiting franchises. But Mr Kotick vigorously denies that his company fails to innovate. “A small segment of very vocal gamers say everything has to be new and different every year,” he says. “Actually, people are happy with existing franchises, provided you innovate within them.” The trick, once again, is to strike a balance: between the familiarity of a trusted brand and “innovative and inspiring” new features.

Mr Kotick's greatest coup was the merger of Activision with the gaming arm of Vivendi, a French media conglomerate, completed last year. Vivendi's main gaming asset was Blizzard, the firm behind “World of Warcraft”, a wildly popular online fantasy game played by 12m paying subscribers. Although the deal gave Vivendi a 54% stake in the merged firm, Activision's management team was kept in place to run it. Mr Kotick had wanted to get his hands on “World of Warcraft” for some time, because its subscription-based model provides regular income, in contrast to the sporadic, release-driven proceeds from games sold in shops. More than half of Activision Blizzard's operating profit now comes from subscriptions, he says: “‘World of Warcraft' is the most stable form of profitable revenue in the industry.”

Let's get physical

As the industry moves towards a greater reliance on subscriptions and online gaming, Mr Kotick's firm is on the right side of the trend. “Guitar Hero”, meanwhile, was an early example of “physical gaming”, in which players use special controllers to get closer to the on-screen action—another big industry trend, encouraged by the success of Nintendo's Wii console, with its motion-sensitive controls. Activision was quick to recognise that the Wii would broaden the appeal of gaming, and it is now the biggest producer of games for the Wii after Nintendo itself. “We are seeing new audiences emerge because of the physical nature of the experience,” says Mr Kotick. His firm's latest entries in the physical-gaming arena are “DJ Hero”, a music game in which the player handles a turntable, rather than a guitar, and a new version of “Tony Hawk” with a motion-sensitive skateboard control.

So what games does Mr Kotick like to play at home? These days, he admits, he only indulges in the odd bout of “Guitar Hero” with his children. When he used to play more games, he says, he would find himself trying to tweak his firm's products to accord more closely to his own tastes. Such decisions are best left to product managers, he insists, who combine their own judgment with feedback from focus groups. The trick is knowing which bits of feedback to ignore. “That's the delicate balance,” he says. Mr Kotick looks rather incongruous as he proudly shows off his firm's new skateboard controller, putting it down on the floor and grinning as he wobbles to and fro. As he knows better than anyone, success in video-gaming is all about balance.