Activision

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In the high-tech world of video games, where software developers compete to have the coolest, most futuristic offerings, Activision Inc. has embraced an unusual strategy nostalgia.

The Santa Monica-based game developer and publisher is updating a number of arcade favorites from the ’80s in a wave of “retro-gaming” that is, issuing new versions of classic games in a bid to attract both old-timers longing for the good old days and a new generation of players who have never experienced them.

Most eagerly awaited is “Asteroids,” the wildly popular ’80s game in which players attempt to blow up falling bits of space debris before their spaceships are crushed. Activision also has recently released new versions of the blockbuster video games “Pitfall,” “Battlezone” and “Zork.”

“We found that the teens who played these games 15 or 20 years ago are still playing games,” said Bobby Kotik, Activision’s chairman and chief executive. “So we decided to take the cr & #269;me de la cr & #269;me of great games and offer new versions.”

Activision is not the first video-game company to trot out new versions of old favorites. Reissued or revamped versions of games like “PacMan” and “Frogger” also can be found on store shelves.

But the company is betting that given its near-iconic status among players, Asteriods could be the biggest nostalgia hit yet.

Activision acquired the rights to Asteroids from Atari in September for an undisclosed amount, as part of an overall strategy to develop games that appeal to a mass market rather than a cult following of hard-core gamers.

Kotik, a long-time gamer who calls Asteroids a personal favorite, said the company wants to capture the attention not only of the kids who are new to Asteroids, but also their parents.

“Consumer research shows that over 25 percent of video and PC games are sold to people 24 years old or over,” he said. “And since we’re seeing the first gamers who are in their 30s having children of their own, we’re trying to create a product that will appeal to both generations.”

Retro-gaming seems to be successful. The latest version of Pitfall was released at the end of March and shipped over 300,000 units internationally in its first 30 days, making it one of the company’s highest-grossing titles.

The updated Asteroids game, for both the Sony PlayStation and PC, is scheduled to hit the shelves in October, just in time for the holiday gift-buying spree, and is expected to cost about $50. Analysts expect the game to be an enormous success, predicting it will outperform Pitfall’s impressive first-month figures.

“Older games are coming back into the spotlight, and the evidence indicates that they are very popular,” said Lew Alton, managing partner of the San Francisco-based research firm L.H Alton & Co. “In the game industry, you have to be incredibly quick-footed when it comes to guessing what is going to be popular. (Kotik’s) decisions have been adroit.”

In addition to resurrecting the golden oldies, Kotik is expanding Activision’s role as a developer and publisher of games for consoles that is, games that are played on home video-game systems, as opposed to personal computers.

The company plans to increase the number of titles by 60 percent over the coming year, with most of the growth coming from console games. In fiscal 1998, which ended March 31, 14 major titles were released, of which three were console games. In 1999, Activision will release 27 titles, 12 of which are for consoles.

“Console sales are growing at a faster rate than personal computers and are projected to continue to do so for the next several years,” Kotik said. “The price curve is coming down for the console systems and entertainment software has entered the mass market. Even Wal-Mart sells Sony and Nintendo games now. Industry fundamentals are incredibly strong.”

Although the market is thriving, Kotik described Activision’s estimated fourth-quarter earnings as “disappointing.” The company is expected to post break-even results, primarily due to a drop in sales of new products and catalog re-orders.

Kotick put the fourth-quarter dip in perspective, saying that the year had otherwise been positive for the company. Activision expects to report revenues of about $260 million, almost triple what they had been in fiscal 1997.

Analysts agree with Kotik, and say the company’s overall performance has been healthy.

“You need to look at the larger picture, since earnings in the business fluctuate per quarter, depending on title releases,” Alton said. “The company has gone from being practically bankrupt almost a decade ago to expecting about $260 million of net revenues for its most recent (fiscal) year. Activision has succeeded where others have failed.”

Given the company’s strong performance and aggressive growth over the last year, game industry analysts speculate that Activision is an attractive acquisition target. One source reported that at least one company has expressed an interest in buying the company.

Kotik refused to comment about any such offers. Instead, he pointed to a track record of being the acquirer rather than the acquired.

Over the last year, Activision has purchased four game companies, including Madison, Wisc.-based Raven, Great Britain’s Centrosoft and two German gamemakers.

“I can say I expect to see a broader consolidation in the game industry,” Kotik said. “We will be a part of the mergers and acquisitions that occur.”

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