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Activision, Inc. — 2004 Annual Report
page 2
We added resources to our internal development studios through the acquisition of
Infinity Ward which created Call of Duty, the #1 best-selling PC game in the U.S.
during the holiday season. Additionally, we expanded our relationships with retailers and
increased our shelf space around the world.
Earlier this year, we announced a strategic alliance with Nielsen Entertainment to work
together to create a reliable measurement of the effectiveness of in-game advertising.
We believe that there will be exciting opportunities in the future to leverage the billions of
hours that consumers spend playing games annually into advertising revenues. The first
step in this initiative is a Nielsen research study to better understand the demographic
makeup of U.S. households with a video game console and/or PC gaming system;
an analysis of the relationship between video gaming and television viewing; and an
investigation into how the video game playing community perceives in-game advertising.
Nielsen will be developing a standardized methodology to measure advertising metrics in
video games, in the same manner that they have created standardized measurement
metrics for other forms of media including television and in-theater advertising. Nielsen
will be able to provide advertisers with the tools to gauge effectively everything from
in-game ad exposure, reach and frequency, to audience recall. They will develop these
metrics in a language that makes it possible for media buyers to evaluate in-game
advertising the same way they evaluate other media opportunities.
We also announced our support for two new hand-held platforms—the Nintendo DS
and Sony’s PlayStation姞Portable (PSP姠). We expect to have games available at the
launch of these systems. Hand-held gaming has been a popular form of entertainment
since the introduction of the Game Boy姞in 1989 and we expect that these new
devices will continue to broaden its appeal.
While our primary focus is increasing the sales of our titles, there are new and exciting
opportunities for growth in the future. We are especially enthusiastic about three
developments—online interaction, broadband penetration and increased production values.
Online interaction will create more personal interest and engagement. Today, the majority
of console game playing takes place alone. The second most popular way to play is in the
same room with a sibling or friend. Playing with others over the Internet through Xbox姠
Live or the PlayStation姞2 is a relatively new concept, but it is a big part of the future.
The maturity of broadband will make this interaction possible. The telecom industry con-
tinues to provide substantial incentives for investment in broadband meaning critical infra-
structure growth is on the way. We believe the tipping point for industry-changing player
interaction could occur when broadband reaches 50 to 60 percent of households.
Penetration today is about 45 percent, so we are getting closer.
And as the presence of broadband increases, especially wireless broadband, we will
deliver games to more platforms and more devices including cell phones, tablet computers
and even PDAs.