Some good responses here.

I still feel the threat is more of a bluff than anything to get two things:

1) larger HD install base for core Activision titles, particularly the COD (and now MW) series).

2) try and get better royalty rates from Sony


Looking at the main titles I don't see how Activision could make up for loss of PS3 sales with 360 sales (i.e. despite the huge appeal of the series I don't see a bunch of PS3 owners buying 360s to get MW2, etc.)

They could divert resources to the Wii, but really, overall, that seems very risky to me. Success on the Wii is tricky for 3rd parties IMHO and requires the right mindset and games design.

Selling MW2 on PS3 might be less profitable than on 360, but it surely will nonetheless be hugely profitable for Activision.

I feel he wanted to get in now, before the title hits to leverage better royalties if he can and try and push Sony to lower price sooner.

After MW2 sells (and assuming it sells like gangbusters on PS3 and as well as 360) such a threat as this would seem silly - ergo he has to get in now and pressure Sony up to the next big wave of Activision releases.

If it was truly unprofitable on PS3, and he really felt the platform was dead, I doubt he'd bother with posturing: he'd just make the moves and leave the platform to its fate.

His actions indicate he wants more PS3s (and via competition stimulous more 360s) sold, with higher sales of his SW on them.

^ Reasonable indeed

Or it could be that he has legitimate concerns about the viability of the PS3 over the long term ...

The more rapidly the sales of a system drop, and the longer it is allowed to sell at a particular sales level, the more difficult it will be for a console to return to its sales level and the less likely it becomes that they will recover. Now, suppose Activision-Blizzard forecast that without an immediate price reduction the PS3 would be outsold by the XBox 360 by 12 Million units in markets they were interested in by the end of 2010; and the lead Microsoft had in western markets jumped from (roughly) 12 Million to 24 Million units. Now also suppose that Microsoft has lower licencing fees and the their per-user revenue generated from downloadable content is higher, so Microsoft's 66% of sales would translate into 80% of gross revenue for the company ... Wouldn't you question the viability of supporting the PS3?

Im sorry, but its unreasonable to assume that Modern Warfare or Call of Duty would be involved in this threat. I.E they aren't going to withdraw support and these games unless Microsoft offers them one huge honeypot in compensation, which I must add isn't worth it so they won't.

You should really consider the threat in the context of the other opportunities which are available to them. This threat would apply more to games like The Prototype which just released rather than evergreen titles which are surefire money spinners. I think it should be pretty obvious that titles which obviously make a lot of money for Activision aren't in the context of this threat.

The first week sales for Prototype were 285K 360 vs 175k PS3. Lets say you go backwards in time and make it an Xbox 360 exclusive game. Had they done this they may have been able to make the game say 20% cheaper, and they probably could have made it slightly better meaning they could have netted more sales on the Xbox 360 platform on the back of more hype (exclusive) and because it was a better game overal with more focused development. Furthermore perhaps he was thinking that he could have grabbed a marketing deal from Microsoft and offloaded much of the advertising costs as well.

The reason why he would try to bully Sony and not Microsoft is their relative positions in the market. Because Sony is the weakest he can be much more sure of getting a concession out of them than he is with Microsoft. Probably in order of priority he wants: 1. Cheaper PS3s, failing that 2. Lower royalties, failing that 3. Shift development and cut deals with Microsoft for certain exclusives. Number 1 is obviously the best case for him as it would probably spur Microsoft to reciprocate the move as well.

@BDBDBDB

If they want lower royalty rates it would only be worth it for games which are selling well. If they felt the lower end development wasn't worth it then cutting royalty rates doesn't do much to significantly improve sales on games which don't sell as well and which are the likely targets for having their development budgets moved elsewhere. Its more a threat to improve profitability on the games which are selling.

@Squilliam: It doesn't matter which specific games get the biggest advantage, since it's the overall sales anyway they make the money with. Cutting the royalties would still make even the low selling games more profitable.

On a title which sells say 500,000 a couple of dollars less on royalties would probably only save something like $1M, so overall it wouldn't make the game much more profitable, however I suppose it could make the PS3 SKU of the game more profitable.

I agree with the principle, but doubt that it will play out that way.

Right now PS3/360 are effectively selling near enough the same, with PS3 at a much higher price point, and with more or less equal games releasing (bar the odd exclusive of which they both have a good supply).

The following seems set to happen this year:

1) FFXIII to release in Japan exclusive to PS3 (as I the Source posted in his Japan preview this will very likely drive a massive boost in the region) and multi elsewhere, although I believe on current install bases, and with 360 already having pushed more jRPG titles, it is more likely to aid Ps3 in console sales than 360.

2) GT5 is around the corner - this will give additional boost in Japan and I believe a good boost in Others

3) PS3 has a good string of other, known profile IPs coming now, either by franchise God of War, or developer, Last Guardian.

4) I believe PS3 is likely to get a price cut before December 2009

Given the above, I strongly doubt 360 will have a 12M lead outside Japan by 2010.  Therefore while the principle you put forward is valid I just don't expect it to pan out that way.  The 360 will hold its own against the PS3 I think, with Forza, Alan Wake, etc. but its not got nearly enough ammunition (or momentum even at a much lower price point) to surge that far ahead.  I therefore doubt Activision have any internal analysis assuming a massive 360 surge outside Japan.

In short, I believe PS3 is going to sell, aligned to 360 sales, more than enough to effectively force Activision into supporting the platform.

Now, as Squilliam says they could take other approaches, but if they leave the megahits on PS3 (MW, CoD, etc) and only cut support for smaller, less important IPs then it won't really matter.

Besides, as I've said (and won't bother repeating after this reply) reading his comments and looking at the situation in context I believe this has nothing to do with Activision really thinking PS3's future is looking too gloomy for them and everything to do with taking maximum advantage of a period of time when their power relative to Sony is at its strongest.

Oh, and Squil, my take is over 38% of Prototype sales were on PS3.  If inFamous hadn't have just released I believe an even larger percentage would have been on PS3 (as I'm confident some PS3 owners settled on the exclusive title and didn't want to stretch for a similar title so soon).

Even allowing for development savings, I don't see Activision deciding that roughly the same profits, on smaller unit sales, is a better choice than more unit sales at roughly the same profit.

Profits matter, but if you want to be the biggest, you need the unit sales as well.  Otherwise you're the smaller profitable company rather than the larger profitable company.

I suspect that without PS3 Activision might squeeze a better margin, but they'd lose, due to revenue/units volume loss, their position as biggest - I doubt that's their strategy.

FYI this post doesn't exist.  You saw nothing.  Move along.

I sniff fear all over Activisions statments. I think its more likely that Activision bought way too much property and its not profitable for them to remain as large as they are. In order to do so they need to drive up game attach rates across the board. Threatening Sony is a bad idea for them and shows their desperation. 

We know that M$ will buy their way through any situation and make it beyond profitable for them to develop for their console and Nintendo is in excellent standings, so they are bullying the underdog to keep from eating the costs of too much investing in a unstable market. I wouldn't take Activisons threats lightly, but at the same time I don't think they carry much weight. If I'm right and there sales are low, they may follow through  thinking that less development cost will offset the loss of sales on the actual product.

Sony made the smart move by blasting numbers all over the place to let them know, they can survive without them. If Sony remains strong on this, Activison is going to have to consider their numbers and make choices internally rather than externally.

My point: Activision's motives for this are not what they appear to be. I'd be willing to bet that their profit reports will reflect a better idea of what their situation and reasons actually are.

@Squilliam: It wouldn't be any more than that for a game with that level of sales. If they could use the million on marketing, the game could sell better.
Anyway, instead of looking individual game sales, we should look how many copies Activision sells on a financial year on PS3.