At the WoW Economist, we thought it would be silly not to comment on the parent company. Quarterly results were published for Activision Blizzard (Ticker: ATVI) last week, I could have rushed to post my thoughts but then I thought today would be a more worthwhile as Modern Warfare 2 was released today and it’s huge part of the ATVI overall market strategy for brand / franchise growth.
For a shop that has so many strong franchises, ATVI has been a bit of an enigma for most investors. The market seemed to have hit bottom in March 2009 however since then ATVI’s stock has been a total roller coaster to nowhere which is somewhat odd when you consider the fact that ATVI is sitting on a cool half billion annually in subscriber revenue from players like us in World of Warcraft. After the break we’ll tear down Activision-Blizzard, draw some contrasts and comparisons as Gamers and / or Investors.
The Gamer Perspective: ATVI has without question the best book of franchises in the gaming business. Today’s release of Modern Warfare 2 will probably be a record breaker in terms of sales. This franchise has sold 45 million copies prior to this release and once the holidays have passed it’s fairly reasonable to assume it will be closer to 55 million copies, this is the big event for ATVI this year. The Tony Hawk skateboard series also has an upcoming release and of course Diablo as well as Starcraft have been favorites for many many years. When taking into account the Guitar Hero and of course World of Warcraft, we’d all think the stock would be trading like Google, but it’s far from the case.
The Investor Perspective: In the terms of the Gaming Industry as a whole, ATVI is categorized with other shops such as Electronic Arts (Ticker: ERTS) and Take Two Interactive (Ticker: TTWO) and to a lesser extent Sony (Ticker: SNE). With ERTS it seems to be just another holiday season. TTWO, with the anchor franchise of Grand Theft Auto doesn’t seem to have any serious franchise releases for the holiday that will make it an above average holiday season. ATVI has Modern Warfare 2 to quarterback the company through the holiday season and with solid franchise releases carrying into next year.
In terms of financial strength, ATVI is the king of the sandbox with strong revenues, a capital surplus, piles of cash and one of its biggest advantages, absolutely no debt. Compared to ERTS who recently announced layoffs or TTWO who has fewer franchises to lean on one has to wonder why all of us ATVI stock owners aren’t patting ourselves on the back.
Summary:ATVI’s problem is that it is categorized as a Video Game company when in reality it should be looking to redefine itself to an online gaming company who turns out some other games as well. ATVI is truly the first company to develop the pay to play subscriber model successfully. The revenue stream created by WoW is very much the gold standard to every other developer out there. “How do I do that?” is what everyone is saying. While everyone is going about chasing ATVI’s tail, ATVI should be focused on a massive PR remodeling job that says, we make games but we’re really about Online Gaming and bringing people together. Until ATVI can break away from being permanently classified as the company that competes with EA and TTWO, it will wade around in the pool of mediocrity that is the Video Game Stock category. Every time ERTS and TTWO take a hit, it will be a black mark on the gaming industry as a whole and ATVI is paying that price in its stock valuation.
Notice: The information included in this post is not from an investment advisor. Just a gamer who happens to own some stock. Basically, The WoW Economist is not liable for anything you do based on this write up. (Legally covers behind FTW).
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by Bolivia Blogs — Blog — Activision-Blizzard – Quarterly Results | the Wow Economist, on November 20 2009 @ 5:59 pm
[...] Today’s release of Modern Warfare 2 will probably be a record breaker in terms of sales . This franchise has sold 45 million copies prior to this release and once the holidays have passed it’s fairly reasonable to assume it will be …Click Here [...]