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As new releases struggle, Call of Duty and World of Warcraft drive Activision Blizzard results

August 5, 2010 |  3:48 pm

CoDMW2 Despite launching four new games, video game publisher Activision Blizzard Inc. continued to see a pair of older titles account for most of its business in its most recent quarter.

Digital downloads and subscriptions for military action series Call of Duty and online fantasy game World of Warcraft provided some of the best news for the Santa Monica-based video game publisher, which saw its revenue decline 7% to $967 million and its net income grow 12% to $219 million.

The new racing title Blur, which launched in May, and action game Singularity, which debuted in late June, were both disappointments for the publisher. They sold 110,000 and 31,000 copies, respectively, in the U.S. through the end of June, according to the NPD Group. June's video game based on "Shrek Forever After" was also a flop, selling just 54,000 units. A new Transformers game title, War for Cybertron, debuted in June to a decent 219,000 units.

At the same time, Activision sold more than 5 million downloads of new content for last November's blockbuster Call of Duty: Modern Warfare 2 for $15 each. Chief Operating Officer Thomas Tippl said on a conference call with analysts that revenue from Call of Duty downloadable content in the U.S. and Europe was high enough to rank it among the top five titles sold at retail, which has traditionally been a much more lucrative outlet for video games than the Internet.

"These [downloadable] products not only drive meaningful levels of high margin revenue, they maintain the franchise's stickiness and keep consumers from selling their games in the used market," Tippl said.

Digital platforms generated the majority of Activision Blizzard's revenue for the first time last quarter, demonstrating the growth of the market and also the weakness of the company's new titles released in retail stores.

Following the firing of two key creators of Call of Duty -- who along with 45 current and former former developers are now enmeshed in litigation with Activision -- the publisher has been reorganizing its resources to maintain and grow the franchise.

On the call, Activision Blizzard Chief Executive Bobby Kotick said that this November's Call of Duty: Black Ops, created by Santa Monica-based developer Treyarch, will receive "the biggest investment we have ever made in the launch of a title."

Activision moved the planned release of True Crime: Hong Kong from later this year into 2011, but maintained its guidance of $4.2 billion in revenue and 49 cents per share in net income for the year based on growing expectations for Black Ops.

Blizzard Entertainment, which focuses on online games, launched its first title in nine years that was not related to World of Warcraft last week with Starcraft II, a sequel to the 1999 game that has proved particularly popular in South Korea. The strategy game sold 1.5 million units worldwide in its first two days alone and has yet to launch in Korea, where it is currently being offered for free during a trial period.

Activision Blizzard shares were down 6% in after-hours trading Thursday as the company's results and guidance fell short of investors' high expectations. Before its financial results were released, the company's stock closed at $11.75, off less than 1%.

--Ben Fritz

Photo: A scene from Call of Duty: Modern Warfare 2

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