Activision Blizzard (atvi) has plenty to be thankful for this Thanksgiving. The game publisher has had success in the console gaming world with Call of Duty: Advanced Warfare (from its Activision Publishing arm) as well as in the PC-based online gaming world with the World of Warcraft: Warlords of Draenor expansion (from its Blizzard Entertainment unit).
The Call of Duty franchise has surpassed $10 billion in global franchise sales to date. While the company did not reveal specific sales numbers, Activision Blizzard CEO Bobby Kotick did confirm that Advanced Warfare was the biggest opening week entertainment launch of 2014. Guinness World Records awarded the franchise the "best-selling first-person shooter of all-time" record with sales of 188.9 million copies through July 2014.
While the franchise has sold fewer copies out of the gate each year since peaking with $500 million in first-day sales in 2012 with Call of Duty: Black Ops II, it’s still the biggest game franchises out there. Michael Pachter, video game analyst at Wedbush Securities, estimates Advanced Warfare sold 12 million copies in week one. He forecasts Activision will sell 21 million copies of the new Call of Duty this year, and an additional 2 to 3 million copies in 2015. That would equate to $1.26 billion in sales this year for the game.
Activision Publishing CEO Eric Hirshberg said the company believes Advanced Warfare will be the most successful game of 2014. Last year, Take-Two Interactive’s Grand Theft Auto V broke all records and took the top spot for 2013 after selling $815.7 million worth of games in 24 hours and breaking the $1 billion mark in three days. That game went on to sell 30 million copies in 2013. But that game took over five years to develop, while Activision has multiple studios spending three years per title to release Call of Duty annually.
Sterne Agee game analyst Arvind Bhatia said most investors had expected Call of Duty sales to be down year-on-year based on pre-order sales. But Activision’s confirmation that advanced Warfare sales are tracking ahead of Ghosts sales is good news, along with stronger digital sales, Season Pass sales, and amount of time people are spending engaged with the game.
“Call of Duty is still one of the most profitable titles out there and the biggest annualized franchise, period,” Bhatia said. “In addition to selling over $1 billion this year, it will do an additional $400 to $500 million in digital revenue.”
Lewis Ward, IDC's research director of gaming, said there are several factors that could be contributing to the lack of concrete Call of Duty numbers from Activision. The game industry is in a console transition, which means many gamers are still upgrading to Microsoft's Xbox One and Sony's PlayStation 4—consoles that hadn’t even been released when Call of Duty: Ghosts shipped last year. There are also more gamers purchasing titles digitally. In addition, Activision has been offering gamers who buy a game on Xbox 360 or PlayStation 3 the ability to upgrade to an Xbox One or PS4 version for a small fee.
Blizzard Entertainment has managed to lure PC gamers back to its subscription-based massively multiplayer online fantasy game, World of Warcraft. The new expansion, Warlords of Draenor, sold over 3.3 million copies in its first day. The game now has over 10 million subscribers, which is up from 7.4 million subscribers at the end of Q4 2014 but down from its peak of 12 million in Q4 2010.
Pachter believes the expansion, which has received positive reviews, will sell 5 million copies. The last expansion, Mists of Pandaria, sold through 2.7 million copies in its first week after shipping on Sept. 25, 2012.
“We think the surprisingly sharp increase in the World of Warcraft subscriber base will go a long way in refuting the bear thesis around the decline in this 10-year-old franchise,” Bhatia said. “While we expect some of the rise in subsciptions to be temporary (based on history), we think the franchise will likely remain strong for the most part and end the year with a 20% larger subscriber base compared to the beginning of the year.”
With the $74 billion video game industry is dominated today by free-to-play online and mobile games, getting gamers to spend money on a game—and its expansion packs, as well as a monthly fee that ranges from $13 to $15—is more challenging. Ward said that all the hard work Blizzard has put into World of Warcraft over the years is paying off.
“Blizzard has done such a good job with the universe—a Hollywood movie, Warcraft, is coming out—that when a big new expansion comes out, millions of lapsed subscribers come back because they’re fans of the universe," Ward said. "It’s a reflection of the quality of Blizzard, setting the bar high for where MMOs should be.”
The strength of these franchises, along with Activision Publishing’s $2 billion Skylanders toy and game franchise, is good news for Activision Blizzard. In September, Activision Publishing shipped Destiny, the first new game from developer Bungie since it created Halo. Activision has dedicated a $500 million investment into the new sci-fi shooter game over the next 10 years.
While Activision has not released any sales numbers for the game, anecdotally, Ward believes Destiny has sold over 7 million discs and downloads globally, which is lower than the 9 million copies of Call of Duty: Ghosts sold last year.
“Destiny has had a strong start for a new game, even if it’s tracking behind Call of Duty,” Ward said. “Because Bungie developed this game, versus Activision using internal studios to make its Call of Duty games, it’s a different business model and dynamic for Activision.”
By early December new sales numbers will paint a clearer picture for Activision’s 2014 franchises. For now, things are looking up for the company.