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Digital Growth Drives Activision’s Second-Quarter Earnings
Activision Blizzard reported a 66-percent increase in year-over-year earnings thanks to the continued success of Call of Duty and its high-margin digital business.
"Our better-than-expected second-quarter performance was driven by record digital sales of our online-enabled franchises,” said CEO Bobby Kotick during an investors call. “For the six month period, net revenues from digital channels grew more than 20 percent, driving record operating margin and EPS [earnings per share] growth of more than 50 percent."
Looking forward, Kotick cited optimism for three upcoming releases: Call of Duty: Modern Warfare 3, its online subscription service Call of Duty Elite, and Skylanders: Spyro’s Adventure. Each of those three titles has a hefty online component, which is an area the company predicts will see double-digit growth in coming years. Overall, Activision Blizzard says it's more profitable right now than the next three independent publishers combined.
Call of Duty chatter took up a large portion of the call, which it clearly deserved. According to Activision, more people play Black Ops each day than the top three Facebook games. DLC for the game is up 40 percent in the second quarter of 2011 over the same period of time last year, as well. So far, Black Ops has sold 25 million copies worldwide, which eclipses its predecessor Call of Duty: Modern Warfare 2’s 22 million. Modern Warfare could recapture the top position, however, with Activision saying that pre-orders for MW3 are significantly higher than Black Ops’.
Blizzard president Mike Morhaime said that World of WarCraft’s subscription base dipped a bit in the second quarter, to a still impressive 11.2 million worldwide. He explained those numbers are typically affected by the season as well as the proximity to content expansions. Morhaime continued by saying the game’s starter edition, which allows players to experience the game from levels 1-20 at no cost, has been successful at bringing new players to the game, though he said it’s too early to say if those people will transition into paid subscribers.
In other Blizzard news, Morhaime said there is still no release date for Diablo III, which is something that Activision Blizzard is clearly sensitive about. One slide projected earnings for the remainder of 2011, and it specifically noted that those numbers were based on the assumption that Blizzard wouldn’t be shipping a major release this year. Morhaime said that the team was targeting a Q3 launch for external beta testing. He later explained that the game’s complexity, as well as the unknown quantity of the game’s auction house, made it difficult to pin down a more specific release date. He also confirmed that expansions will follow the release of the game, which should come as no surprise to anyone familiar with Diablo.
The conference call ended with a series of questions from investors and analysts. There wasn’t much game-related information to be gleaned aside from a quick reference to StarCraft II’s mysterious map marketplace. Morhaime said that user-created maps will be available for sale when the service launches, and the company may leverage the technology it’s developing for the Diablo III paid auction house for the StarCraft map marketplace as well.
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