For a "meaningful" portion of a current estimated 27 million Call of Duty players, Activision believes it could see average per-user revenue of $200 for future games, including initial sales and map packs. That's why the company is so focused on further monetizing that brand rather than diversifying its portfolio, says one analyst.
Stern Agee's Arvind Bhatia says some of the company's investors are uncertain about the company's laser-like focus on annualizing and monetizing a few key franchises; brand fatigue is a concern, for example.
But Bhatia says the strategy will pay off over the long term: "If we assume 20 percent of the current online players (around 5.5 million) double their spending on Call of Duty over time, that would be an incremental $500 million in revenue at fairly high margins," he estimates.
That's not including Activision's other growth areas -- Blizzard's new Titan MMO, the launch of Diablo III and its online revenues, and the launch of Call of Duty in China, which Bhatia expects won't occur before 2012 or 2013. Finally, there's the company's 10-year deal with Bungie and the new franchise it will yield, plus the new multimedia Spyro-centric toy brand Activision recently revealed.
Amid investor concerns over console hardware and software weakness at traditional retail, Activision points to very healthy underlying online trends in the game industry that can't be charted through the NPD measures investors have typically used to gauge gaming's strength.
But there's still more on the horizon for console retail, Bhatia believes, despite the fact he doesn't expect a new Sony or Microsoft console for at least two to three years. Nintendo's Wii will need to catch up to the more advanced hardware eventually, says the analyst.
"We would not be surprised if Nintendo unveiled the specifications of its next console at E3 in June this year, followed by product introduction early next year," he estimates.
I would rather see a longer life cycle of the packaged product and additional DLC. Rather than spending $60 plus $15 for two map packs every year. How are they going to get to $200 per user on an annual cycle?
They either increase the DLC price or increase the frequency. At $15 per map pack that is 10 packs plus the $60 game. That's almost a map pack a month. Sounds an awful lot like a subscription model.
It looks like Activision wants to blend the traditional model with the free-to-play model. You pay for the game, but then you also pay for content. I'm all for map packs, but I want to know that the publisher is creating map packs to extend the shelf life of the game, not to suck every possible penny from me.
"We would not be surprised if Nintendo unveiled the specifications of its next console at E3 in June this year, followed by product introduction early next year," he estimates.
You know, analyst have been saying this for the last 3 years. And every time, they have been completely wrong. There is nothing for Nintendo to play "catch up" to. They are ahead this generation in both sales and revenue. Why would they risk killing that momentum by announcing a new console?
Considering that the 3DS is on the verge of release and they have at least one or two major Mario/Zelda games planned for the Wii, I have to agree. At best we'll get an announcement for "sometime next year".
"If we assume 20 percent of the current online players (around 5.5 million) double their spending on Call of Duty over time, that would be an incremental $500 million in revenue at fairly high margins."
So, not only are all of the eggs in one basket, we're counting the chickens that haven't even been laid yet? Somewhere along the line from the actual market data to this article, something went horribly wrong. Maybe we could go back 3 years and project the spending of gamers on plastic instruments, and see how much money Activision's going to make.
Don't get me wrong, I'm not saying the scenario described is impossible, I'm just not sure analysts are supposed assume gamers will double their spending continuously for ANY amount of time without actual market research.
Take that horse and flog it! Smack it with a broken guitar! Hammer it with a snapped skateboard!
More seriously: expecting 20% of players to double their spend feels more than a little optimistic, especially in light of the fact that there's limited room for franchise expansion; WW2 is mined out, "modern" warfare can't be far behind and "jungle" settings (e.g. Vietnam) are both potentially controversial and difficult to render. And unlike football/soccer simulations, there aren't any personalities or yearly roster refreshes to catch people's attention.
Also, I can't help but remember the attempt by Epic to turn Unreal Tournament into a yearly franchise - or how they abandoned the concept after just two releases (2003, 2004)...
Yeah double our spending seems like a bit of a stretch... Don't get me wrong I've loved the multiplayer on the last four games, but its hard for me to spend $60 on a game anymore, the last two opening day games I've purchased where MW2 and BlackOps. I just don't have the freedom to buy brand new games anymore.
"Also, I can't help but remember the attempt by Epic to turn Unreal Tournament into a yearly franchise - or how they abandoned the concept after just two releases (2003, 2004)..."
Just building on what you're saying, Activision has already had a good long run, its hard to imagine there's much more left in the bucket.
Call of Duty Oct-03
Call of Duty: UO Sep-04 (Expansion I know, but hey) -Finest Hour
They either increase the DLC price or increase the frequency. At $15 per map pack that is 10 packs plus the $60 game. That's almost a map pack a month. Sounds an awful lot like a subscription model.
It looks like Activision wants to blend the traditional model with the free-to-play model. You pay for the game, but then you also pay for content. I'm all for map packs, but I want to know that the publisher is creating map packs to extend the shelf life of the game, not to suck every possible penny from me.
You know, analyst have been saying this for the last 3 years. And every time, they have been completely wrong. There is nothing for Nintendo to play "catch up" to. They are ahead this generation in both sales and revenue. Why would they risk killing that momentum by announcing a new console?
So, not only are all of the eggs in one basket, we're counting the chickens that haven't even been laid yet? Somewhere along the line from the actual market data to this article, something went horribly wrong. Maybe we could go back 3 years and project the spending of gamers on plastic instruments, and see how much money Activision's going to make.
Don't get me wrong, I'm not saying the scenario described is impossible, I'm just not sure analysts are supposed assume gamers will double their spending continuously for ANY amount of time without actual market research.
More seriously: expecting 20% of players to double their spend feels more than a little optimistic, especially in light of the fact that there's limited room for franchise expansion; WW2 is mined out, "modern" warfare can't be far behind and "jungle" settings (e.g. Vietnam) are both potentially controversial and difficult to render. And unlike football/soccer simulations, there aren't any personalities or yearly roster refreshes to catch people's attention.
Also, I can't help but remember the attempt by Epic to turn Unreal Tournament into a yearly franchise - or how they abandoned the concept after just two releases (2003, 2004)...
"Also, I can't help but remember the attempt by Epic to turn Unreal Tournament into a yearly franchise - or how they abandoned the concept after just two releases (2003, 2004)..."
Just building on what you're saying, Activision has already had a good long run, its hard to imagine there's much more left in the bucket.
Call of Duty Oct-03
Call of Duty: UO Sep-04 (Expansion I know, but hey) -Finest Hour
Call of Duty 2 Oct-05
Call of Duty 3 Nov-06
Call of Duty: MW Nov-07
Call of Duty: WAW Nov-08
Call of Duty: MW2 Nov-09
Call of Duty: BO Nov-10