Video game developer and publisher
Activision Blizzard Inc. (
ATVI
)
recently launched the fourth expansion pack of its popular
subscription-based massively multi-player online role-playing game
("MMORPG")
World of Warcraft
("WoW").
The pack, named
Mists of Pandaria
, is already available to gamers in the U.S., Canada, Europe,
Russia, South East Asia, Australia, New Zealand, Mexico, Argentina,
Chile and Brazil. Players can buy the game from retail stores as
well as from the
World of Warcraft
website for $39.99. Activision launched a special collector's
edition pack simultaneously. The pack contains a number of bonus
items and is available at a retail price of $79.99.
The pack expands the game to the shores of a lost continent and
challenges players to embark on new adventures to unveil its
secrets. The game features a new race (the pandaren) and a new
character class (the monk), which are the additional
attractions.
The expansion pack is aimed at boosting the subscriber base of
World of Warcraft.
The MMORPG has been a major revenue contributor over the years.
However, the lack of fresh gaming content and competition from
other title releases have resulted in a significant decline in the
subscriber base lately.
As of June 30, 2012,
World of Warcraft
's subscriber base was 9.1 million, down by 1.1 million from the
previous quarter (March 31, 2012) and by 2.0 million from the
year-ago period (June 30, 2011). Activision noted that the
subscriber loss was more rapid in the eastern markets of China,
Taiwan and Korea compared to the western markets of North America
and Europe.
In order to gain market share in these regions, Activision, for
the first time in the franchise's history, decided to launch the
new game in Taiwan, Hong Kong and Macau (September 27) and in
mainland China (October 2), within a week of its western
release.
With video game sales slowing down in the major western markets,
Activision has been focusing on boosting its presence in the
emerging markets of China and South East Asia. Activision has
licensing agreements with two of the leading Internet providers in
China, which will help it to make inroads in the Chinese online
gaming market. The market is expected to grow at a compound annual
growth rate (CAGR) of 40% over the 2009-2015 period.
We believe that the new expansion pack will help Activision to
solidify its position in China going forward. The game has already
received approval from Chinese authorities, which removes a major
obstacle in our view. We believe that the new content and features
will provide a significant impetus to the dwindling customer base
of the
World of Warcraft
game going forward.
We believe that subscriber expansion will drive top-line growth
going forward. Moreover, the new expansion will provide Activision
a significant competitive edge over
Electronic Arts Inc. (
EA
)
going forward.
We maintain our Outperform recommendation on the company over
the long term (6-12 months). Currently, Activision has a Zacks #1
Rank, which implies a 'Strong Buy' rating in the short term (1-3
months).
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