More Offerings from Activision's MW3 - Analyst Blog

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The unprecedented success of Activision Blizzard Inc. 's ( ATVI ) blockbuster title Call of Duty: Modern Warfare 3 (MW3) has prompted the company to further extend its offerings. The hugely popular game, with certain upgraded contents, will be available in the form of downloadable content through Call of Duty Elite , Activision's online portal.

Modern Warfare 3 Content Season for Call of Duty Elite will be available for the Call of Duty Elite 's premium members on Xbox LIVE starting from the 24 th of this month. Subsequently at a later stage, this downloadable content will be available on other platforms as well. The premium members will get upgraded and new multiplayer maps, Liberation and Piazza, with new game modes, special ops missions and much more until September.

In all, there will be 20 upgrades that will be available for downloading in a space of nine months (Jan - Sept). Activision has always excelled at promoting Call of Duty , which has turned into a money-making franchise. The Call of Duty community has more than 30 million gamers and has already raked in more than $6.0 billion in sales (life to date).

MW3's Popularity & the Strategy

Call of Duty: MW3 has touched the $1 billion mark in sales in the first 16 days of its release and there seems to be no end to its popularity. Activision expects to sell more than 25 million units of Modern Warfare 3, which is expected to boost revenue for the upcoming quarter. The preliminary figures bode well with Activision's revenue projection of $2.17 billion for the current quarter.

The company's intention of expanding in the online segment was apparent from the launch of Call of Duty Elite . Digital gaming is now a rave. Moreover, given the popularity of this particular franchise, Activision surely could not have missed out on the opportunity of grabbing the rich dividends that MW3's online presence will offer. Activision has experienced growth in the digital segment, which accounted for 62% of its third quarter revenues.

Apart from the original title, the Call of Duty franchise has always offered content that could be downloaded online. Not only did this keep fans happy, but it also generated additional revenue for the company.

While the release of Call of Duty games every year might eventually tire gamers due to the over exposure of the game, Activision has plans of releasing two games of the same franchise in 2012.

Our Take

We believe that the release of Activision's famous franchise games and their subsequent content enhancements will continue to benefit the company in the forthcoming quarters, driving its top-line growth.

We expect that the company's continued initiatives to expand in the digital/online segment will bring in rich dividends for the company over the next 12-18 months. A healthy product pipeline for the holiday season will help Activision tap the strong demand, thereby driving its top-line growth.

However, Activision continues to face tough competition from Electronic Arts Inc. ( EA ) and Take-Two Interactive Software Inc. ( TTWO ) , which will act as a headwind going forward.

Moreover, a gloomy macro-economic environment in North America and Europe, increasing competition and weak video game results during the last 12 months, as well as Activision's limited presence in the social and mobile gaming platforms will act as headwinds in the near term.

In the long run, we maintain our 'Neutral' rating. We currently have a Zacks #3 Rank for Activision Blizzard Inc., which implies a 'Hold' rating in the short term (1-3 months).


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ATVI , EA , TTWO

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