Activision Blizzard and Tencent's "Call of Duty: Mobile" Is Off to a Strong Start
Call of Duty: Mobile was released at the beginning of October, and its performance so far has been worth celebrating. The game notched 148 million downloads across its first month on the market and generated $53.9 million in sales across the stretch, according to data from Sensor Tower. It's also generally gotten good marks from players and critics.
The title, which was developed by Tencent (OTC: TCEHY) in a partnership with Activision Blizzard (NASDAQ: ATVI), marks the Call of Duty (CoD) franchise's biggest foray into mobile yet. Key challenges remain, but it looks like the companies have delivered a strong foundation to build on with the game.
Image source: Activision Blizzard.
The Tencent-Activision team-up project is firing out of the gate
Call of Duty: Mobile managed to deliver the second-best-ever monthly debut for a mobile game in terms of downloads -- trailing only Pokemon GO's downloads of 163 million, according to Sensor Tower's data. Some industry watchers have also pointed out that first-month downloads for CoD: Mobile trounced battle-royale sensations Fortnite and PlayerUnknown's Battlegrounds -- which recorded 35 million downloads and 60.7 million downloads, respectively, across their first 30 days.
Investors should keep in mind that outperforming PUBG and Fortnite in terms of first-month downloads doesn't mean that Activision and Tencent's mobile game will go on to surpass those two hugely successful titles in terms of sales. Long-term user engagement is the best marker for success in the free-to-play space, and the mobile version of Call of Duty undoubtedly benefited from the franchise's decades of brand strength buildup -- while PUBG and Fortnite were relatively new properties. However, it's undeniable that CoD Mobile is off to a strong start -- and that's without launching in China.
CoD: Mobile scores solid cash and has big long-term potential
Call of Duty: Mobile's first-month gross of roughly $54 million might not look that impressive when compared to opening sales for mainline entries in the franchise on console and PC platforms. Call of Duty: Modern Warfare launched on Oct. 30 and did roughly $600 million in retail and digital unit sales across its first three days on the market, but it's important to keep in mind that the sales models and budgets for these games differ greatly.
Games like Call of Duty: Modern Warfare have massive production and advertising costs and typically start at a $60 price point for consumers, while CoD: Mobile is a free download that makes money from in-app purchases. Players can purchase optional in-game currency packs, ranging in price from $0.99 for the cheapest option up to $99.99 for the game's Prestige Pack -- and then spend that digital money on game items.
The mobile-focused, free-to-play model allows companies to reach a much wider audience, and it can be hugely profitable if games go on to be sustained hits. For reference, Nintendo and Niantic Games' record-breaking Pokemon GO debuted in 2016 and posted roughly $200 million in revenue across its first month -- and its lifetime sales recently crossed the $3 billion mark.
CoD: Mobile might have been capable of surpassing the nearly $54 million in sales it did across its first month. Activision Blizzard has stated that it's prioritizing reach and engagement for the game over profitability in the near term, and it's reasonable to expect that the focus will shift somewhere down the line.
Content expansions and game maintenance will play a big part in sustaining player spending, and advertising could become a focus as well. Activision Blizzard has been working to build in-game advertising as a revenue stream for titles from its King Digital unit (which is responsible for mobile hits like Candy Crush Saga), and comments from management suggest that ads will become a bigger part of its monetization plans for CoD: Mobile.
The next big challenge for CoD: Mobile
Call of Duty: Mobile has already significantly expanded the franchise's reach in fast-growing markets like India and Brazil. The next big step for the game is securing a release license in the world's largest internet market: China. That will hinge on passing muster with the country's game licensing agencies.
Tencent's role in developing CoD: Mobile improves its odds of getting a release in China, where the company would also handle publishing duties -- as per the government guidelines that bar nondomestic publishers in the market. However, investors can't take it for granted that the title will be able to easily secure a release in the country. Passing that bar might be dependent on Tencent and Activision making some significant changes to the game.
CoD: Mobile is off to a great start, but one of the project's core goals has always been to build a significant audience in the Chinese market. Investors should cheer the game's performance so far -- and keep in mind that an important hurdle remains.
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Keith Noonan owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard and Tencent Holdings. The Motley Fool recommends Nintendo. The Motley Fool has a disclosure policy.
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