Record Billion for "Call of Duty" - Analyst Blog

Activision Blizzard Inc.'s (ATVI) most prolific franchise " Call of Duty" continued its impressive run after its latest instalment " Modern Warfare 3 " garnered sales of $1.0 billion in just 16 days, beating the earlier record of 17 days set by the feature film "Avatar" in 2009.

Activision's online service Call of Duty Elite is also growing rapidly, with more than six million registered players. Activision has sold more than one million premium subscriptions to date. Going forward, Activision expects to sell more than 25 million units of Modern Warfare 3 , which is expected to boost revenue growth for the upcoming quarter. Activision forecasts revenues of $2.17 billion for the upcoming fourth quarter.

The Call of Duty franchise has managed to establish one of the most loyal fan bases and topped the most played games list in 2010. Currently, the Call of Duty community has more than 30 million gamers and has already raked in $6.0 billion in sales (life to date). Considering the stupendous growth of the social and free-to-play games in recent times, the popularity of "Call of Duty" is phenomenal.

This apart, the strong growth of the online service is also a reflection of Activision's continuous focus on digital channel development, which accounted for 62% of the total revenue in the third quarter. In the nine months ended September 30, 2011, digital revenue increased 16.0% year over year, primarily based on Call of Duty 's expanding online content, an increase in the number of multi-player communities and a higher installed base of high-definition ( HD ) online enabled hardware.

According to one of the studies by Strategy Analytics, the global online gaming market is currently worth $4.0 billion and is expected to triple in the next five years. This bodes particularly well for Activision, as the company continues to invest in developing games such as World of Warcraft , upcoming instalments of Call of Duty , Bungie Universe , Skylanders Web World and StarCraft II , which boasts a strong digital customer base.

However, we believe that the increasing popularity and higher consumer spending on mobile games and social networking games will cannibalize the company's digital sales going forward. We believe that Activision's limited presence in the social and mobile gaming platforms, as well as significant competition from Electronic Arts Inc. (ERTS), which has a significant exposure to these gaming segments, will hurt profitability going forward.

We remain Neutral over the long term (6-12 months). Currently, Activision has a Zacks #2 rank, which implies a Buy rating in the near term owing to its healthy product pipeline for the holiday season.

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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 Nasdaq, Inc.

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

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