Activision just had another solid quarter and the company is expecting a monstrous holiday with Modern Warfare 3 and the next World of Warcraft update, but investors continue to show concern that the publisher has become overly reliant upon these two blockbuster franchises. One way Activision is looking to diversify is with Skylanders: Spyro's Adventures, which ties into the toy market. It's an interesting bet from Activision, and reactions to Skylanders appear mixed.
"Investors are understandably concerned about the company’s overreliance on CoD and WoW. This is currently being reflected in the stock’s relatively low multiple. However, we believe this will likely change in the near to intermediate term and ATVI’s product pipeline will begin to look much more diversified. In the next 60 days or so, with the launch of Skylanders (interactive toy/video game), Activision is pioneering a relatively new genre," said Sterne Agee's Arvind Bhatia. "We believe the Street’s expectations are relatively modest for this title, but management is spending heavily against this property and we believe there could be upside potential if the title takes off."
Activision's expectations for Skylanders might be too great, though, if you ask Wedbush analyst Michael Pachter.
"Although we expect Call of Duty: Modern Warfare 3 to perform very well due to Infinity Ward’s prior successes and the network effect, the success of many other 2H titles (including two Cabela’s games, a Spider-Man game, an X-Men game, a James Bond game, and Skylanders Spyro's Adventures, among others) remains uncertain. In our view, the 2H game discussed most often by management, Skylanders, is the most likely to underperform expectations due to its studio and target age group," Pachter remarked.
In IndustryGamers' meetings with Activision Publishing boss Eric Hirshberg, the executive always spoke very highly of Skylanders, indicating how bullish the company is on the new project. It'll be interesting to see how the younger demographic reacts to the title and if it can become another big hit for the publisher (whose audience in recent years has clearly become the older, hardcore gamer).
