Activision recently killed off Guitar Hero and more while doubling down on its major successes - Call of Duty and Blizzard titles. This is somewhat alarming since it certainly narrows the company's portfolio, but one analyst sees the big bet on Call of Duty paying off, to the point where revenue per user may double.
"Currently, the biggest investor concern on ATVI revolves around the concentration in the company’s portfolio (Call of Duty, World of Warcraft). However, management believes focusing on monetizing the Call of Duty franchise further is the best use of its resources. Over time, management believes the ARPU from Call of Duty (initial sale + map packs) could double from the current $100 to $200 for at least a meaningful portion of the 27 million players currently engaged in playing Call of Duty online," noted Sterne Agee analyst Arvind Bhatia.
"If we assume 20% of the current online players (~5.5M) double their spending on Call of Duty over time, that would be an incremental $500M in annual revenue at fairly high margins. We think this is the key to the longer-term bull thesis on ATVI," he continued.
Part of that thesis includes Bhatia's assessment that "ATVI offers one of the best risk-rewards in the video game universe, at current price levels." And that doesn't even seem to factor in the possibility that ATVI could start charging for a premium subscription service with the new Beachhead division.
Besides Call of Duty, Bhatia notes, "Other areas of potential growth include a) Blizzard’s upcoming casual MMO; b) the launch of Diablo and its monetization online; c) introduction of Call of Duty in China (probably not before 2012/2013); d) Bungie’s game in development and e) recently announced new toy based property, etc."
2 Comments
March 11, 2011
At least the analyst wasn't Michael Pachter... thet guy knows CRAP about the industry. He has made SO MANY wrong calls, I'm surprised he still has a job...
March 14, 2011
I think this is starting to become the consumers fault. We keep buying all this crap from them even though its mostly worthless, Map packs have even increased, WAW was $10 for a map pack and now Mw2 and Black Ops are $15 a pack. Soon it'll be $20 for less then 5 maps. There becoming a monopoly in online video games and no one seems to complain about it. The special edition of the game features an R/C car I could probably buy from radioshack for about $25 and they charge $70 for it, scams and more scams, I'm not really surprised by anything in this article.