How Activision adapts to the new competition
The video game industry has always been intensely competitive, but in recent years new game formats such as mobile and free-to-play have changed the landscape. Traditionally, companies have focused on selling console games and billing up to $ 60 up front. Today, one of the most popular games in the world is Fortnite, which is completely free to play.
Some game publishers, like Take-Two Interactive, were slow to adapt. The company has some amazing gaming franchises but little progress to show in mobile games or e-sports.
Activision Blizzard (NASDAQ: ATVI) is an example of a video game company that has done a great job expanding into the new frontier of gaming. The publisher of Call of Duty and World of warcraft now has leading titles in mobile, free and console games.
Call of Duty find success in free to play
The free video game model allows users to download and play a title without paying up front, but the ultimate goal is to generate income by encouraging in-game purchases or displaying in-game advertisements. category has taken off in recent years, with massive successes such as Fortnite (owned by Epic) and Apex Legends (property of Electronic arts) accumulating an audience in the hundreds of millions. Fortnite generates alone over $ 1 billion in annual sales, proving that the model is financially viable.
Activision widely watched this touch trend until March 2020, when it was released. Call of Duty War Zone, a free version of its successful franchise (available on PC and console platforms). New Cod The episode allows 150 players to battle at the same time on a fictional map loosely based on a modern city in Eastern Europe. An interesting gameplay innovation is the “loot” mode, which allows players to use in-game currency to purchase items and weapons. In-game currency can be collected from enemies and the team that collects the most money wins.
Although anyone can play Call of Duty War Zone For free, users can purchase in-game items such as player outfits and weapons. While the financial success of the game is not yet clear, the game registered over 50 million players in the first month, making it one of the fastest growing free-to-play games in history. Call of Duty War Zone is a great example of how Activision can stay relevant in this emerging genre.
The main mobile game franchises
Another rapidly growing area of the video game market is mobile. The number of mobile gamers has exploded thanks to the wide adoption of smartphones over the past 10 years. Today, mobile is the largest segment of the market measured both by number of players and by total revenue. In 2018, mobile gaming generated $ 63 billion in sales, accounting for 46% of total video game sales that year.
Activision operates the candy Crush franchise, which is one of the biggest mobile games in terms of gross sales. Despite the fact that candy Crush has been around for years, the game series still tops the charts in U.S. app stores and saw its active player count increase during the coronavirus-induced quarantine this year.
candy Crush is also free to play with in-game purchases, but the company recently introduced in-game advertising to make the app more profitable. In the first quarter earnings report, management noted that advertising within its mobile segment has grown more than 75% year-over-year.
Last fall, the company also launched a mobile version of Call of Duty (also free to play with in-game purchases). Although it features different gameplay, this is another smash hit. As of December, it had been downloaded over 170 million times and generated nearly $ 100 million in revenue – and those numbers are surely higher today.
With established franchises such as candy Crush and more recent hits like Mobile call of duty, Activision has proven that it can thrive in the mobile world as well.
The core business remains solid
It’s great to see Activision succeed in emerging categories in the industry. For the business to remain relevant, it needs to go where the gamers are, and many gamers have clearly migrated to free and mobile offerings.
However, it should be noted that the legacy activity of Activision has remained strong. The last of the company Call of Duty installation, Call of Duty: Modern Warfare, released in October 2019, was the most successful version of the entire series, selling the most units and reaching the most active players.
Fans are also excited about the recently announced reboot of the Tony Hawk Pro Skater series, which is set to release its first new game since 2015. This launch shows that there could be significant value in Activision’s existing IP library, which into dozens now. discontinued titles.
Now is the right time to be a shareholder of Activision Blizzard. The stock is nearing its all-time high thanks to the strong performance of the year to date, and there is plenty of reason to be excited about its future prospects.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.