Activision Winning Holiday Game Shootout With EA’s DelaySonali Basak
Activision Blizzard Inc., the largest U.S. video-game company, is heading into the holiday shopping season with two of the most-anticipated shooter titles and less competition after rivals delayed their products.
Activision’s new Destiny game and latest Call of Duty will be the top-selling action titles of the holiday season, according to Michael Hickey, an analyst with Benchmark Co. He raised his sales estimates after Electronic Arts Inc. and Take-Two Interactive Software Inc. pushed back competing titles to 2015 because their games need more work.
“It’s a big win for these guys,” Hickey said in a phone interview.
The timing couldn’t be better for Activision, based in Santa Monica, California, and its longtime chief executive officer, Bobby Kotick. Worldwide sales of games for consoles are forecast to grow 7 percent to $27 billion this year, according to PricewaterhouseCoopers LLP, fueled by demand from consumers who’ve bought the new PlayStation 4 from Sony Corp. or Microsoft Corp.’s Xbox One. That will mark the first annual growth for game makers since 2008, according to PwC.
“There’s a long history and big audience for Call of Duty,” Kotick said in a telephone interview. “It will likely be the most successful game of 2014. Destiny will also be very successful.”
Activision, Electronic Arts and Take-Two are among the exhibitors at the world’s largest video-game fair, Gamescom, which started today in Cologne, Germany. The event’s organizers are forecasting a record attendance of more than 340,000 visitors seeking out new titles for consoles.
Shooter titles attract fervent fans. Players don headsets and battle in urban or futuristic settings, sometimes on teams. They trade insults. In first-person games, scenes unfold from the player’s perspective. Call of Duty: Advanced Warfare involves a private military corporation called Atlas. In Destiny, players with incredible power serve as guardians of the last city on Earth.
Hickey, who recommends buying Activision stock, is forecasting 2014 unit sales of 19 million for Call of Duty: Advanced Warfare.
The analyst raised his projection for Destiny to 10 million copies from 8 million, citing the competitors’ delays.
Activision closed little changed at $22.81 yesterday in New York. The stock has gained 28 percent this year, while Electronics Arts jumped 55 percent and Take-Two rose 22 percent.
Publishers like Activision have been racing to tap fresh demand for new and updated games since the PlayStation 4 and Xbox One went on sale last November. The new machines, the first in seven years, offer snappier effects and more life-like ways to play, whether as corporate soldiers in Call of Duty or cops in Grand Theft Auto.
While the consoles were available last year, few machines were in players’ hands for the holidays, and only a handful of key titles were ready for sale. As a result, the biggest seller then was Take-Two’s Grand Theft Auto V, made for the earlier PlayStation 3 and Xbox 360. This year’s contest will be fought on the Xbox One and the PS4.
Getting games ready is still proving a challenge. Electronic Arts, based in Redwood City, California, said on July 22 it will push back Battlefield Hardline to early 2015. New York-based Take-Two last week delayed Evolve until early next year, too.
More than a dozen analysts raised their price targets for Activision shares last week as the company posted quarterly results that beat estimates and raised its 2014 forecast.
Michael Pachter of Wedbush Securities in Los Angeles and Daniel Ernst at Hudson Square Research in New York are highest, with targets of $30 in the next 12 months.
“There are companies that execute consistently, like Activision,” Hickey said. “Take-Two has consistently delayed games. EA has sort of a mixed track record.”
Kotick, Activision’s CEO for two decades, is part of a group, with Chairman Brian Kelly, that bought 24 percent of the company when Vivendi SA gave up its controlling stake.
The CEO has said Activision may spend as much as $500 million to create and market Destiny. The game will cost about $60, and is being released on Sept. 9, ahead of its lead competitors.
Sales could exceed 20 million units within the first 12 months, according to Doug Creutz, an analyst with Cowen & Co., who predicts Destiny will be the top title of 2014. The game is being developed with Bungie, maker of the Halo game for Xbox.
“It’s a hotly anticipated title,” Creutz said in a telephone interview. “People are ready for a new experience on the new console. We have seen franchise transitions around the transition of new consoles.”
Activision’s shooter titles aren’t the only action games vying for players’ attention, and Creutz suggested the company may also be competing with itself.
Destiny may steal sales from Call of Duty: Advanced Warfare, Creutz said. Call of Duty may have sold 16 million units last year and the new version could do 20 percent less, he said. The game is scheduled to be released on Nov. 4. and will cost about $60.
The game is being developed with Sledgehammer Games for next-generation consoles and PCs. The last one, Call of Duty: Ghosts, was made by Infinity Ward studio.
“This year is a better studio, and that matters,” Pachter, at Wedbush, said in a telephone interview.
Activision also will be competing with Ubisoft Entertainment SA’s titles Far Cry and Assassin’s Creed Unity. Hickey, at Benchmark, estimated Ubisoft may sell 6 million copies of Far Cry through March, and 11 million units of Assassin’s Creed. Far Cry 4 comes out on Nov. 18 and Assassin’s Creed on Oct. 28.
Take-Two also will be out with a version of Grand Theft Auto V that has better graphics for the latest consoles. Pachter estimates it will sell about 6 million copies. Some people won’t want to buy the game a second time, he said.
Pachter sees potential holiday sales of about 35 million units in the shooter category, with much of it going to Activision.
“Take my word for it,” he said. “There’s less competition.”