Activision Blizzard (NASDAQ: ATVI ) has learned to love the month of November,
and not just because the annual flood of Black Friday-related holiday deals is
always the most lucrative period from the video game industry. For the fourth
year in a row, November has given Activision one of the biggest sales openings
for a video game in the history of the medium, and in the case of Call of Duty:
Black Ops , the single best opening day ever. The latest game in the
long-running military shooter franchise sold 5.6 million copies in its first 24
hours on the market, pulling in $360 million. This is the second consecutive
year that Activision has broken day one sales; Call of Duty: Modern Warfare 2 ,
released on Nov. 10 th , 2009, sold 4.7 million copies within 24 hours,
trouncing the record previously held by Microsoft (NASDAQ: MSFT ) and Bungies
Halo series. The most recent entry Halo: Reach , released last September, had a
record breaking day itself, selling 3.3 million copies on day one, earning
Microsoft a cool $200 million in the process. Halo s console exclusivity,
though, has kept it from hitting the lofty heights of Activisions behemoth.
Before the release of Modern Warfare 2 , Halo 3 was the record holder for
biggest sales debut, with 2.45 million in first day sales in 2007, but even that
year Activision was making waves in November. While Guitar Hero 3 (released on
October 28 th , 2007) didnt match Halo 3 or any of the subsequent record
breakers with sales during its first day on shelves, the game went on to become
the first piece of game software in history to break $1 billion in sales. Black
Ops big open couldnt come at a better time for Activision Blizzard. The company
reported strong third quarter earnings last week thanks to sales of summer
releases like Starcraft II: Wings of Liberty that were stronger than expected
and a strong uptick in new subscriptions for the companys evergreen massively
multiplayer online role-playing game, World of Warcraft . Warcraft should also
help Activision Blizzard maintain its momentum through the holiday season when
the latest expansion for the software, World of Warcraft: Cataclysm , releases
during the first week of December. Going into 2011, though, ATVI may be at an
impasse. Wedbush Morgan analyst Michael Pachter said back in August that he did
not expect Black Ops to outsell Modern Warfare 2 on day one let alone in
lifetime sales. Though Black Ops has exceeded those day one expectations, its
still questionable whether or not it can match Modern Warfare 2 overall, a game
that has sold in excess of 21 million copies since releasing last year and that,
as of last month, was still charting in the NPD Groups top ten sales.
Considering that Modern Warfare 2 still controls a sizable player community on
Microsofts Xbox 360 and Sony s (NYSE: SNE ) Playstation 3, its doubtful that
those players will flock to the new software en masse. There is one indisputable
bright spot in the companys future business plan. Activision Blizzard is
expected to publish the first game under a 10-year contract with Halo creators
Bungie Studios sometime in the next two years. The new franchise will create a
new annual cash cow for Activision, and they will need it. Call of Duty may be
strong now, but Activision has habitually oversaturated the market with their
most popular franchises. Annual entries of inconsistent quality in the Tony Hawk
Pro Skater and Guitar Hero franchises have ended up devaluing those properties
beyond hope of rehabilitation. ATVI shares are up more than +8% from last
September, trading around $11.50 today, but still down -8% from the companys
52-week high. Given strong projections for its holiday software line up, now
would be a good time to buy ATVI, but only if you plan to turn the stock around
quickly come the beginning of the next fiscal year. As of this writing, Anthony
Agnello did not own a position in any of the stocks named here.
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