Following several quarters of record-breaking earnings reports, Activision has ended its 2008 fiscal year with a bang worthy of a Call of Duty 4 claymore. For the 12 months ended March 31, the Santa Monica-based publisher reported net income--aka profit--of $344.9 million on record revenues of $2.9 billion. The whopping figure was made even more impressive because it was a 92 percent increase on the $1.51 billion Activision took in the year prior, and marked 16 years of consecutive growth for the company.
The massive sales surge has also prompted Activision to claim a series of bragging rights once held by its archrival, Electronic Arts. Citing figures from the NPD group, the publisher now claims to be the number-one third-party publisher in the US in terms of console and handheld software dollars, having grown its market share to 17.3 percent of the market--a 7.2 percent increase in a single year.
Two major games were behind Activision's ballooning sales. As of March 31, the critically lauded shooter Call of Duty 4 had sold over 9 million copies worldwide, making it the number-two game on the planet in terms of units according to NPD and European industry-research groups Chart-Track (UK) and GfK (Germany). The same sources pegged Guitar Hero III, Activision's rhythm-game-turned-pop-culture-phenomenon, as the number-one game for the year in terms of dollar revenue.
To date, the Call of Duty and Guitar Hero franchises have generated over $1 billion each in revenue. That's a hefty return on investment for the publisher, which picked up RedOctane in 2005 for just under $100 million and Call of Duty developer Infinity Ward in 2003--when Activision's total annual revenues were just $947.7 million.
Call of Duty 4 and Guitar Hero III's holiday release all but preordained that Activision would have a bumper October-December quarter. However, continuing strong sales of both games boosted income to record levels from January to March as well. During the period--Activision's fourth fiscal quarter--the company saw profits of $44.2 million on earnings of $602.5 million, up from $312.5 million during the same period the year prior.
"Fiscal 2008 was the best year in our history and Q4 was the largest and most profitable nonholiday quarter, even though we did not release any new titles," said the increasingly outspoken CEO Bobby Kotick in a statement. Looking ahead, Kotick declared that Activision's $18.9 billion merger with Vivendi Games to form Activision-Blizzard was on track. "Our intention is to close [the deal] by the end of the first half [of the 2008 calendar year]," he said to analysts during a postearnings conference call.
Despite the near certainty of the merger, Activision still issued a forecast for its 2009 fiscal year, which ends on March 31, 2009. Activision expects revenues of $3.1 billion--with one major caveat. Using cryptic language, the company said that it--not Activision-Blizzard--was anticipating "continuing performance obligations" from "online functionality for certain key titles to be released in the December quarter." After "excluding the impact of the change in deferred revenue related to online-enabled games," the "stand-alone" company expects to take in only $2.75 billion--a $350 million difference.
[UPDATE] Shortly after this story went live, Activision reps explained the $350 million charge to GameSpot. "This [charge] is all related to the accounting change we are implementing with games that have online functionality," the rep sad. "It is similar to the accounting change EA announced not too long ago. Under the change, when a company sells a product (such as game software on a disc) but also provides a service component (additional features that involve online activity and features), but does not charge separately for that service component and online features, then the full amount of the sale (game software plus these online features) has to be spread over a usage period for that online activity, which we estimate to be six months from after shipment."