Activision Blizzard's billion-dollar quarter beats expectations

$1.038 billion in revs yield $195 million in profit for Call of Duty, World of Warcraft publisher; Starcraft II delayed to "first half of 2010"; Modern Warfare 2 most preordered game to date; COD4 sells 14 million; new James Bond, Spider-Man, post-Ride Tony Hawk next year.

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Yesterday, Electronic Arts announced a loss of $234 million loss, despite an increase in sales, thanks to deferred revenue costs and the ongoing recession. Today, its archrival Activision Blizzard turned in its quarterly earnings report, which revealed $195 million in profits for the April-June quarter. Overall, the company's $1.038 billion in quarterly revenues were slightly better than the $1 billion it had forecast earlier in the year.

Modern Warfare 2 boasts the most preorders in Activision's history.
Modern Warfare 2 boasts the most preorders in Activision's history.

Year-on-year comparisons were impossible because Activision Blizzard didn't come into existence until the July 2008 union of Activision, Inc. and Vivendi Universal Games. (The latter's parent, French media conglomerate Vivendi, holds a controlling stake in the year-old company.) However, the publisher's outspoken CEO Robert Kotick took the opportunity to boast that the megapublisher has beat expectations every single quarter since its formation.

"Since our merger one year ago, we have delivered better-than-expected financial performance for four consecutive quarters," said the executive. "Our second quarter overperformance was driven by Activision Publishing's Prototype, Transformers: Revenge of the Fallen, X-Men Origins: Wolverine, and the Guitar Hero and Call of Duty franchises, as well as Blizzard Entertainment's World of Warcraft. During a challenging economic climate, Activision Blizzard grew its quarterly North American and European market share 2.8 points across all platforms to 12.7 percent from 9.9 percent for the previous year and was the number one North American third-party console and handheld publisher for the quarter and first six months of the calendar year, according to the NPD Group, Charttrack and Gfk."

"No Starcraft II for you! You come back--one year!"

While today's report might be music to Activision Blizzard shareholders' ears, it contained some devastating news for gamers. As rumored, Blizzard Entertainment's Starcraft II: Wings of Liberty won't launch until the first half of 2010. "Over the past couple of weeks, it has become clear that it will take longer than expected to prepare the new Battle.net for the launch of the game," the Irvine, CA-based developer said in a statement. "The upgraded Battle.net is an integral part of the StarCraft II experience and will be an essential part of all of our games moving forward. This extra development time will be critical to help us realize our vision for the service."

Starcraft II's delay and the previously announced postponement of the new sci-fi shooter Singularity have forced Activision Blizzard to lower its full-year guidance from $4.3 billion to $4.05 billion.

In a call with analysts following the announcement, Kotick, Activision Publishing CEO Mike Griffiths, Blizzard CEO Mike Morhaime, and other executives revealed the following details:

--World of Warcraft is still down in China, but is "ready to relaunch pending receipt of the necessary approval from the Chinese government."

DJ Hero's songs will be heavily localized, with the European versions favoring
DJ Hero's songs will be heavily localized, with the European versions favoring "dance music."

--Activision Blizzard is predicting that, since their respective launches, some 33 million Xbox 360s, 20 million PlayStation 3s, and 50 million Wiis will have been sold in the combined North American and Europe market by year's end.

--Since retailers are being increasingly selective due to the recession, Activision expects overall game sales to be flat or down for the year. However, Kotick said that stores are "still showing strong commitment to our holiday launches" and giving them prime "shelf space allocation."

--One of those holiday titles, November 10's Call of Duty: Modern Warfare 2, is already the most preordered game in Activision's history. Call of Duty 4: Modern Warfare has now sold nearly 14 million copies, a number that will increase when its Wii port ships out November 10.

--The music genre is down significantly, and executives conceded that Guitar Hero "is performing in line with overall market." Guitar Hero World Tour band kit has already been lowered to $99 at certain retailers to further promote the franchise.

--Singularity is now being groomed as a full-fledged "first-person action franchise." (Emphasis added.)

Tony Hawk Ride will only launch in the UK, Germany, and North America in 2009 to ensure steady supplies.
Tony Hawk Ride will only launch in the UK, Germany, and North America in 2009 to ensure steady supplies.

--Tony Hawk Ride will only be released in North America, the UK, and Germany this year to ensure its skateboard peripheral is in ample supply. The game will be released in "all other territories" in "early 2010."

--To accommodate the popularity of dance music in Europe and hip-hop in the US, DJ Hero will have the most localized content of any Activision game to date.

--New James Bond, Spider-Man, and Tony Hawk games are planned for 2010. The year will also see a game based on the animated films Shrek 4 and How to Train Your Dragon.

--Blizzard sold 20,000 tickets for this month's BlizzCon in only eight minutes.

--The delay of Starcraft II: Wings of Liberty to 2010 doesn't affect the release schedule of any other Blizzard games, said Morhaime. He said once it launches, work will immediately begin on the second installment in the three-part game, Heart of the Swarm.

--Morhaime repeatedly deflected questions about launch plans for Diablo III. "We have not announced release dates for any other games," went the refrain.

--Kotick compared the upcoming revamp of Battle.net to Xbox Live in terms of its scope and feature set.

--Guitar Hero: Van Halen was not mentioned anywhere in Activision's report or the subsequent conference call. However, Activision reps confirmed to GameSpot the game is still coming this year, and it is slated to ship on December 22.

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