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Activision warns of "significantly lower" earnings

Announcement puts stock into freefall in after-hours trading; publisher blames underperforming portfolio of holiday releases.

Hot on the heels of NPD's bleak report on November game sales comes a stark earnings warning from a top third-party publisher. Following the end of trading in New York this afternoon, Activision issued a press release that told investors to brace themselves for quarterly and annual earnings lower than the company's November 2 forecast. The warning comes despite Activision's 54 percent year-on-year increase in sales during November.

"For the quarter, we still expect to generate significant revenues," Activision CEO Michael Griffith said in a statement. "However, we are disappointed that our earnings performance will come in substantially below our previous outlook."

Activision blamed its fallen fortunes on two factors. First, the overall lull in the game market during the 2005 holiday season. "For the October/November period, US software sales were down 20 percent," the company said in a statement, slightly overstating NPD's report of an 18 percent decline. Activision went on to say that "sales in the month of December are tracking below company expectations" and that large "competitive pricing" and marketing expenditures would "disproportionately" affect its bottom line.

The second culprit Activision cited for its lowered outlook was an enemy within. It acknowledged that "overall the company's portfolio of products are not selling as well as had been anticipated." Activision's press release also said that it "expects lower than anticipated reorders of its most profitable titles."

So which of Activision's titles are to blame for its lowered guidance? While the publisher didn't name games, analysts singled out two of the company's fall games as being lackluster: The multiconsole and PC title Gun, which NPD said sold only 225,000 copies, and True Crime: New York City, which moved a paltry 73,000 units on all platforms.

On the next-gen front, Activision's rush to make four of its games Xbox 360 launch titles seems to have yielded mixed results. On the one hand, Call of Duty 2 was the best-selling Xbox 360 title, boasting a 77 percent attach rate to the console. On the other hand, the poorly reviewed 360 versions of Gun, Quake 4, and Tony Hawk's American Wasteland were not among the top five games for the new platform.

42 Comments

  • Ontain 

    Posted Dec 16, 2005 11:31 am PT

    I played and finished GUN for PC. i didn't encounter any bugs and thought it was a fun game.

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  • SLAYERPSP

    Posted Dec 15, 2005 11:04 pm PT

    they will be all right i liked true crimes ny its not bad but ther 360 games suck gun is a port fun game but way too short and people are tried of tony hawk bring back kelly slater surfing enough skateboarding already and what about a new wake boarding game the last one was fun

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  • green11420

    Posted Dec 15, 2005 5:46 pm PT

    perfect time to invest
    you know the old saying!
    buy low, sell high!!

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  • DarkmanX3

    Posted Dec 15, 2005 3:39 pm PT

    They wouldnt have this problem if they would just make decent games out for the holidays. Btw .. Gun sucked balls. after all that marketing hype they put into that game. What a disappointment

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  • ZippyDSMLee

    Posted Dec 15, 2005 2:35 pm PT

    Activision has forgoten what good games are altho they still have alil more fight in them than aklaim did if Activision dosent focus on quailty over gettign the games out ASAP there will be no hope for them.

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  • Terran499

    Posted Dec 15, 2005 12:07 pm PT

    Hope Activision doesn't close its doors. Hey Activision make another Dark Reign game, that'll see.

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  • tbonetrav18

    Posted Dec 15, 2005 11:06 am PT

    Not a suprise, everyones earnings are lower.

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  • Ravidrath

    Posted Dec 15, 2005 10:26 am PT

    Talking to friends that work at Activision, none of this is really surprising to them. Everything is tremendously over-focus grouped, and marketing and the release calendar are the only important things to the company. Both GUN and True Crime 2 shipped with a lot of bugs, and the designers on both projects wanted more time to improve the games - what does that say? While marketing is important for "mainstream" products like this, quality is more important. Especially in the case of GUN, which was supposed to be a big new franchise - Activision loves their yearly sequels, but people aren't going to buy the sequel if the first one isn't good.

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  • gdogg4210

    Posted Dec 15, 2005 10:15 am PT

    I say they should try to breakaway from the mainstream and publish more originals rather than the whole sequel and rip off act they got happining

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  • skyvader

    Posted Dec 15, 2005 9:34 am PT

    The prices these companies are asking are just out of line for what you get. Most people will wait until it drops 10-20 from it's regular price to get one. I picked up Doom 3 for $15 which is over half off the regular price. Plus it was brand new. These companies closures can be attributed to the quality to cost ratio. some titles just aren't worth the 50-70 they are asking. These companies need to change their pricing if they want to sell games and not report losses like they do.

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  • jega411

    Posted Dec 15, 2005 9:30 am PT

    i work at eb games, soon to be gamestop, and they send their reps sometimes to see how we display their product. They are all about marketing. But i will not lie to a customer to help a big wig sell crap. Their games right now suck. i think people are getting tired of sequels. As it stands EA and Activision are the two biggest publishing companies lets hope they can get it together. Because they may fade in the next gen. But EA does have the NFL even though Madden sucks , it still has a market. I hope activision decides to take a more creative approach to game development.

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  • NeoJedi

    Posted Dec 15, 2005 8:05 am PT

    Gun and True Crime - New York City should've never came out... especially True Crime. This is alarming for the industry when a big game maker like Activition can't sell it's games... but it is also good in a way, meaning that gamers will not settle for crap anymore.

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  • Gaara79

    Posted Dec 15, 2005 8:03 am PT

    Good, hope they learn not to make crap ports anymore, or make sequels to crap like True crime...

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  • Aragorn33

    Posted Dec 15, 2005 7:57 am PT

    Maybe they'll try making a good Tony Hawk game next year? And True Crime 2: that game was crap too.

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  • TimberWolf_CLT

    Posted Dec 15, 2005 6:55 am PT

    I have to agree with avalanche.

    It shouldn't be any big surprise that sales are down when there's almost nothing worth buying being offered.

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  • SavoyPrime

    Posted Dec 15, 2005 6:44 am PT

    Maybe Activision will learn a lesson from this. Stop putting out crap games.

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  • ps21990

    Posted Dec 15, 2005 6:36 am PT

    cant believe it.

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  • REVENGEotSITH

    Posted Dec 15, 2005 6:21 am PT

    Let's look at what Activision did for the 360. They "glitzed" up Gun and Tony Hawk from the last-gen version (with ZERO added gameplay elements, just a nicer coat of paint for $10 more) and advertised the heck out of these games, they did a very poor job of porting over Quake 4 (the framerates are pretty bad at times, the Live options are terrible, and the Live graphics are even worse, and has anyone else noticed how the screen is "stretched" at the sides in order for it to fit on a 16:9 HDTV? Bad stuff), and as much as I like CoD2 the Live portion is very poorly done (no custom matches, LOTS of lag in over half of the matches I've played).

    And they wonder what went wrong! Let's see, gamers are a little bit more intelligent than they make us out to be. Stop putting out crap just to meet some fiscal deadlines and stop putting so much money into advertising - use that money for more quality control or development!

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  • necrogodomega

    Posted Dec 15, 2005 5:33 am PT

    Well, they 360 versions of those games are barely a step up from their Xbox counterparts, that's why they didn't sell too well. And I don't find Gun fun at all, and I guess many other people feel that way. I'm just not into the "old West" setting at all.

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  • ghostadv

    Posted Dec 15, 2005 2:53 am PT

    It's too bad Gun didn't do so well, a game I was really looking forward to. But I can't really say I'm all the surprised. I mean, besides Gun being a stylistic western, it basically turned out to be an average game overall. & to be honest, I'm surprised the first True Crimes game sold so well. It just looked like a bad GTA clone with even worse hand to hand combat.

    P.S. I'm getting sick of so many Call of Duty & Tony Hawk games.

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  • ewjim

    Posted Dec 15, 2005 2:02 am PT

    TOO MANY "old hits" in new view... How much Tony Hawk's or Call of Duty they can make?!? I think this "cows" are out of milk... LOL!!!

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  • lowdown478

    Posted Dec 15, 2005 1:43 am PT

    Thats what they get for releasing garbage.

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  • ryan191919

    Posted Dec 14, 2005 11:57 pm PT

    Arrrgh...I'm hanging on to the stock. Activision is no slouch. They'll figure things out.

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  • nemes1s3000

    Posted Dec 14, 2005 11:25 pm PT

    Praying for a miracle.

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  • 8081

    Posted Dec 14, 2005 10:59 pm PT

    Ya but the tony hawk games where good especially the first 2

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  • azizrulez

    Posted Dec 14, 2005 10:34 pm PT

    i think they got over confident and i really dont think true crime deserved a sequel also i was kinda disappointed by the way quake 4 turned out on the console especilly

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  • dru26

    Posted Dec 14, 2005 10:02 pm PT

    Activision should have expanded on their next gen attempts instead of making direct ports. True Crime should have been released for 360, considering there isn't anything like it available yet.

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  • neoand12

    Posted Dec 14, 2005 9:11 pm PT

    Gun was so lame even i trade that in the 2nd day of the 360 release

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  • Lasafrog

    Posted Dec 14, 2005 9:10 pm PT

    Activision is an old great, in a day where EA, Epyx, and Microprose ruled the day, and with good reason. They had a geniune creative talent driving their business model, and the software showed this. Fast forward to today, and we certainly see a climate in the industry that rarely allows a strong value for quality over pure business savvy. It kills me to say it, but I'm afraid that Activision is on the way out, and even they know they have tough times combined with their failure to produce quality to blame. I sure hope they find a way to turn it around...

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  • OtterX

    Posted Dec 14, 2005 8:56 pm PT

    Ravidrath--- (quote)Gamephilia, while I agree, the problem is that the first True Crime: Streets of LA sold really well. Like, four million copies. Now that the sequel utterly tanked and True Crime 3's been cancelled, it's obvious that the first True Crime was a fluke and just happened to be released at the right time - I think there are some people that could've told them that, but with sales like the original's you can't expect them to listen(quote)

    Maybe the first one sold really well because GTA clones were a new thing.... people were actually looking for that same experience outside of GTA at the time. Now, GTA clones are a dime a dozen... so why buy True Crime now?

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  • OtterX

    Posted Dec 14, 2005 8:50 pm PT

    Maybe this decline in sales on all game company fronts will encourage them to actually make new, original games. Sure... Gun was original, but it seemed more like a corporate project than a work of art. Alot of it didn't feel to have alot of "heart" ..... Invisible walls on the edge of Dodge City? Can we say BS people.................................. ESPECIALLY on a next gen system?

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  • Commandofreak92

    Posted Dec 14, 2005 7:56 pm PT

    Call of Duty 2 is awesome though

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  • LordOfMidnight

    Posted Dec 14, 2005 7:49 pm PT

    "Gun" was really disappointing to me and it was being advertised all over the tv, so they had to have taken a hit on just that I would assume. I never played "True Crime" but there wasn't anything about it that grabbed me and wanted to make me play it. Sad to see the bleakness of all this but I can't say I'm surprised personally.

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  • evil_dracula

    Posted Dec 14, 2005 7:26 pm PT

    Build Better Games, Make More Money.

    There is a one-to-one relationship there and every publisher knows it. Gun was marginal and certainly not worthy of the marketing effort it received and as for True Crime - that franchise should have quit while it was behind. It's beyond me why that game ever made it past the storyboard phase.

    Were it not for Call Of Duty, I'd have written off Activision completely. The problem with these big publishers is that they are so driven by fiscal timelines that they have to roll out titles on schedule whether or not they'll sell at retail.

    They need to focus on utilizing a wider range of development shops to bring better titles to them rather than relying on a handful of 'safe' developers to creat garbage on demand. (luxoflux and neversoft are both in this category IMHO)

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  • Ravidrath

    Posted Dec 14, 2005 7:18 pm PT

    Gamephilia, while I agree, the problem is that the first True Crime: Streets of LA sold really well. Like, four million copies. Now that the sequel utterly tanked and True Crime 3's been cancelled, it's obvious that the first True Crime was a fluke and just happened to be released at the right time - I think there are some people that could've told them that, but with sales like the original's you can't expect them to listen.

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  • Gamephilia

    Posted Dec 14, 2005 6:40 pm PT

    Was anyone rooting for True Crime: New York City to sell through the roof? Publishers have the mentality that consumers are utterly bovine in their shopping habits, but the truth remains that crap rarely sells. Look at the numbers on E.T. (pre-crash) and you'll see that a big license and a popular franchise can't always hypnotise the masses.



    Modern exceptions like 50 Cent: Bulletproof and The Matrix are rare. Many products of a similar strain are stillborn every year. Mediocre titles can sell, as EA's modest profit growth can attest. But worn out stuff breeds cobwebs.



    On the other side, Gun was a marketing failure. I don't blame quality in that case.

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  • Peter_Skerritt

    Posted Dec 14, 2005 6:32 pm PT

    I can't say that I am shocked here. The reception to the latest Tony Hawk game has been lukewarm at best. The advent of the XBOX 360 has accelerated the irrelevance of new current-gen releases. True Crime: New York City was a failure. There weren't nearly as many XBOX 360 systems to fill demand, which in turn hurt game sales. It adds up to a very miserable picture for ATVI.

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  • avalach21

    Posted Dec 14, 2005 6:24 pm PT

    good, games like Gun and True Crime need to fail. That way these companies can see that people don't want to buy terrible crap. Let's make a few more tony hawks, not change a thing except the story and the levels, and sell it for 50 dollars. Someday, people will get sick of it.

    Now let's just hope the same happens to EA. It's not that I just want to see them fail, I want them to see that they need to put thought into their games and not just release yearly sequels that offer nothing new. These companies have the economic muscle, it's too bad that they don't use it properly.

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  • crazy_boy166

    Posted Dec 14, 2005 6:12 pm PT

    gee that sucks cuz l like alot quake on da pc and the others tony on xbox....pretty sad

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  • atomsoft

    Posted Dec 14, 2005 6:06 pm PT

    Too bad I hope this doesn't cause some huge set backs because they have a few good games that I wouldn't want to see dissappear

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  • monkeyman

    Posted Dec 14, 2005 6:00 pm PT

    This is distressing news, especially since Activision owns the place I work for.

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  • Donkeljohn 

    Posted Dec 14, 2005 5:55 pm PT

    Activision used to be consistent in releasing hugely popular games. Now they have a spotty track record. It is sad to see the old greats' edges dull.

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