Guitar Hero tops $2 billion, Activision Blizzard earns $981 million in Q1

May 7, 2009 1:50PM PDT

Rhythm franchise only third series to top lifetime-sales milestone; COD4 sales hit 13 million; World Tour, Lich King top multiplatform, PC charts for quarter; MMORPG revenues more than $100 million per month.

Whereas rivals THQ and Electronic Arts reported red ink this week, Activision Blizzard released earnings solidly in the black today. For the January-March quarter, the first of its fiscal year, the company exceeded its $860 million earnings target, as it predicted it would three weeks ago.

It's good to be the King.

The Santa Monica, California-based operation reported a whopping $981 million in net revenues for the quarter--nearly as much money as competitor THQ's entire annual income and archrival Electronic Arts' annual losses.

Year-on-year figures are not available, given that Activision Blizzard did not officially come into being until last July, but the company submitted now-defunct Vivendi Games' $325 million Q1 2008 for comparison's sake. Profit-wise, the company racked up $189 million in net income, more than quadruple the $43 million that Vivendi made in the same quarter the year prior.

Unsurprisingly, the Call of Duty, Guitar Hero, and World of Warcraft series were singled out as the quarters' big earners. Citing numbers from the NPD Group, Activision declared "Guitar Hero World Tour was the #1 best-selling third-party title in the U.S. across all platforms in dollars." (Emphasis added.) Sales of the rhythm franchise were also up 84 percent for the quarter in Europe, according to figures from UK-based research firm Charttrack and Germany-headquarted Gfk.

Unsurprisingly, World of Warcraft: Wrath of the Lich King was the number-one game for the quarter on the PC charts, according to NPD. A closer look at earnings numbers showed the impact of the World of Warcraft franchise on the company's bottom line. Massively multiplayer online role-playing game income for the quarter was $314 million, or more than $100 million per month.

After the earnings report, Activision executives held a conference call with analysts to talk more about its finances and game lineup. Highlights from the call are below:

--The company has $3.1 billion in cash on hand as of the end of the quarter, and is continuing to buy back stock.

--CFO and chief corporate officer Thomas Tippl said that reduced Guitar Hero hardware manufacturing costs will increase profit margins.

--Blizzard Entertainment will be ramping up its development costs during the rest of the year; MMORPG revenue will be an estimated 35 percent of earnings in the April-June quarter.

--The company will have 11 major releases in the back half of the year, as compared to eight last year.

--Activision president Mike Griffith said that the installed base of current-generation hardware in the US and Europe, including handhelds, to be 170 million units.

--Guitar Hero now commands 55 percent of the music-based game market in North America and Europe. "We took share from Rock Band in North America and Europe," claimed Griffith. Guitar Hero outsold Rock Band 10 to 1 in Europe, and "should improve" when GH: Metallica launches there next month.

--On rhythm games: "This is a genre retailers continue to disproportionately support."

--DJ Hero can be supplemented with a guitar. "It is an all-new interactive music experience that allows gamers to rule the party, delivering unique remixes and mash-ups created by professional DJs exclusively for the game."

--50 percent of likely buyers for DJ Hero are consumers who are not Guitar Hero owners.

--All Guitar Hero instruments will work with Band Hero, but the DJ Hero turntable will not.

--More than 35 million Guitar Hero games sold, and more than 40 million "professional songs" have been downloaded.

--Bizarre Creations' new racing game, Blur, is officially confirmed and will be on hand at E3.

--Griffith: "From a business perspective, we are targeting Blur to do for racing what Call of Duty did for shooters, and that was the goal when we acquired Bizarre Creations [in 2007] to make this game. "

-Call of Duty 4: Modern Warfare life-to-date sales now top 13 million, nearly as many as Grand Theft Auto IV.

--In the back half of the year, Activision is also "planning to release our reinvention of Tony Hawk with a very innovative and interactive game that lets consumers skateboard. Our goal was to reinvent this franchise where we engage a broad mass-market consumer, and we feel good about what this game can do."

--President and cofounder of Blizzard Entertainment, Mike Morhaime: "This summer we will beta-testing, this phase will signal the final stretch of development. During the Starcraft II beta test, we'll begin external testing of our new Battle.net, including some features that are designed to connect all future Blizzard games. This includes new tools that will make it easier for players to communicate with each other between games. We are also introducing a centralized system that would let players manage of all their Blizzard entertainment games and future games in one place without having to remember multiple sets of login information."

--This quarter, the Guitar Hero franchise surpassed the $2 billion mark in terms of sales, and "is only the third franchise in the history of gaming besides Super Mario and Madden to achieve that milestone," according to Griffith.

By Tor Thorsen