Activision Blizzard: breaking records and beating estimates in 2016
At the end of last week, world-renowned video game developer Activision Blizzard released fourth quarter and full year results for 2016 that easily beat expectations and smashed the records it had previously set for itself. Unsurprisingly, the company’s share price surged on the news, bringing its year-to-date performance to 31%. Not bad for the second week of February!
Activision Blizzard gained 19% last week alone!
As of 13 February 2017 47.34
SOURCE: Yahoo Finance
For the whole year, Activision Blizzard reported an impressive net revenue figure of $6.61 billion – this is a massive 42% up from 2015. And the fourth quarter was even better in isolation: the company reported $2.01 billion for the last three months of 2016 against $1.35 billion in the previous year. This is an increase of 49% - and it’s also an all-time record for fourth quarter revenue.
Fourth quarter revenue isn’t the only record the company broke, either. In the fourth quarter of 2016, net revenues from digital channels rose by an incredible 101% from the same period in 2015. This money comes from downloadable content and online playtime, which makes it particularly important to the company. Gaming is evolving at breakneck speed, and these digital revenues are a major part of it: digital downloads let consumers get hold of games quicker, and they cut out the middlemen with whom game developers (used to) share profit.
Digital channels also let developers turn what was previously a single sale (of a video game on disk or cartridge) into a subscription-based service, where people pay-to-play, and purchase ‘in-game’ benefits (such as new weapons or clothing) with real-world money.
Other stand out results from the fourth quarter include an increase of 57% in earnings per share (against an increase of 8% for the whole of 2016), and a 71% rise in operating cash flow for the year, both against the same period a year ago.
Speaking to this incredible success, Activision Blizzard’s CEO, Bobby Kotick, was straightforward and confident: “Our record performance in 2016 further strengthened our position as the world’s leading standalone interactive entertainment company. For the quarter and the year, we delivered our highest revenues, non-GAAP redefined operating margins and earnings per share, well surpassing our own expectations.”
He also had some positive news for gamers and investors alike, when looking to the future, saying: “The launch of Blizzard’s Overwatch® created a major new franchise, while King’s mobile advertising tests are very promising as the basis for meaningful new revenue streams. We accelerated our efforts in esports and consumer products, enabling more ways to celebrate and connect to our communities. Thanks to the strength of our established franchises and the vitality of our new initiatives, we are well positioned for growth in the years ahead.”
Activision Blizzard remains one of the world’s biggest and best game developers. It’s at the forefront of two of the biggest trends in modern gaming (the move to digital channels, and the yet-to-be realised impact of esports), and almost every fact about the company is staggering (such as its incredible 447 million monthly active users in 4Q2016). The company’s flagship title, Call of Duty, might be showing its age – but it has so many huge properties in its portfolio (not to mention a proven ability to repeatedly innovate said title) that this hardly seems to be an issue.
Ultimately, last year’s results leave absolutely no doubt that Activision Blizzard is outperforming its rivals – and that it looks set to continue its strong run throughout 2017.
Dominion holds Activision Blizzard in its Global Trends Ecommerce Fund.
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