Activision Blizzard’s lead down to franchises and diversity
The video games industry is massive. In 2015, it was worth around $70 billion – compare that to the global recording industry’s $15 billion, or the global box office’s $38.3 billion, and it’s easy to see how video games are dramatically outpacing these older forms of entertainment. The video games industry is not done growing, either. Forecasts suggest it could increase to $90 billion by 2020, as it benefits from new technology (like virtual reality and artificial intelligence) and new business models that are enabled by this technology (like digital downloading and eSports).
Activision Blizzard’s share price is up an incredible 40% so far this year!
SOURCE: Yahoo Finance
Activision Blizzard is leading the pack when it comes to video game developers – although Electronic Arts and Take-Two Interactive are hot on its heels. One of the reasons that the company is staying out front is that it has reinvested its free cash, and made savvy mergers and acquisitions, to push product diversification. Another is that it manages its successful franchises incredibly well.
The company’s two biggest properties are Call of Duty and World of Warcraft. Both of these products, over their many iterations, have generated billions for Activision. And even though the latest installment of Call of Duty hasn’t gone down as well as hoped with the fans, it remains a hugely successful game: in 2016, it was the world’s number one console franchise. Both games count their players in the multi-million range.
Activision is beginning to push these franchises into other forms of entertainment, in a reversal of older trends. As early as the 1980s, popular franchises like Marvel Comic’s Spiderman and (back then) LucasArts’ Star Wars, were frequently pushed into the video game market. Today, video games are worth far more than comics and films, and it makes absolute sense that the intellectual properties that dominate the industry are rolled out in these other medias. This is part of a larger shift towards the primacy of video games in entertainment culture, which is likely only visible, first-hand, to Millennials and younger.
Activision’s first foray into this world, with a live-action, CGI-heavy World of Warcraft movie, was a lukewarm success. The film was panned by critics, and did poorly on the domestic market. But, worldwide, it grossed a respectable $440 million at the box office. Given its budget of $160 million, and the relatively new concept of turning a game into a movie, the company can rightly claim this as a success.
The company is also big in mobile, having purchased King Entertainment, the mobile games of which were worth more than $1.5 billion last year. Taken alongside its involvement in the industry’s high-potential nascent trends like eSports and virtual reality, it’s pretty clear to see how Activision Blizzard has already gone up by 40% this year – and it’s pretty easy to be optimistic about its future.
Dominion holds Activision Blizzard – as well as Electronic Arts and Take-Two Interactive – in its Global Trends Ecommerce Fund.
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