When it comes to making cool video games, Activision Blizzard aims to be sub-zero. The #2 global video game publisher (#1 in consoles and handheld games in the US) is best known for industry-dominating franchises such as World of Warcraft from Blizzard Entertainment, and Call of Duty through Activision. The latter division also makes games based on licensed properties from Marvel (Spider-Man and X-Men), DreamWorks Animation (Shrek), MGM and the UK's EON Productions (James Bond), Hasbro (Transformers), as well as professional skateboarder Tony Hawk. Its games are produced for console systems and handheld devices from Sony, Microsoft, and Nintendo, as well as for PC and mobile phones and tablets.
Activision Blizzard is moving away from casual and music-based games, and -- like many of its competitors -- continuing to publish fewer, more focused titles, as fewer titles dominate more of both the company's and total industry sales. The top 10 titles in the industry accounted for more than a quarter of all sales in 2011, up from 23% in 2010. More than 60% of Activision Blizzard's sales came from just two franchises in 2010 -- genre dominators subscription-based massively-multiplayer online role-playing game (MMORPG) World of Warcraft (WoW) and military-focused first-person shooter Call of Duty (CoD). By the end of 2011, those two, along with the newly introduced Skylanders Spyro's Adventure, accounted for nearly three-quarters of Activision Blizzard's total sales. This new reality has meant the cancellation of even once-hit franchise Guitar Hero, as the popularity of that genre has faded.
Despite the move to streamline its catalog, the company's strategy still includes acquiring and creating franchises, as the introduction of Skylanders attests, but in tandem with a disciplined selection and development rigor with an eye to enhancing operating profit and revenue predictability. Skylanders incorporates the use of toys, offering an extra revenue stream. That propelled it to being a top-ten selling game and #1 selling kids' game in dollars during the quarter of its release in North America and Europe. It was the #10 best-selling title overall in dollars for the year.
CoD installment Black Ops, released in 2010, was the top-selling video game in the US that year, raking in more than $1 billion in worldwide sales. The series' Modern Warfare 3 (MW3), launched in November 2011, pulled in $775 million in its first five days, driving it to be the #1 best-selling game of 2011 in dollars, while Black Ops came in at #5. MW3 went on to surpass $1 billion in sales in 16 days, the fastest of any entertainment property, breaking the 17-day record held by the Twentieth Century Fox movie Avatar. Activision also produces subsequent downloadable content for current CoD games, initially releasing them on Microsoft's Xbox Live, and later on other platforms.
Both Activision's CoD and Blizzard's WoW depend on a robust social gaming community for their success, so maintaining and enhancing that aspect is also a core component of the company's strategy.
The most current installments in Blizzard's two current franchises, World of Warcraft: Cataclysm and Starcraft II: Wings of Liberty (both released in 2010), were both top-ten PC titles in North America and Europe for 2011. That partially made up for the lack of any new releases from the company that year, but total revenues for Blizzard still fell 25%. The company's third franchise, Diablo, is yet another popular and critically acclaimed series. The first and most recent sequel, Diablo II, was released back in 2000, but the third installment is nearing completion and is targeted for release in the first half of 2012.
Those are Blizzard's three currently active franchises, but it has talked about a fourth game it is developing, a casual online multiplayer project reportedly given the working title Titan. The company announced in 2012 that it was laying off 600 employees, about 10% coming from active game development. The company was quick to reassure, though, that the cuts would not knock current projects off track.
In 2010 Activision established a 10-year partnership with Bungie, Inc., the creators of the mega-hit franchise Halo, for exclusive rights to distribute and publish all games based on a new, future property from the developer.
Another major industry trend affecting Activision Blizzard's business model is the escalation of online connectivity speeds and the proliferation of connected devices. The increasingly connected world continues to cause the digital distribution of its software to replace physical, disc-based distribution. Digital online revenues increased nearly 15% in 2011 and are now more than a third of sales at more than $1.5 billion. Activision Blizzard expects this trend to continue.
Like many major video game publishers, Activision Blizzard also maintains a distribution business that provides warehousing, logistical, and distribution services for its own games as well as for third-party publishers. The company's distribution operations are focused on European markets. – less