Activision Blizzard’s second quarter earnings were better than expected thanks to good sales of a diverse game line-up in a seasonally weak quarter.
But the Santa Monica, Calif.-based game company — one of the biggest independent game publishers — dropped a big bomb. It said that Starcraft II, in the works for more than a decade, won’t ship this year as expected. The company shaved $300 million from its 2009 revenue guidance, with sales now targeted at $4.5 billion.
The pattern among game compaines is becoming familiar. Electronic Arts also beat earnings estimates for the second quarter. But Activision Blizzard joins a number of companies that have delayed titles for the fall. Ubisoft has postponed a big Splinter Cell game, and Take-Two Interactive delayed BioShock 2.
The company also offered fairly weak third quarter guidance of 3 cents a share for earnings and $700 million in adjusted revenue. That reflects the slow economy to some extent. The second quarter saw three big movie game releases. During the quarter, the company released X-Men Origins, Transformers: Revenge of the Fallen, and Ice Age: Dawn of the Dinosaurs. It also launched Prototype, an action combat game, and saw gains with its perennial hit, World of Warcraft. Guitar Hero World Tour and Wolverine also sold well.
Activision Blizzard was formed in July 2008 by a merger of Activision and the game business of Vivendi. Activision Blizzard’s earns were $195 million, or 15 cents a share, compared with $28 million, or 5 cents a share a year earlier. Not counting deferred revenues, earnings per share were 8 cents, down from 14 cents a year ago. Revenue nearly tripled to $801 million, adjusted for deferred revenues. EA actually reported $816 million in the quarter, so it surpassed Activision Blizzard in terms of revenues.
In May, Activision Blizzard projected it would report six cents a share and revenue of $775 million. Besides delaying Starcraft II, the company also postponed the release of a new original game, Singularity, to the first quarter of 2010. Mike Morhaime, head of Blizzard, said on the company’s conference call that the original Starcraft is still No. 3 in online games in Korea, 10 years after its release.
Morhaime said the online game service that accompanies Starcraft II, Battle.net, is not ready. That service is being revamped so it serves only as an online game arena, but also as a social network. The company is investing heavily in the service so that it can host a number of Blizzard games.
The company delayed that game so it won’t compete with a game that’s on schedule: Call of Duty: Modern Warfare 2. Modern Warfare 2, which has the largest preorders in Activision Blizzard’s history, will ship Oct. 10. A special edition of the game will include a pair of night-vision goggles. Modern Warfare 2 won a heap of awards at the recent E3 game conference in June.
Bobby Kotick, chief executive of Activision Blizzard, said that the game industry is coalescing around big titles with a lot of marketing muscle behind them. He said the company is fortunate to have a lot of those titles. Other big games coming this year are Tony Hawk Ride, which comes with a skateboard peripheral; superhero game Marvel Ultimate Alliance, Guitar Hero 5; kids fighting game Bakugon; the racing game Blur; DJ Hero, which comes with a turntable peripheral; and a new version of the first-person shooter game Wolfenstein.
Meanwhile, Blizzard is awaiting the green light to restart its World of Warcraft online game in China. The game has been offline since June as Blizzard moves the game from its Chinese operator The9 to Netease and tries to deal with objections to the game from the Chinese government at the same time. Hollywood director Sam Raimi, the company announced earlier, is working on a World of Warcraft movie.
In 2010, Activision Blizzard will release new games based on the James Bond franchise, Spider-Man, Tony Hawk, Guitar Hero and Shrek 4.