One of gaming’s biggest publishers is looking to make 2014 its biggest year ever.
Activision, the company responsible for Call of Duty, Skylanders, and Blizzard’s roster of PC titles, reported its earnings yesterday. The publisher beat expectations, and that has analysts excited for its future. In 2014, we’re gonna see more Call of Duty and Skylanders as well as expansions to some of Blizzard’s titles, but it’s the gaming giant’s new endeavors combined with its strong track record that has some industry observers predicting that Activision will go off the charts later this year.
“2014 is likely to be a record-setter,” R.W. Baird analyst wrote in a note regarding Activision. “We continue to view Activision’s second half of 2014 as potentially the largest in the company’s history.”
What makes Activision look so strong in 2014? Well, new installments from the aforementioned annual hits like Skylanders and Call of Duty are definitely in the works, but the company also plans to release Destiny, the latest game from the studio that created Halo.
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“Also important, Activision is beginning to push more aggressively into mobile and free-to-play,” said Sebastian. “[It is] leveraging core franchises with Blizzard’s upcoming Hearthstone [Heroes of Warcraft] title and the likely second-half release of Call of Duty Online in China.”
Hearthstone is out now in public beta, and Blizzard (a wholly owned subsidiary of Activision) expects to release the free-to-play online collectible card game later this year. Of course, that release date doesn’t really mean much because gamers can already spend money on the title to purchase more cards, and Blizzard has already begun advertising it.
Blizzard is also working on Heroes of the Storm, which is a multiplayer online battler similar to the extremely lucrative League of Legends. It will likely launch — at least in open testing — later this year.
Cowen & Company analyst Doug Creutz, who accurately predicted that World of Warcraft’s subscriber numbers would rebound during the last quarter, expects that the free-to-play Hearthstone and Heroes of the Storm will generate at least $100 million in revenue for 2014. In his “upside scenario,” Creutz thinks it’s even possible the new Blizzard titles could combine to generate $200 million.
“We believe Activision Blizzard is the best-managed company in the video game sector,” Creutz wrote in a note to investors. “We also believe that Blizzard is the single best, most consistent content-creation asset in our coverage universe. We also expect current cornerstone franchises Call of Duty, World of Warcraft, and Skylanders to continue generating strong revenue and operating profits for the next several years.”
Activision doesn’t have a lot else coming in the first half of 2014, so analysts expect Hearthstone, Heroes of the Storm, and the sales from back-catalog games to help the publisher pad its bottom line until it launches Destiny.
Bungie and Activision are working together now to launch the multiplayer shooter for Xbox One, PlayStation 4, Xbox 360, and PlayStation 3 on Sept. 9. In it, players team up to tackle an adventure cooperatively.
Preorders for Destiny are currently tracking at a record pace, according to Sebastian.
Destiny’s success isn’t guaranteed, but it’s also probably not a risky bet. Bungie has a history of releasing well-received blockbuster games in the Halo franchise. Activision, as both Creutz and MacQuarie analyst Ben Schachter have said, has one of the most well-respected management teams in all of gaming.
“We may need to wait a couple of quarters before finding out if Activision will deliver,” Schachter wrote in a note to investors. “Over the next few months and heading into E3 in June, we’ll be watching the traction of HearthStone, buzz around Destiny, [and] anticipation for the Blizzard expansions as well as general industry health.
“Last night’s [earnings report] was a good reminder of why this management team is considered the best in the business,” wrote Schachter. “Despite many industry and company-specific challenges in 2013, Activision managed expectations, executed against both its operational and financial plan, raised its dividend, and now heads into 2014 with a slate that could provide meaningful growth.”
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