Analyst questions annual franchises

Call of Duty and Assassin’s Creed may have proved that the annual release model can be a success outside of the sports genre, but analyst Michael Pachter has warned others about following the model.

"We question the strategy of annual franchises for any game except sports simulations," he said in a Wedbush Morgan note to investors. "While Activision has been enormously successful with the Call of Duty franchise, we think its success has been largely a function of its online multiplayer offering, with a network effect driving ever higher packaged product sales.

"We are not optimistic that others can replicate that formula, and think that a balance between the EA approach (games every two years) and the Take-Two approach (games every six years) is appropriate.

"It is important to point out that Take-Two has not intentionally brought games out slower than the others, but rather is laser focused on game quality, and its internal studios have delivered phenomenal results. We still think that if Take-Two were able to deliver its key franchises every three or four years instead of every five or six, its share price would appreciate dramatically."

But despite the Call of Duty success, Pachter still foresees potential troubles for the company.

"We continue to believe that Activision shares will be range-bound until the company is able to demonstrate that it can deliver significant profits outside of its Call of Duty and Blizzard businesses," he outlined.

"The company’s Skylander products are promising for this holiday, but we think that the target market (10 and under boys) is relatively small, suggesting only a modest profit contribution."