Activision has begun to slip

In a damning assessment of Activision’s quarterly financial report, analyst Michael Pachter has claimed that he fears Activision has begun to slip a bit” and that November’s Call of Duty: Black Ops will fail to match the performance of last year’s global hit Modern Warfare 2.

The Q2 results were not particularly impressive,” Pachter stated. Most Q2 releases all underperformed expectations (Blur, Shrek Forever After and Singularity were all weak); Transformers: The War for Cybertron sold in line with our estimates.

The Q2 results reinforce Activision’s dependence on a handful of franchises, and calls into question whether its future franchises will contribute meaningfully to the bottom line as performance of additional IP seems uncertain at best

We were somewhat troubled by the shift in release date for True Crime. After going four years without a meaningful title slip, Activision slipped two titles last year, Blur and Singularity, for the same reason: the company wanted to give the developers more time to polish the games. Neither sold well in Q2, and it does not appear that either will have a second wind later in the year. The last version of True Crime was a flop, and it is far from certain that the new version will be successful.

We fear that after so many years of near-flawless execution, Activision has begun to slip a bit, perhaps in the process becoming overly reliant on the parts of the business that are phenomenally successful.”

And despite Activision’s enthusiastic assurances about Call of Duty: Black Ops, Pachter remains unconvinced that it will deliver as expected.

We have doubts that Black Ops can repeat the success of Modern Warfare 2, as this year’s game faces stiff competition from EA’s Medal of Honor and Bungie’s Halo Reach,” he added.

In our view, the three games combined will sell at least 25-35 per cent more units than Modern Warfare 2, suggesting total holiday sales of around 25m. However, it is not clear that Black Ops will capture more than 50 per cent market share, placing upside at risk.”

What Pachter’s more certain of, however, is that Activision is planning a premium online multiplayer model for Black Ops – and that the announcement isn’t far off.

We continue to believe that Activision could grow earnings by monetizing Modern Warfare 2 online multiplayer. We expect the company to announce plans to monetise online multiplayer content in MW Black Ops, StarCraft II and other games before year-end.”

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