Activision-Blizzard (ATVI) has got to be one of my favorite stocks. It is partially because I can understand the stock really well. Video games are something I have been dealing with for a long time, but the company really gives me a lot of reason to love it.
Nostalgia!
The games are just fantastic. The most recent rundown for the last year is Call of Duty: Modern Warfare 3, Diablo 3, and Call of Duty: Black Ops 2. All three of these games were fantastic. Diablo is the longer lived product. Blizzard has 3 intellectual properties, but they are some of the most valuable in the entire industry. StarCraft, WarCraft, and Diablo are iconic game franchises. I remember when StarCraft first came out. It was the newest IP for Blizzard. They really have not done much else, but all their games are beyond top-notch.
Nonstop delays are due to extensive testing and reworking. You’ll never have a THQ (THQI) or Paradox style release. Both those companies have their reasons. Development almost drives them into bankruptcy and if they had Blizzard’s release schedule it would destroy them in only 1 game. So I am not too harsh on them, but to a certain extent you need polished games to make good revenue. THQI avoided rushing a product somewhat, though Darksiders 2 does come off as a tad forced.
The Activision side of ATVI puts games out much faster, and the quality of these has increased dramatically. Not just the polish but the success. The Call of Duty games are insanely popular. I mean all of them are turning into massive hits. Calling them one brand is ridiculous, as the only thing they have in common is some mechanics and the fact that they are all first person shooters. They rake in so much cash.
There are lots of cool games coming down the line on the Blizzard side. Well two that I know of. The next two StarCraft installments. I have been waiting forever to get those. I can’t believe it would take this long when the engine is already up and running, but I know all the games play different so I’ll trust the company. I am sure there is a new Modern Warfare game in the works too.
I just know that the company has a few good catalysts for the next year, and Black Ops 2 is not even done earning money for the company. However, there are a few things that concern me. While I do not think this will affect the company performance in the short-term it is a somewhat worrying trend.
Activision-Blizzard is a massive company, and the second largest by revenue after Nintendo. The recent trend though has been towards consolidation, which might sound like a good thing. However, what I mean is that the company has been shutting down and cutting out studios. I know that these games have not been blockbusters but not every game can be a Diablo or Call of Duty.
I am concerned that these excellent but niche games will be cut in favor of these broad appeal games. It would be like if story-based gaming gave way to MMORPGs. Thankfully there was a backlash against the proliferation of crappy MMORPGs and not every studio is going after one, though there are quite a few in the works.
So maybe the backlash will happen, and maybe this consolidation is necessary, but I still worry. After Prototype 2 did just okay ATVI just shut down the studio. Now if the game was not profitable at all then I can understand that. However, it was considered to be of good quality though not as good as the first.
This is a pretty minor concern that I am keeping an eye on. It is just that I have not seen any new strong IPs built. I want to see more lucrative gaming lines, because that is how video game companies expand. I do not just want another sequel or another expansion to World of WarCraft. I also do not want Call of Duty: Soviet War or something like that. If they keep trying to pump that well pretty soon you’re going to end up with Call of Duty: 1000 Year Reich, where you play the Nazi’s leading to a giant public relations issue.
So yes, the company will earn and earn. For the next few years it is a strong company, and if you invest in one video game company go with this one. It offers a dividend, and has some strong products. However, you can’t keep milking the same franchise, though it helps if you always release quality. More solid IPs have to be impending. Management liked Skylanders so maybe that will be good, but I don’t even know what that is.
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