Activision's Revenues Mostly Based Upon Three Properties

By Brian Leahy, Mar 02, 2010 3:30pm PST Inside the same SEC filing that included information about an investigation into "breaches of contract and insubordination by two senior employees at Infinity Ward", Kotaku noticed an interesting bit of information about Activision Blizzard's 2009 profits.

A significant portion of our revenues has historically been derived from products based on a relatively small number of popular franchises and these products are responsible for a disproportionately high percentage of our profits. For example, our top three franchises, Call of Duty, Guitar Hero, and World of Warcraft, accounted for approximately 68% of our net revenues for the year ended December 31, 2009.

That is a large amount to be spread across so few properties. In fact, Activision just made some major cuts, some of which hit studios involved in the Guitar Hero franchise.

Activision, of course, recognizes the risk involved here stating, "due to this dependence on a limited number of franchises, the failure to achieve anticipated results by one or more products based on these franchises may significantly harm our business."

Interestingly, but not surprisingly, World of Warcraft has accounted for 98% of Blizzard's net revenue in 2009 and 97% in 2008 and 2007. This should change with StarCraft II: Wings of Liberty on track for a mid-year 2010 release.

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  • Obviously this isn't a perfect analogy (please don't hurt me Fred Garvin) but movies, music and games are hit-driven industries where the hits pay for the misses. So you come out with a bunch of products (albums, movies, games) knowing that a good chunk of them will fail but some of them will break even and make money and a very small number of them will be knock-it-out-of-the-park successful.

    Hollywood makes dozens of shitty movies for every Avatar.

    The recording industry releases dozens of shitty albums for every Appetite for Destruction.

    Activision, however, apparently has decided (and this is supported by Kotick) that only the games which can be guaranteed to make money will be made. They only want COD, GH and WoW. They famously cut several games a while back, including Ghostbusters, and only want the games which are 100% guaranteed.

    What I wonder is - is this a good strategy? Is it doomed to fail long term? Or are they shoring up for something down the line?

    It could be that they see this as a good strategy. Gamers don't seem to be tiring of WoW and COD6 and even though GH has slowed down it's still making money. Of course it could be a bad long term strategy since eventually gamers will get sick of all of these. Even though Hollywood still makes James Bond movies they've had several lulls in there. Of course, it could be bad long term but will take so long that Kotick will have retired on a pile of money and what the fuck does he care any more?

    However, Devil's Advocate, could they be shoring up for a long term strategy? Maybe once they have a shit ton of money in the bank they could take risks again. Maybe they could come out with the games they used to. Maybe I'm giving them too much credit here.

    Thing is, this isn't an industry where there's hundreds of years of history to fall back on, there's a few decades at most. Activision is amongst a handful of the largest companies and they're amongst the first to be so huge and last so long (i.e., Atari may have been bigger back in its heyday but they didn't last). We all want to point and say "this is a bad idea, you'll see" but the fact is we don't know, for all we know Activision could make it work. The average football gamer has no idea who worked on Madden 2010 and they don't care, they just buy it. Every single year. I'm not sure if they even criticize it. The average gamer will probably also buy every CoD game as it comes out (see: the "boycotters" and what they were playing on COD6's release day) and not care who made it.

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