WalkingCaptain (39.00)

The Gaming Industry Part II

August 05, 2010 – Comments (3) | RELATED TICKERS: ATVI , EA , NTDOY.PK

The Gaming Industry Part II: Activision Blizzard

 

Greetings Fellow Fools,

 

My first post in this series was a little jumbled considering the specificity of its title, so I decided for the rest of this series I would focus more on individual topics or companies. Today I was going to talk about Nintendo, however seeing all of the recent news and activity related to Activision Blizzard, I figured I could postpone my Mario Bros rant until next week.

Background

For those of you who missed my last post, I have been a Fool for a little while now, have several years of investing experience with roughly 1 class worth of financial education. I have been an avid gamer since I was three or four years old. I played lode runner on my dads IBM dos PC before I was really capable of laying down memories, and began playing Nintendo at the age of 3. I worked my way up to the Nintendo 64 from there, at which point I lost interest in consoles and moved on to PC gaming.

Earnings

Activision Blizzard is (I believe the largest) and most respectable gaming company in America. Electronic arts’ has some decent games, but they have little in comparison to the lineup of excellent titles provided by Activision or Blizzard for that matter. ATVI released earnings a few hours ago, and while profit met expectations, I guess revenue is a bit down, which sent the stock price down 75 cents after hours. While this is weak to those of us holding the stock, it is approaching what I consider a great buy price (below 10.50).

Economic Variables

With little experience or knowledge of finance or economics, it is hard for me to say what cyclical, currency, or industry-wide factors might influence the price of this stock, and all of these things should be considered in every full security analysis. My experience lies in direct game quality assessment. What I believe about Activision Blizzard is that they have an extraordinarily impressive lineup of games for the foreseeable future, leading me to the conclusion that they should either meet or beat Wall Street expectations of revenue and profit assuming relative stability in the various other economic factors which could affect this.

Blizzard

The first PC game I ever purchased was Warcraft II from the bargain bin at some gaming shop in 1999 or 2000. I knew nothing of the game, but it was cheap and looked cool, and it certainly was. I was excited for Warcraft III (although I ended up hating that game), and eventually also dabbled in every other Blizzard game released to date. Every single one of these games has been extremely popular; the original Starcraft still has an extremely large following particularly in Asia, almost any PC gamer knows of Diablo II, and DOTA, even though it is merely a modification of Warcraft 3.

Starcraft II

I discussed my optimism for the effects of Starcraft II in my last post, but now I have actually played the game, and I say that it met my expectations almost exactly. The single player campaign is above expectations, and the online multiplayer/ladder system is absolutely glorious. I have been missing class and work for the last week due to this game. I expect the company to figure out creative and obnoxious ways to convince me pay for more of this game, and I also expect it to work. I was slightly surprised by the early sales, but I also expect this game to continue selling for years to come, particularly when the price begins to drop to more traditional levels of 30-50 dollars.

Activision

The Call of Duty series is extremely successful because most of titles are extremely enjoyable to play. In addition, while they release purchasable map packs, they do not release expansion packs, which are the undoing of online multiplayer first person shooters. A simple example is that of the Battlefield series. I don’t really know how many people still play the battlefield games, but I purchased and played some of them, and they were great. The battlefield 1942 demo is what convinced me to build my first computer. But as soon as they released an expansion pack (which they always did), the community of players was immediately divided between those who had it and those who didn’t. This rift immediately lead to a decrease in the amount of servers to play on for each group, which lead to a spiraling decrease in both players online as well as servers to play on.

Lineup

Up next for these companies lies more content for Starcraft II, GoldenEye for the Wii, potential future developments in the Guitar Hero series, and at some point Diablo III as well as a potential new Massively Multiplayer Online Role Playing Game, to succeed World of Warcraft as the worlds most popular and profitable game in that category. As a gamer, these are the games which I am interested in seeing and playing (ok I don’t really care for Guitar Hero, but I felt I had to mention it somewhere here.) I expect these games to have sales on par with Starcraft II and Call of Duty Modern Warfare II.

Conclusion

So that’s a bit of what I have got to say about Activision Blizzard. If you have further questions/comments I will be periodically to see what you all have to say. Next week you can probably look forward to my rant about Nintendo, although something else may just push that back again. From this point forth, I hope to keep my posts as pointed as possible in terms of topics, if you have any advice on this, let me know.

 

-WalkingCaptain