Activision's New StarCraft II Pack

Activision Blizzard Inc. (ATVI - Snapshot Report) is set to release its new StarCraft II: Heart of the Swarm expansion pack on Mar 12, 2013. To commemorate the release, Activision will host events around the US, France, Australia, South Korea, Singapore, Taiwan, Russia, Brazil, and Mexico beginning Mar 11.

In the US, the event will be co-hosted by Activision Blizzard and its retail partner GameStop Corp (GME - Analyst Report). Players attending the events will be able to grab their expansion copies for $39.99 (Standard edition) and $79.99 (collector’s edition) at the stroke of midnight.

Activision will stream the launch events live, scheduled to be held in Australia, South Korea, France, and the US. Besides demonstrating the key features of the new expansion pack, the streaming will also include additional exclusive video content from StarCraft II Community, and “King of the Beta” tournament matches between top professional gamers that will be played at Blizzard’s headquarters.

StarCraft has been a hit franchise for Activision over the years. The original version won critical acclaim as one of the top real-time strategy games of all time. StarCraft II: Wings of Liberty was released on Jul, 2010 and sold more than 1.5 million copies within the first 48 hours of its launch, thereby making it the fastest-selling strategy game of all time.

StarCraft II: Heart of the Swarm is a sequel to the critically acclaimed Wings of Liberty and is the second part of the StarCraft II trilogy. StarCraft II centers on the clash between the protoss, terrans, and zerg. The new expansion pack has an attractive storyline that follows the adventures of former zerg Queen of Blade Sarah Kerrigan and the development of a zerg empire.

StarCraft II: Heart of the Swarm comprises new multiplayer units for all the three races. The pack includes 20 campaign missions, new upgraded weapons, group and clan systems, unranked matchmaking and global play capabilities that allow players to fight each other in different regions around the world. The pack also adds new multiplayer maps, which is an additional attraction.

We believe that the new expansion pack (which is releasing after a gap of two years) will drive significant top-line growth for Activision due to pent-up demand. However, we also believe that the game faces significant competition from Electronic Arts' (EA - Analyst Report) recently released Mass Effect 3 downloadable contents (DLCs) and Crysis 3.

Moreover, the cannibalizing effect of free-to-play games from EA and Zynga (ZNGA - Snapshot Report) is a major concern for Activision going forward. Additionally, volatile macroeconomic environment, uncertainty related to the console transition and tough year-over-year comparisons are the other headwinds.

We believe that the continued softness in video game industry retail sales, limited presence in the mobile and social gaming segment and increasing investments in new products will continue to hurt Activision’s profitability in the near term.

Currently, Activision Blizzard has a Zacks Rank #5 (Strong Sell).