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Activision Unveils New Expansion Pack

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Activision Blizzard (ATVI - Free Report) recently unveiled a new expansion pack for its popular role playing game Diablo III called Reaper of Souls. However, Activision did not provide the exact release date. We believe that the new expansion pack will further boost Diablo III’s popularity in the near term.

The pack introduces a new class of warriors in the game known as “The Crusader” and brings back Malthael as the antagonist. Reaper of Souls increases the game’s level cap to 70, features new adventures and two absolutely new game modes called Loot Runs and Nephalem Trials.

Originally released for Windows and Apple’s (AAPL - Free Report) Macintosh operating systems in May 2012, Diablo III received tremendous response from gamers, making it the fastest-selling PC game of all times.

Activision is set to release Diablo III on Sony’s (SNE - Free Report) PlayStation 3 as well as on Microsoft’s Xbox 360 entertainment system on Sep 3. Both the console versions will be priced at $59.99 and are expected to release in the U.S., Canada, Spanish-speaking Latin America, Europe, Australia, and New Zealand.

However, Activision announced that the game will not be available on the upcoming console PlayStation 4 from Sony until 2014. The company also did not provide any details about the availability of the game on Microsoft’s (MSFT - Free Report) Xbox One.

We believe that Activision will continue to release downloadable contents (“DLCs”) and expansion packs for its major franchises. Since the DLCs and expansion packs offer new content, they help aging gaming franchises such as Diablo and Call of Duty to remain fresh for a long time.

Another major benefit of these expansion packs is their cost effectiveness. The content packs are mostly delivered online, which cost less than the traditional physical format, as they require minimum packaging cost. This low-cost feature will not only attract more customers but will also drive Activision’s profitability over the long term.

Activision is expected to benefit from its strong product pipeline in 2013. The upcoming release of its blockbuster franchise Call of Duty: Ghosts presents a significant growth opportunity in the upcoming holiday season. Going forward, the higher mix of digital revenues is expected to help margins as well.

Currently, Activision Blizzard has a Zacks Rank #1 (Strong Buy).

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