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Activision Renounces Destiny Publishing Rights, Stock Down
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Activision Blizzard recently ended its partnership and ceded publishing rights of the Destiny franchise to Bungie, its developer. Following the news, shares of the company slumped 9.4% in the last two trading sessions.
Destiny was the first title to be released (Sep 9, 2014) under Activision-Bungie’s 10-year deal. In fact, Destiny holds the record for being the biggest franchise launch, having earned more than $500 million in just a day after its release. Moreover, Destiny 2, which was released in 2017, was the second-highest selling console game in North America.
Notably, post the split from the Destiny Franchise, Activision will no longer be recognizing any material revenues from the game in 2019. Per reports, losing the franchise is expected to cost the company between $300 and $400 million in revenues in 2019.
Reasons Cited for the Split
Activision has been known for abandoning its popular franchises before they become an overhang for the company. Such franchises include Guitar Hero and the Tony Hawk franchise.
Although Destiny’s Forsaken attributed to Activision’s monthly active users’ growth, 46 million monthly active users (MAUs), up 2.2% sequentially, the game failed to match the company’s expectation and enhance user engagement levels.
Reportedly, as Bungie was entitled to 20-35% of operating profits plus bonuses from Destiny, Activision’s bottom line took a toll. Moreover, as Bungie owned Intellectual Property right (IP) for Destiny, capitalizing on game-related merchandise would have been difficult for the company.
Per reports from The Wall Street Journal, Destiny is anticipated to have garnered $370 million in total revenues for 2018. The game was ranked fifth, in terms of revenues, among the company’s other popular franchises including Overwatch and Call of Duty, reflecting the overall decline of the game.
However, losing Destiny will make the company more dependent on its handful of franchises in the near-term, namely Call of Duty, World of Warcraft, Skylanders, Overwatch and King Digital’s Candy Crush that make up over 70% of its revenues.
King’s average MAU witnessed a year-over-year decline due to the inability of Candy Crush to boost user engagement level. Moreover, Blizzard too witnessed a year-over-year decline in MAUs, primarily for Hearthstone and Overwatch.
Declining bookings and MAUs are expected to drastically hurt Activision’s financial performance. Moreover, intensifying competition from the likes of Electronic Arts (EA - Free Report) and Take-Two Interactive (TTWO - Free Report) is also expected to negatively impact growth.
However, Call of Duty franchise is one of the biggest growth drivers for Activision. The latest title, Call of Duty: Black Ops 4, instantly became a hit as it generated record digital sales on the first day of release in the company’s history.
Additionally, Activision is using growth of the e-sports industry to its benefit. Notably, Overwatch League drew more than 10 million viewers in the opening week. The company also has multi-year deals with Disney (DIS - Free Report) and Twitter to live stream its e-sports league.
Given the company’s strong slate of releases including Crash Team Racing Nitro-Fueled, and Rastakhan’s Rumble, a robust product portfolio and foray into e-sports are expected to fuel growth.
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Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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Activision Renounces Destiny Publishing Rights, Stock Down
Activision Blizzard recently ended its partnership and ceded publishing rights of the Destiny franchise to Bungie, its developer. Following the news, shares of the company slumped 9.4% in the last two trading sessions.
Destiny was the first title to be released (Sep 9, 2014) under Activision-Bungie’s 10-year deal. In fact, Destiny holds the record for being the biggest franchise launch, having earned more than $500 million in just a day after its release. Moreover, Destiny 2, which was released in 2017, was the second-highest selling console game in North America.
Notably, post the split from the Destiny Franchise, Activision will no longer be recognizing any material revenues from the game in 2019. Per reports, losing the franchise is expected to cost the company between $300 and $400 million in revenues in 2019.
Reasons Cited for the Split
Activision has been known for abandoning its popular franchises before they become an overhang for the company. Such franchises include Guitar Hero and the Tony Hawk franchise.
Although Destiny’s Forsaken attributed to Activision’s monthly active users’ growth, 46 million monthly active users (MAUs), up 2.2% sequentially, the game failed to match the company’s expectation and enhance user engagement levels.
Reportedly, as Bungie was entitled to 20-35% of operating profits plus bonuses from Destiny, Activision’s bottom line took a toll. Moreover, as Bungie owned Intellectual Property right (IP) for Destiny, capitalizing on game-related merchandise would have been difficult for the company.
Per reports from The Wall Street Journal, Destiny is anticipated to have garnered $370 million in total revenues for 2018. The game was ranked fifth, in terms of revenues, among the company’s other popular franchises including Overwatch and Call of Duty, reflecting the overall decline of the game.
Activision Blizzard, Inc Price and Consensus
Activision Blizzard, Inc Price and Consensus | Activision Blizzard, Inc Quote
Can Other Popular Franchises Aid Activision?
However, losing Destiny will make the company more dependent on its handful of franchises in the near-term, namely Call of Duty, World of Warcraft, Skylanders, Overwatch and King Digital’s Candy Crush that make up over 70% of its revenues.
King’s average MAU witnessed a year-over-year decline due to the inability of Candy Crush to boost user engagement level. Moreover, Blizzard too witnessed a year-over-year decline in MAUs, primarily for Hearthstone and Overwatch.
Declining bookings and MAUs are expected to drastically hurt Activision’s financial performance. Moreover, intensifying competition from the likes of Electronic Arts (EA - Free Report) and Take-Two Interactive (TTWO - Free Report) is also expected to negatively impact growth.
However, Call of Duty franchise is one of the biggest growth drivers for Activision. The latest title, Call of Duty: Black Ops 4, instantly became a hit as it generated record digital sales on the first day of release in the company’s history.
Additionally, Activision is using growth of the e-sports industry to its benefit. Notably, Overwatch League drew more than 10 million viewers in the opening week. The company also has multi-year deals with Disney (DIS - Free Report) and Twitter to live stream its e-sports league.
Given the company’s strong slate of releases including Crash Team Racing Nitro-Fueled, and Rastakhan’s Rumble, a robust product portfolio and foray into e-sports are expected to fuel growth.
Activision currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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