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Activision financials: Revenue at $4.8 billion, major franchise cuts include Guitar Hero and True Crime

Wednesday, 9th February 2011 21:33 GMT By Stephany Nunneley

Activision has posted its annual earnings and earnings forQ4 2010, while confirming earlier reports it has canceled the Guitar Hero series and True Crime: Hong Kong.

What happened?

The Guitar Hero business disbanded and 2011′s game canned.

True Crime canned.

Around 500 staff laid off.

First Strike Black Ops DLC hitting PS3 on March 3.

No Blizzard release this year, but two coming in 2012.

No Acti music or skateboarding games in 2011.

Beachhead studio formed to work on CoD digital content.

According to CEO Bobby Kotick: “Due to continued declines in the music genre, the company will disband Activision Publishing’s Guitar Hero business unit and discontinue development on its Guitar Hero game for 2011. The company also will stop development on True Crime: Hong Kong. These decisions are based on the desire to focus on the greatest opportunities that the company currently has to create the world’s best interactive entertainment experiences.”

Year end and Q4 financials

Activision Blizzard reported results well above Wall Street’s expectations. Net revenues came in at $4.80 billion, compared with $4.78 billion in 2009. Revenues from digital channels for the calendar year were more than $1.5 billion, an increase of more than 20 percent year-over-year.

For the fourth quarter ending December 31, net revenue came in at $2.55 billion, compared to the same period in 2009, when it reported revenues of $2.50 billion. Revenues from digital channels for the quarter were more than $470 million, an increase of 40 percent year-over-year.

Analysts expected revenue of $2.2 billion, and given Activision’s conservative nature, its 2011 guidance may be “slightly below” investors’ current expectations.

Such a boon in revenue and earnings can attributed to strong sales for Call of Duty: Black Ops, a game which sold over $1 billion in its first six weeks at retail. Analysts expected 20 million copies of Black Ops to be moved during the quarter, but it looks like that figure may be a lot higher.

“Because of focus and disciplined execution, 2010 was another extraordinary year for Activision Blizzard,” he said. “We made some of the best games we have ever made in over 30 years of being in the interactive entertainment business. We benefited from new content releases for two of the world’s most successful online entertainment franchises: Activision Publishing’s Call of Duty: Black Ops and Blizzard Entertainment’s World of Warcraft: Cataclysm, a new installment in the world’s largest subscription-based massively multiplayer online role-playing game.

“During the year, we grew our net revenues, delivered record earnings, achieved record GAAP and non-GAAP operating margins of 11 percent and 29 percent, respectively, and generated $1.4 billion in operating cash flow.

“The amount of players online with Black Ops is equal to the number of Netflix subs.” – Kotick.

“Activision Blizzard’s key franchises have larger audience bases than ever before and we continue to see significantly enhanced user activity and engagement for our expanding online communities. Our revenues from digital channels, which now account for over 30 percent of our overall revenues, were driven by increased sales of Activision Publishing’s Call of Duty map packs and value-added services for Blizzard Entertainment’s World of Warcraft.

“Notably, since Call of Duty: Black Ops was launched in November players have spent an average of 52 minutes per day playing online, roughly equivalent to the 55 minutes that the average user spends each day on Facebook. As of February 2, 2011, more than 27 million gamers have played Call of Duty games online, logging more than 2 billion hours, or the equivalent of more than 229,000 years of gameplay.”

The company plans to buy back stock as well, which will see it repurchase up to $1.5 billion in outstanding common stock.

No new releases for Blizzard in 2011

CFO Thomas Tippl said during the financial call to investors, that the company’s outlook of 2011 does not include a new Blizzard game, but instead expects the developer to release two titles in 2012 – possibly the new MMO and Diablo III – but no one would confirm which titles when asked by numerous analysts on the call. Blizzard is good for one major release a year, it was explained, and the firm wanted to wait on a Diablo III release this year, because quality matters to Blizzard above anything else. If the game happened to release this year, it would be because Blizzard believed it to be ready, but don’t expect it.

Development on Diablo III is going well, but until it goes into beta, a release date will not be locked in. No date is set, because there isn’t one.

Mike Morhaime, president and a co-founder of Blizzard, said net income was $850 million for the developer this year. While he would not go into detail on the difference between digital and retail sales of Cataclysm, retail carried “the lion’s share,” of sales.

“Our outlook for 2011 does not include a new Blizzard game, but two titles are expected in 2012.” – Tippl.

StarCraft II is approaching 4.5 million units sold worldwide, and over 150, 000 maps have been uploaded onto Battle.net. Information on Heart of the Swarm, the first of three planned expansions for the game, is coming in the next few months, and information on the beta will appear in the next financial call.

“Blizzard significantly evolved its direct digital distribution capabilities with the launch of its new Battle.net service and saw players embrace its service offerings in record numbers,” said CEO Bobby Kotick.

The cancellation of the Guitar Hero series and True Crime

CFO Thomas Tippl said the firm does not plan to release any new music or skateboarding games in 2011, and due to the cancellation of True Crime: Hong Kong, along with the Guitar Hero and DJ Hero series, it would result in the loss of about 500 out of 7000 positions at Activision Publishing which is roughly 4 percent of sector’s total workforce. However, Tippl said due to the firm heavily investing in Blizzard and Call of Duty, “net head count at end of year is probably not going to be materially different.”

Business Highlights

Blizzard just turned 20 years old. A lot of same employees still work there.

Cataclysm has sold through more than 4.7 million copies in its first month and has more than 12 millions subs.

Black Ops was the first game to surpass $650 million in sales during its first five days. To date, the game has achieved more than $1 billion in retail sales worldwide.

Total unique Black Ops players increased by more than 49 percent over the number of players of Modern Warfare for the first three months after each game’s release.

Black Ops: First Strike set XBL records with more than 1.4 million downloads in first 24 hours, an increase of more than 25% over Modern Warfare 2′s Stimulus Package.

First Strike will be released on PC “later in the quarter”, out March 3 on PS3.

Strong double digital growth worldwide in Black Ops popularity.

Eric Hirshberg, COO of Activision Publishing, said the firm did not feel True Crime: Hong Kong would compete in the open world genre, and it wasn’t going to be “good enough.” So, it was canceled for quality purposes and was “the right decision for the right reasons.”

Demand for the music game genre declined at a “considerable pace,” despite the favorable reception of Activision’s particular offerings and those of its competitors.

“We simply cannot make these games profitable based on current market and demands,” said Hirshberg.

The COO also said without saying which studio was developing the newest title in the series, that the Call of Duty franchise was at “the epicenter of online gaming,” and a new FPS was in the works.

Hirshberg also said the firm expects the installed base of online-enabled consoles to increase 24 percent to 92 million this year.

More DLC is planned for Black Ops, First Strike will land on PS3 March 3 with PC getting it later in the quarter.

Other titles in the works include Spider-Man, Transformers and X-Men, along with a “broad entertainment franchise which brings together toys, games and online in an unprecedented way,” which will be announced at the Toyfair next week on February 23.

Also, a new Family Guy game is in the works. Giggity.

Beachhead Studios to create online content for Call of Duty

It was announced during the financial call to investors, that Activision had formed a new studio called Beachhead, which will create new digital content for the Call of Duty series. The studio will lead the creation of an all-new digital platform for the CoD franchise, complete with a suite of online services to “super charge the online experience,” while “integrating online and console together for the first time.”

The Beachhead project has been in development for over a year, and more information on the studio along with content and services plans will be announced at a later date.

“Beachhead will create the best-in-class online community, exclusive content, and a suite of services to supercharge the online gaming experience like never before,” explained CFO Thomas Tippl. “The platform will support in-game integration and bring online experiences and console play together for the first time. The platform has been in development for over a year and we’re very excited about the increased value we can bring to the community.

“We look forward to sharing more specifics on this exciting new endeavor with you in the near future.”

Eric Hirshberg added during this segment of the call, that a new standalone Call of Duty title was in development for the Chinese market. It is to be a free-to-play, micro-transaction based game, and while he didn’t say if Beachhead had any input in it, Hirshberg did mention that it would not be released this year.

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32 Comments

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  1. Razor

    27 million

    Holy Jesus Christ.

    #1 4 years ago
  2. OlderGamer

    Does BO have 27M or does he mean that 27M have played a cod online?

    #2 4 years ago
  3. LePlatypus

    @2 The latter.

    Could we see a CoD 2011 announcement soon?

    #3 4 years ago
  4. Johnny Cullen

    Tippl said in the last call we’d hear more on this year’s iteration of CoD in this call, if I remember correctly.

    #4 4 years ago
  5. OlderGamer

    ^^Oh goodie nothing like reinventing the wheel each and every year. Acti does that so well, I mean just look at GH and TH ….oh, wait.

    Personialy, I can not wait till the FPS bubble pops.

    Not sure it will, lest not soon, but I would get out of my chair and dance in the damn living room.

    #5 4 years ago
  6. Erthazus

    I still think they should not cancel True Crime game.
    Activision had an opportunity to have it’s own GTA franchise. Whats the problem?

    #6 4 years ago
  7. LePlatypus

    The games market is over saturating too quickly now. FPS’ will soon be gone.

    #7 4 years ago
  8. LePlatypus

    @6 The fact that it doesn’t have the same marketing appeal as GTA?

    #8 4 years ago
  9. Blerk

    It’d be fucking AMAZING if the COD bubble suddenly burst. It won’t happen, of course, but just imagine! :-D

    #9 4 years ago
  10. DSB

    @7 That would make sense if FPSes suddenly became popular out of nowhere, instead of being an exponential progression over two decades.

    The actio FPS has been a staple since the mid 90′s, they’re not going away simply because less talented studios get to make some token shooters.

    The only thing that could do is eliminate those less talented studios at the expense of a temporary marginal loss for the more talented ones, which is hardly going to destroy any of them, any time soon.

    #10 4 years ago
  11. M2Kx

    Why not Blerk? To be honest, I don’t expect anything good from the “new” Call of Duty, and I think, that I’m not alone at the moment.

    #11 4 years ago
  12. Hunam

    Seems more and more like Acti are just going to bottle down and focus on the games they can sell. Although it’s concerning if they are trying to get more hands on with Blizzard. Although I can see Blizzard doing a management buyout once the CoD goose stops laying golden eggs and seeing Acti crash and burn. I mean EA struggled but they always had their Sports division to keep them going.

    #12 4 years ago
  13. The_Red

    Let’s how they will milk Call of Duty franchise now that there is no more Guitar Hero games. How long before the COD is whored like GH (With 3-4 different games a year)?

    #13 4 years ago
  14. NeoSquall

    This bars Activision Blizzard from my white list of developers/publishers.

    I’d gladly scrape my balls with a rusty shaver rather than buying a game from them.

    #14 4 years ago
  15. Callum

    Guys…the FIFA franchise has been milked for decades…trust me…COD is here to stay. It’s the same people buying both games, and it’s probably the only two games they buy per year.

    Thanks god for indie developers! All hail Team Meat!

    #15 4 years ago
  16. DSB

    Fair point Callum, but I think it’s easier to buy the exclusive rights to the worlds biggest leagues and keep everybody else out of the race than it is to create the pan-ultimate shooter and keep it that way.

    CoD is facing some serious challenges to renew itself. It does have an old engine, it does have a new team leading the main contender, and it does have three developers grinding away at the current one on top of that. The odds are really stacked.

    That being said, I think EA have fucked over their buyers just as blatantly with their sportsgames from time to time. A Madden game only selling 5 million copies in six months is a disgrace, and should be a wake-up call, but I think the idea is that as long as you can sell 5 million copies on a mediocre effort, then good enough is good enough.

    They’re filling their games with commercials and completely disregarding the people who like myself were once very likely to pick up a new iteration on release day. NHL used to be one of my favourite sports games, now it’s just incredible to see the same flaws making it into every new version.

    They almost lost Fifa to PES a few years ago, in spite of sitting on all the valuable licences. Something is just very wrong, and people don’t seem to care very much.

    #16 4 years ago
  17. AHA-Lambda

    HOLY SHIT!!!!

    This is a freaking GIGATON!
    Guitar hero? DEAD
    DJ hero and tony hawk? might aswell be dead, they’ll be next
    true crime (and potentially the hope of new ip outside of the bungie deal?) DEAD
    A 5th CoD studio dedicated to digital services? I do NOT like the sound of that AAAAHH!!!

    So to sum up activision we have:
    CoD
    blizzard
    licenced crap
    and prototype 2?

    unbelieveable bloody unbelievable for a company this size to be so fucking closed minded. I hope CoD dies soon and it changes their fucking business model.

    A company is supposed to diversify their portfolio of products and make improvements to them when quality and/or sales fall. But no activision has always been the milk it till its dry and then cut their losses type. I cant believe they would cancel whole IPs and fire a significant percentage of their workforce after posting a record breaking revenue such as that.

    I fucking hate this company so damned much >:(

    #17 4 years ago
  18. Anders

    So Diablo 3 and StarCraft II: Heart of the Swarm in 2012, then. Sweet.

    #18 4 years ago
  19. Hunam

    I hope they don’t cancel prototype 2. Really looking forward to that.

    #19 4 years ago
  20. Crysis

    Aww, C’mon! I was really interested in True Crime, fuck you ActiVision, I hope CoD flops!

    #20 4 years ago
  21. Erthazus

    @AHA-Lambda, you forgot to mention new Bungie crappy game that is also included.

    I wish for one thing, i don’t care much, but Activision need a lesson. I hope that Respawn entertainment will create something that will finish Call Of duty.
    I probably will not care about that casual crap they always create (but damn, they made Medal Of Honor in the past that was freakin awesome.)

    #21 4 years ago
  22. DSB

    @18 Just want to go on record saying I called it on Diablo 3 :p 2011 would’ve been way too early for a Blizzard game.

    @AHA-Lambda Companies are supposed to make money. Nothing else.

    Cutting staff while posting profits is extremely attractive to investors, and certainly much more so than a bloated company full of excess paid for by the shareholders.

    And they aren’t supposed to do anything except to keep making money.

    This is universal to any business, and you probably wouldn’t like very many of them.

    Although I agree that their line-up is looking very conservative, it’s still highly profitable. With all the capital they have compared to everybody else, it’s a shame that Activision doesn’t try to expand more on talent than they do.

    #22 4 years ago
  23. drewbles82

    Glad i chose rock band over guitar hero since their library of tracks wont be getting any bigger.Yes rock band 3 cud have done better but they did the dumbest thing and released it a wk b4 blackops and same day as fable 3, plus they werent shipping with the keyboard or the pro guitars, dont understand why they thought it was a good time.
    anyway call of duty is getting boring, i prefer mw2 style to black ops but releasing one every yr is 2 much. I liked the first true crime so id have liked 2 see a new one.
    all we eva hear lately is ppl being laid off etc, not gonna be much left.

    #23 4 years ago
  24. G1GAHURTZ

    TWENTY SEVEN MIIIIIIIIIIIIIIIIILION!

    That’s some serious business.

    #24 4 years ago
  25. back_up

    they will earn more if they cancel games for PC

    #25 4 years ago
  26. orakaa

    DAMN !!! I was so expecting True Crime Hong Kong, and the game seemed on its way for its final polish (saw some previews which were quite good)…. but no “let’s stick to WOW and COD”.

    Great… -____-

    #26 4 years ago
  27. dtyk

    Ok, True crime Hong Kong is literally 2 months away from shipping and I know that for a fact. I can’t fathom why they would ever cut a game at that stage when its got the polish and the substance.

    Most likely just wanna not spend any advertising money and MILK THE SHIT out of WoW and CoD

    #27 4 years ago
  28. OlderGamer

    After playing Rift, WoW can shows its self to door.

    I just got my preorder and 6 months of founders subscription(that 9.99/month). I am ready to roll w/last beta on the 15th, and with Headstart on the 24th.

    So I leave wow to chinnese gold farmers and account thieves. Good ridence.

    #28 4 years ago
  29. hitnrun

    Wow, unbelievable. Not this announcement, per se, but sort of the slow motion car wreck that is <a href="http://www.penny-arcade.com/comic/2007/12/05/"Activision's business plan.

    Guitar Hero could have been a franchise with near-eternal enthusiasm, like Mario party-games and Halo. Instead Kotick and friends moved the production schedule to annual, and then, incredibly, bi-annual, and then, farcically, bi-annual with a concurrent spin-off.

    Now the series is not even worth the trouble of a desultory release. Three years ago it was the most powerful name in the industry. That has to be some kind of record.

    #29 4 years ago
  30. hitnrun

    D’oh, linkfail.

    #30 4 years ago
  31. OlderGamer

    The power of Acti I guess.

    One of those things where they ride the horse as fast for as far as they can get. then the horse dies and they get on a new horse. They could careless about the games, the franchises, the gamers, or sadly, the people that work hard to make those games.

    But hey everybody, its ok, there is a new CoD being made right now! So buy those BO map packs now, and we can do it all over again in just a few months!

    #31 4 years ago
  32. shaneob

    Does anyone know how to get hold of the financials of just the Tony Hawks games (from the first to the latest)??

    Just doing some research on it, and can only find sales figures or financials on Activision.

    Thanks in advance

    #32 3 years ago