Activision quarterly earnings show Call of Duty’s vulnerability

The intense focus on a single franchise can backfire badly, as Activision Blizzard is now demonstrating quarterly in the wake of the unusually poorly received Call of Duty: Vanguard, released last November.

Driving the news: Earlier this week, the publisher announced financial results for the spring quarter that were significantly lower than those of spring 2021 — and blame is squarely on Call of Duty.

• The shortfall in financial terms: $1.6 billion for the quarter in overall net bookings (that’s player spending on its games) vs. $1.9 billion a year prior.
• Remember: Activision Blizzard consists of three companies: Activision (Call of Duty), Blizzard (Overwatch, World of Warcraft) and King (Candy Crush).
• Most of its spring 2022 drop came from Activision proper, which reported a decline in operating income by $271 million compared to last spring. Blizzard dropped less, and King grew.

In plainer English: Way fewer people are playing Call of Duty or spending money on Call of Duty this year.

• Way fewer = 33 million fewer, according to the company’s count of monthly active users.
• The player base is still huge, mind you. Activision had 94 million players in June. Blizzard had 27 million. King had 240 million.

Between the lines: We can all equate “Activision” in any of these results with “Call of Duty” because the two have been nearly 1:1 for years.

• This isn’t the 2000s when the Activision label balanced CoD releases with Guitar Heroes and Tony Hawk Pro Skater games and, gasp, original games.
• These days, Activision’s large studios — consisting of more than 3,000 developers — make Call of Duty content year-round.
• They produce annual premium releases, the Fortnite rival Warzone, and Call of Duty on mobile, plus constant seasonal updates to all of those games.

The problem for Activision: Vanguard sold millions, but fewer millions than its predecessors. It disappointed fans, who then bailed on it. And the once-hot Warzone has cooled.

• That’s left the company pointing investors toward the next CoD and Warzone releases coming this fall.
• The CoD vulnerability contextualizes the years-long push to get the famously slow Blizzard to produce more games.
• And it draws a stark comparison to rival Electronic Arts, which has been able to brush off an underwhelming release of Call of Duty competitor Battlefield last fall while touting strong performance in its FIFA and Apex Legends series, among others.

The big picture: No need to weep for Activision Blizzard, which is primed to get purchased by Microsoft at a premium, should regulators approve.

• And it’s no wonder that, for all the attention Microsoft owning Call of Duty gets, company execs have identified ever-reliable King as a key prize.

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