Video game developer, Activision Blizzard Inc. (ATVI), recently announced that it will launch an online version of Call of Duty.
Activision will launch the online version known as Call of Duty Elite simultaneously with Call of Duty: Modern Warfare 3, which is scheduled to release on November 8, 2011.
Developed by Activision’s new Beachhead studio, Call of Duty Elite will be available on personal computers, smartphones and consoles. Gamers can play a free version of Call of Duty Elite, where they will compete against friends, join groups and play in tournaments while tracking their statistics and performance.
Activision is also offering a premium membership, which will include exclusive entertainment and game content. However, the company did not specify the subscription amount.
Activision is expected to initiate a public beta this summer for Elite with Call of Duty: Black Ops, in order to test the acceptability of the new version of the franchise.
Call of Duty has been one of the most successful franchises for Activision. According to NPD, Call of Duty: Black Ops was the top selling video game in calendar year 2010.
Following the suites of other Modern Warfare series, Call of Duty: Modern Warfare 3 is also a first person action game with renewed creative excellence.
Activision has been heavily backing its Call of Duty franchise, as the downloadable Call of Duty version has more commercial potential than most of the standalone console games.
The analysts also believe that Call of Duty Elite may emerge as a new source of subscription-based revenue for Activision, much like the World of Warcraft online series.
We believe that the online version of Call of Duty will increase Activision’s exposure to the emerging digital market. This will also help the company to counter its nearest rival Electronic Arts Inc.’s (ERTS) upcoming and much-awaited title Battlefield 3, which is also scheduled to release in November 2011.
Activision is also scheduled to release Transformers: Dark of the Moon and Wipeout In The Zone in the upcoming quarters, which are expected to drive significant revenue going forward.
Recommendation
Recently, Activision Blizzard posted better-than-expected quarterly results on the back of strong top-line growth. In the forthcoming quarters, we expect the company’s initiatives to expand in the high-margin digital business segment to pay rich dividends.
However, Activision continues to face tough competition from Electronic Arts and Take-Two Interactive Software Inc. (TTWO).
Moreover, Activision does not have a presence on the social gaming platform, where Electronic Arts has seen some gains, which may hurt its competitive position over the long term.
We maintain our Neutral rating over the long term (6-12 months). Currently, we have a Zacks #2 Rank for Activision Blizzard, which implies a Buy rating in the short term (1-3 months).
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