Activision Blizzard is working on the biggest gamble in the company’s existence. One of the most anticipated games of the year ‘Destiny’ gets released tomorrow and the company is expecting big numbers. The video game publisher claims to have dumped more than $500 million into the development of its latest project with Bungie. It would be the most money ever spent on a video game. Dwarfing Rockstar and Take-two Interactive’s Grand Theft Auto V’s $232 million price tag.
The company held an open Beta test over the summer which originally was only available to players who had pre-ordered the game. Because of the high demand, the beta test was then additionally opened to Xbox Live Gold and Playstation Plus subscribers. The total number of players that participated in the beta test according to Activision was 4.6 million. Although most companies don’t report beta test statistics, this was by far the biggest test on record.
Activision is in desperate need of a new triple-A franchise as its two most popular game series’ Call Of Duty and Madden NFL have plateaued in sales and are getting long in the tooth. Call of Duty is now in its 15th year and Madden has been leading the football simulation genre since 1989. Having a popular franchise game is essential to a publisher’s earnings as it allows the company to sell new versions every 1-3 years with a far lower development cost. For instance a new Madden NFL is released every year with only minor tweaks and player updates over the previous version and is still one of the most popular games in August.
That’s good news considering the huge upfront cost that Activision shelled out for Destiny. Another positive sign is Moody’s upgrading the company’s debt. Cheaper borrowing will help with the company’s promotions for the upcoming holiday season.
The stock itself has been looking very strong. Partially because comps from a year ago look so positive. In 2013 video game sales were abyssmal, but a large contributer to the poor performance was consumers simply waiting for the new game consoles from Microsoft and Sony. Video game software sales totaled $13 billion in 2013 and have already surpassed that number this year.
Industry analysts have predicted Destiny to ship between 8 and 16 million units in the first week of release. I believe it will do north of 10 million and anything at the top end of the range will cause a solid bump in the stock price. I expect Activision stock to be trading around the $27 level early next year after the company reports holiday sales.