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Activision Blizzard
stock received a lift in Friday trading, after the company announced that its Call of Duty videogame franchise has banked $3 billion over the past 12 months.
It seems like good news, and Activision (ticker: ATVI) shares advanced roughly 2.5% to $80.78 in late afternoon trading Friday.
But it’s unusual too. Activision typically announces its opening weekend sales for its latest Call of Duty game days after its launch—usually the Wednesday or Thursday morning after. Jefferies analyst Alex Giaimo told Barron’s in an interview in November that the four of the past five Call of Duty games received such treatment, with the company boasting more than a half billion in sales each time.
The latest game, Call of Duty: Black Ops Cold War launched in November and executives have tried to soften expectations around its success in terms of gross unit sales, Giaimo said. He speculated that it’s possible Activision is trying to convince people that short-term unit sales aren’t the most important gauge of the new title’s success, in part because the games in the series make money through means other than simply selling more copies.
There’s some truth to that argument. Videogames have been slowly moving away from a hits driven business making money over a longer period through things such as in-game purchases, expansions, and other mechanisms.
Unit sales still matter, however. Black Ops wasn’t a critical success, so it’s definitely worth pausing to consider why Activision decided to abandon the pattern it had adopted at a time when videogame businesses are arguably among the best positioned to profit from life amid worldwide government ordered lockdowns.
For investors it’s hard to tell what, if anything, the three billion number actually means. First, it’s a non-GAAP figure. So that’s already reason to pause and think: Activision’s Call of Duty announcement Friday was measured in bookings not revenue. Bookings are a typical measurement of sales for videogame companies that accounts for digital and physical sales, and license fees, merchandise, publisher incentives, among other things, according to the press release.
Activision uses bookings because when it sells a game that costs it money over the length of time the player uses it—most contemporary games use the internet for things such as bug fixes, multiplayer, and so on—revenue for such games must be pushed out over several months, or even more than a year in some cases. Cloud software companies do the same thing, and investors watch the figure closely. The point is that it’s difficult to easily determine when the $3 billion actually entered the company bank account, and which products it’s associated with.
The Call of Duty bookings are also mid-quarter figure with no easy comparison available. It reminds us at Barron’s of the mostly meaningless list of record sales of various products that
Amazon.com
(AMZN) tirelessly issues year after year. Amazon rarely makes the figures useful in any fashion for investors using hedged language, and inconsistent measurements, among other techniques, to dampen its utility.
That is not to say the Call of Duty announcement is bad news. Activision did generate $3 billion worth of bookings in the past 12 months from a single franchise, which it says is a record. It speaks to the strength of the Call of Duty series and the success of some of the other parts—namely its battle royale game, and Modern Warfare remake.It’s just not the kind of information that should convince investors that Activision is a company worth investing in, if they haven’t already.
Write to Max A. Cherney at max.cherney@barrons.com
