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Activision Beats Expectations as 'Modern Warfare 3' Flies Off Shelves

Tuesday, 8 Nov 2011 | 7:22 PM ET

Between better-than-expected earnings and the launch of what could be the biggest game ever, Tuesday was a big day for Activision Blizzard.

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Activision's non-GAAP Q3 earnings came in at 7 cents a share, a nickel higher than projections, while revenue was $627 million, compared to the $558 expected.

The company pushed guidance for Q4 up just slightly ahead of projections to EPS of 53 cents on $2.1 billion in revenue. The company's fourth quarter will be all about "Call of Duty: Modern Warfare 3" which went on sale at midnight Tuesday.

Videogamers don't like to wait, especially when it comes to the biggest release of the year. I spent the day at GameStop's West Hollywood location, which had a consistent line at its registers. Many of the gamers, who were nearly all men, pre-ordered the game and were eager to pick it up to rush home and play.

A number of them said the only reason they didn't get the game last night at midnight was that they saw a line form outside the store as early as 6 pm and didn't want to stand around for 6 hours. This is one of 13,000 stores around the world that opened last night, hosting gamers eager to get in a few hours of play before work this morning.

On the earnings call, Activision CEO Bobby Kotick compared the franchise to "Star Wars" and "Harry Potter" sales — but the scale of this game, and its launch in particular, can't be underestimated. MKM Partners analyst Eric Handler projects that the game will sell a record 6.5 million units on its first day — $420 million at retail. The biggest opening weekend for a movie, was "Harry Potter and the Deathly Hallows, Part 2," which grossed $483 million worldwide, and that's from a three-day weekend.

It's likely to sell as many as 25 million units — that's $1.5 billion dollars at retail, making it core to Activision Blizzard's success. And the company isn't just looking for a one-quarter pop from the game. With the game, the company is launching a subscription service called "Duty Elite" for $50 a year. Every one of the gamers I talked to in the store today either had already signed up for "Elite" or planned to. That should translate into a significant revenue stream long after the quarterly pop it'll see from the software sale.

Even the launch of another rival game, just two weeks ago, isn't dampening Modern Warfare 3's debut. When Electronic Arts debuted "Battlefield 3" just two weeks ago, there was some question of whether the space could sustain such similar games. But despite the fact that Battlefield sold 5 million games this week, gamers are turning out again. A couple of the guys I talked to today had played and enjoyed Battlefield 3, saying that they were very different games (though they're both in the "first person shooter" genre). But some gamers, like a Gilbert I chatted with, decided to hold off and instead spend all their disposable cash on upgrades for this game. That should bode particularly well for Activision.

CEO Bobby Kotick is on Squawk Box Wednesday. Let's see if he has any color on early sales to share then.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.