Activision's annual release of "Call of Duty" is always a watershed event for the industry.
Since 2007, the series has been the video game industry's sales leader, raking in billions of dollars for the publisher. But after last year's "Call of Duty: Ghosts" stumbled, analysts are now wondering if consumer fatigue may finally be descending on the franchise.
Tuesday's release of "Call of Duty: Advanced Warfare" will be a key test. The game, set in a fictional future, is loaded with science fiction-themed gadgets such as exoskeletons and hover bikes and boasts Academy Award-winner Kevin Spacey as the lead character. It's a big shake-up for the series, but that's not enough to convince onlookers that the numbers will rebound.
Colin Sebastian of R.W. Baird & Co predicts the game will sell 18 million to 20 million units—which would be flat to down 10 percent compared with last year's "Call of Duty: Ghosts." Sterne Agee analyst Arvind Bhatia says he expects fourth-quarter shipments of the game to be down 15 percent versus 2013.
Activision, though, is quite bullish about this year's installment and implies that the analysts may have it wrong this time. The forecasts, notes Eric Hirshberg, CEO of Activision Publishing, are based on game pre-orders, which aren't as good a barometer as they used to be.
"We see purchase intent well above last year and we see engagement with the brand in social media channels all being markedly up, so I'm still optimistic," he says. " Preorders don't represent what they used to, because of the move to digital and all the ways people can buy the game."
It's a defense that has convinced some people.
Eric Handler of MKM Partners says he agrees that retail orders are lower than they were a year ago but notes that may not be a sign that the game's audience is waning.
"Although we project a decline in sales for [Advanced Warfare] versus 'Ghosts' at launch, increased digital download sales should result in higher margin and profit," he says. "Given increased digital expectations and last year's quality issues, we believe retailers are being cautious with presale orders and will prefer to chase demand."
(Digital sales numbers on the Xbox One and PlayStation 4 aren't tracked by The NPD Group and are much harder to pin down, making analysts more reliant on the publisher for sales data.)
Also benefiting "Advanced Warfare" is the fact that the competitive field is lighter this year. In 2013, "Call of Duty" had to face off against Electronic Arts' eagerly anticipated "Battlefield 4."
This year, the two games won't fight for players, as EA delayed its title until spring 2015. And Wedbush's Michael Pachter notes that 2015's "Call of Duty" game will also benefit from a lack of direct competition (though it will have Microsoft's "Halo 5" casting a shadow.)
Amid the talk of whether the game will do better or worse than its predecessors, one truism tends to get lost. Even in an off year, "Call of Duty" posts sales numbers that any other franchise would envy. And Activision has three other major franchises rolling out this year, as well: the already released "Destiny" and "Skylanders: Swap Force" and an upcoming expansion for "World of Warcraft." Sales of those games should provide a cushion if "Advanced Warfare" sales don't meet Activision's expectations.
That diversity is what makes analysts, even the ones who are cautious about the numbers for "Advanced Warfare," fans of the company. And Hirshberg notes that multifranchise approach is what has made Activision successful.
"This is an industry driven by great content," he says. "I think we've got an incredible slate right now, one that delivers a lot of experiences for a lot of gamers. ... All of these are franchises that are built to last and bring people back. And we've shown the ability to do that with several [games]."
This story has been updated to clarify a quote from Eric Handler