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Can New Consoles Save Activision Blizzard, Inc. (ATVI)?

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Activision Blizzard, Inc. (NASDAQ:ATVI) is a name to reckon with in the gaming sector. Since the sector is at a turning point with the release of new gaming consoles near the end of the year, it’s high time to assess the investment potential of Activision Blizzard, Inc. (NASDAQ:ATVI), whose stock has seen a good runup this year. The company is currently in top gear: The launch of new gaming consoles will bring new titles. At the same time, Activision is fighting an IP battle with Worlds Inc. Apart from micro issues, like this lawsuit, the company is also dealing with macro issues like an overall drop in the video game segment, which could take its toll on the company’s fortunes.

Activision Blizzard, Inc. (NASDAQ:ATVI)

Stemming the revenue drop

For its first quarter results, Activision Blizzard, Inc. (NASDAQ:ATVI) announced $804 million in revenue, up from the $587 million reported for the first quarter of the previous year. However, the worrisome factor was related to subscription loss for its blockbuster World of Warcraft. While it retained the title of #1 subscription based MMORPG, the game lost more than 10% of its subscribers in a single quarter, with more than 1 million players dropping out.

With a slew of Free to Play game titles coming up, it is not surprising that gamers are becoming more and more reluctant about paying subscription fees. Activision Blizzard, Inc. (NASDAQ:ATVI) is not the only company feeling the pain. Its closest rival, Electronic Arts Inc. (NASDAQ:EA), chose to follow the trend instead of fighting, as it moved its Star Wars: The Old Republic title from a subscription-based platform to the Free to Play model. While Electronic Arts Inc. (NASDAQ:EA)’ Star Wars was way behind Activision’s WoW, with its subscription topping out at 1.7 million, this move to the FTP model is a harbinger of the things to come.

World of Warcraft has seen a seesaw pattern in its subscription numbers in the past as well, based on the period between expansion packs. This time, the company’s CEO expects subscription numbers to fall through the year. The drop in numbers is a cause of concern; however, Activision has seen a fall in its WoW subscriptions in the past and every time managed to rise again, with each new expansion bringing players back for more. This time, WoW may have less resilience, as the game is already nine years old.

Exclusive content collaborations

Activision Blizzard, Inc. (NASDAQ:ATVI) is looking towards Call of Duty and Destiny to fill the void this year. After Nintendo’s Wii debacle, entire industry is now focused on the launch of PlayStation 4 and Xbox One. Activision is looking to maintain its console agnostic status, but at the very same time, it is also pushing towards exclusive content collaborations. The company stated that such collaboration may help it in augmenting its market push for the products.

Activision would be releasing Call of Duty-Ghosts on Xbox One and PlayStation 4. The rumored launch date is said to be in early November. Activision Blizzard, Inc. (NASDAQ:ATVI) is also following its peer Electronic Arts Inc. (NASDAQ:EA) footsteps as it will release its Call of Duty DLC first on Xbox One. Electronic Arts, on the other hand, will be releasing Titanfall exclusively for Xbox consoles.

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