The price of publicly traded companies in the video game industry can provide a barometer for the wider industry, and the significant drop in the price of Activision stock over the past month is worth examining. This guest post from FirstAdopter looks at what moved Activision’s stock price over the past month.
If you followed Activision closely in the past year, you would know the stock ignored weak sell-through data from Call of Duty Ghosts (-30% vs. the previous Call of Duty), Skylanders, and even a one million subscriber decline in World of Warcraft over 6 months. Actual sell-through data for Activision’s catalog from reliable sources in the last 5 quarters were: -26% y/y, -6% y/y, -28% y/y, -44% y/y, and -10% y/y. The weak sales did not matter; the stock kept going up because of the narrative that “Destiny will be as big as Call of Duty/Halo/Grand Theft Auto and was going to save the day.”
On September 9th, Destiny came out. Conspicuously, Activision didn’t send out review copies to web-sites like they normally do a week before launch. Then the reviews came out a few days later. They were awful. Three of the largest, most prestigious game sites gave Destiny a 6/10, which rarely happens for big games. I spent 19 hours finishing the game and I agreed with these negative reviews.
It was the biggest critical flop relative to expectations for a large budget title in a very long time. The market focused on the poor quality of the game as being detrimental to the future potential of the franchise’s DLC and sequel sales. The Destiny franchise was now severely damaged.
The stock started to fall. Activision then added fuel to the sell-off with a Destiny sell-through press release of $325 million in 5 days. The market quickly realized Destiny is selling at a fraction of the rate of Call of Duty (COD: Black Ops 2 sold $500 million in 24 hours) and Grand Theft Auto (GTA V sold $1 billion in 3 days). The hopes and dreams of Destiny being the next Call of Duty or Grand Theft Auto were dashed.
The narrative of Destiny is “going to save the day” was no more and the market could also no longer ignore the secular decline of the core Call of Duty, Skylanders, and World of Warcraft franchises in the past year and the future.
Further Reading on Activision Stock
- Week 2 sales sell-through down 78% week over week
- Week 4 sales sell-through down 30% week over week
- Leaked Bungie contract with Activision showing a 2 year cycle for Destiny sequels, Destiny intellectual property ownership by Bungie not Activision, and large royalty split
- Destiny game discounts: 17% off, 33% off
- Michael Pachter: “Destiny..is all but assured a solid Metacritic..We expect between 88-92.″
- Michael Pachter after Destiny gets a Metacritic of 76: “That’s not good enough, I think, to support a recurring franchise.”
- Examples of “damage the relationship” to customer post , another one , another one
- Activision uses reviews from no-name sites like Pocket Lint, Biogamer Girl, and Rebel Gaming in the center of national TV commercials
- 6 key people left Bungie
- Veteran game journalists on Rebel FM podcast episode 230: Destiny nothing like what was promised when he visited Bungie for 8 hours “(promised) big place..personalized..what happened? Not what we have” “not only is Destiny critical disappointment..it will be a sales disappointment” “I don’t understand how it took 500 people to finish this game” “It’s doesn’t make sense to me” “where did all that !@#$ money go” “Call of Duty is falling down faster than they expected it to” “Call of Duty..fall apart faster than they can replace it. Destiny is not the game that’s going to do it”
- Game journalist Patrick Klepek on Destiny “it’s so tremendously bad”
- Shane Satterfield’s (ex-GameTrailers) insightful take on Destiny DLC
World of Warcraft
- September 23, 2014 World of Warcraft successor gets canceled
- Michael Pachter quote on MMO cancellation: “(news is) a problem..It is a blow, for sure, They need to stem WOW declines..”
- “Blizzard will move forward with an eye toward more small, experimental projects”
- World of Warcraft subscribers are down over 40% from peak of over 12 million
Call of Duty
- Cowen says pre-orders for this year’s Call of Duty are down more than 50% vs. Call of Duty Ghosts in 2013 and down 80% from the Call of Duty in 2012
- Call of Duty Ghosts sell-through was down 30% from Call of Duty Black Ops 2
- 8 quotes from gamers on the damage Call of Duty Ghosts did to franchise and how it will hurt this year’s COD sales
- Call of Duty Ghosts is the 54th most played game on PC today
- Google searches for “call of duty preorder” are down 64% y/y
- Skylanders sell-through is declining
- 6 quotes from consumers on Skylanders fatigue
- one day after launch Skylanders Trap Team is 98th on Amazon’s videogame bestseller list and below Disney Infinity which was released 3 weeks prior
- Google searches for “skylanders” are down 46% y/y
Call of Duty Online
- Bad pedigree: Call of Duty Online is being developed by Raven Software which developed Call of Duty Ghosts multi-player, widely criticized as the worst in Call of Duty history
- Call of Duty is mainly a Western console brand and doesn’t have same power in China where PCs and the game Crossfire is dominant
Heroes of the Storm
- League of Legends and Valve’s Dota2 dominate the MOBA market. It will be very difficult to compete against these two entrenched players.
This guest post on the movement of Activision stock was written by FirstAdopter, a news and commentary blog on technology and finance.