How Activision Blizzard Made $2B Off Their Gaming Franchises

Activision Blizzard, Inc. has announced massive fourth quarter revenues: A record-breaking $2.01 billion in sales. That’s a rise of 49 percent from the same quarter the previous year. The publisher’s gaming hits include names like Call of Duty, Overwatch, and Hearthstone.

Stock is up 9.5 percent following the earnings news. From Reuters:

“The company’s net income rose to $254 million, or 33 cents per share, from $159 million, or 21 cents per share.

‘The launch of Blizzard’s Overwatch created a major new franchise, while King’s mobile advertising tests are very promising as the basis for meaningful new revenue streams,’ Activision Chief Executive Bobby Kotick said in a statement.

To tap into new streams of revenue, Activision has set up a film studio, e-sports and consumer products divisions, and bought “Candy Crush” maker King Digital for $5.9 billion, a deal that closed a year ago, to expand in the mobile gaming market.”

Overwatch’s success no doubt drove the revenue increase, but the publisher has also dealt with an under-performing November debut for “Call Of Duty: Infinite Warfare.” So why is Activision doing so well?

How They Did It

Some have pointed to the U.S.’s inescapable political climate as a reason for the spiking popularity of the gaming franchises at Activision. One comment from investor Paul Kedrosky:

“It is a good bet that anything that allows people to escape or cocoon will do well over the next few years.”

While this may well be a factor, it doesn’t answer the larger question about Activision’s success, which is why they are the ones to provide the best escapism. This answer lies in their circular approach to building up their collection of powerful franchises, which constantly cycles through four stages.

First, the publisher focuses on high-quality content, through their existing talent, tech, and systems. Next, that quality improves their audience reach, measured in engagement. Third, that improved time spent metric drives “premium recurring in-game revenues,” increasing the players’ investment in the franchise. Fourth, that investment boosts cash flow for the entire company, which is then reinvested in making the franchise even more high-quality — which was the first stage of the process. When it’s chugging along, each franchise builds on itself to become better and better.

Image: Wikimedia

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Written by:
Adam is a writer at Tech.co and has worked as a tech writer, blogger and copy editor for more than a decade. He was a Forbes Contributor on the publishing industry, for which he was named a Digital Book World 2018 award finalist. His work has appeared in publications including Popular Mechanics and IDG Connect, and his art history book on 1970s sci-fi, 'Worlds Beyond Time,' is out from Abrams Books in July 2023. In the meantime, he's hunting down the latest news on VPNs, POS systems, and the future of tech.
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