I found Activision (Ticker: ATVI ) when it was at around $17. I think I even wrote about it on here when I bought it (Edit: I actually didn’t write about it, looking back at my emails it was bought in September of 2013, I started this sometime in November).
Since then it’s run up to the mid-high $30s and has proved to be quite a profitable stock for just about everyone who’s ever bought it.
I’ve also invested in Electronic Arts (Ticker: EA), and I’ll be the first to tell you, I was on my hands and knees everyday praying that I wouldn’t have to sell for a loss. I had timed it so that I could buy before they announced (through official channels) that they would be making Starwars Battlefront. I had planned to hold the stock until the hype was feverishly high, and then was going to sell it. What ended up happening was, EA crashed because the SIZE of SW:B was too big (16 GB I think). I got lucky and the stock pulled back up, but I would never go into it again.
EA rises and fall’s on a dime, because its flagship games aren’t stable. When I say Flagship, I mean games like NBA 2K, Fifa, and Madden Ultimate Team. As you can see, it’s got the three biggest sports games in the world, but it has no shooters, or anything close to an eSport. That’s where ATVI comes in. Activision’s full name is ActivisionBlizzard, and while they have nice money makers coming in from the Activision side, the Blizzard side of the company is where all the eSports games you hear about on a day-to-day basis, and all the loyal fans come from.
With these game companies, if they can build a good product, and develop a dedicated fan following around it, they can make money and become profitable. Right now, if you want to be successful as a game maker, your company better be churning out a product that can fit the mold of what an eSport game should look like (lots of cash tournaments, organized tournament structure, easy to watch, and interesting to non-players, high levels of skill required, etc.), and is also in a genre that isn’t totally dominated already by companies like ActivisionBlizzard, Valve (company that owns Steam – the world’s biggest game distribution platform as well as developers of two of the biggest eSports currently, DotA 2 and CS:GO), and Riot (creators of League of Legends – the biggest eSport).
While people like to play 2K and Madden for nostalgia and fun, there isn’t much incentive to keep buying $60 games when they release, with little to no reward at the end. Unlike previous generations of gaming, we’re in an era where people expect to have some sort of goal to work towards, and if there isn’t something set in stone, then there is no point. EA doesn’t offer that to its fan base, ATVI does.
Additionally, FPS (First Person Shooters) games and MoBA (Massive Online Battle Arena) games have taken over the gaming industry as a whole. To be successful as a game developer making anything other than that, you need to have a fan base, or an interested group of people looking for games in said genre. Luckily for EA, their main games are sports games, something that no other game dev out there does.
Activision regularly pushes out content for all their games – from Call of Duty (yes they own that multi-billion dollar franchise), to World of Warcraft (the only game analysts of ATVI seem to know on the Blizzard side, trust me, WoW is dead, Blizzard knows it), Blizzard has built up a system where they can easily charge players over $250 a year for micro transaction after micro transaction, and no one every notices.
One of their newer games – Hearthstone, generates over 20 million dollars a month for ATVI according to Polygon. In reality, Hearthstone easily makes at least 50% more than that now. At the time the article was published, Hearthstone had less than 30 million players, now it has over 40 million (and growing). This can only mean that the game, which is relatively cheap to make, has a very small dev team, and is on phones as well as computers, is one of Blizzard’s biggest cash cows.
The incredible success that Hearthstone has seen recently still pales in comparison to how much WoW is making Blizzard ($10-$20 a month per player base subscription fee alone for 6.5 million players), but it’s tremendous success has greatly lead to ATVI running up.
Blizzard has 5 games live currently with one in Open Beta currently. Hearthstone also makes them the least amount of money!
Activision owns Call of Duty, a series in which each game initially retails for $60, and requires AT LEAST another $60 in after-purchase investments to play. The game boasts over 50 MILLION unique players per month. The franchise Activision’s main bread winner. Along with CoD they have other games as well, but this is really the only notable one.
While I’m not a particularly big fan of EA, it does have some pretty solid numbers. I don’t like EA because fundamentally (not fundamentally as in numbers, rather logistically), it just isn’t as good a company as ATVI, and since they both do the same thing in essence (sell games), Activision should be the better company to buy.
While EA may have had a 100 million dollars less in sales/revenue than ATVI, it’s gross margin actually came out ahead – about 120 million dollars ahead. It’s also increased y/y sales by about a billion dollars!
That’s a tremendous increase, and EA has an even more exciting and interesting line-up of games coming this year (genres that ATVI isn’t even going next to yet). Look at ATVI’s numbers real quick:
Compared to Activision’s y/y growth slowing down and fewer growth catalysts, EA is technically the better stock. I feel like it’d be worth it to buy equal positions in both EA and ATVI heading into the summer time as that’s when the companies REALLY make money.
Wow, this is the second 1000 word article I’ve written in a week, I hope you liked it. Please rate and comment if it was good!