The gaming industry has been sliding down in the year 2014, as we did not see many hit releases. This industry is certain to rebound, as we may notice a flurry of new releases in the next few months. It is anticipated that gaming software revenue would be around $64 billion in the year 2014. Market research companies also expect the gaming software industry to hit $100 billion mark by 2018. Exponentially growing mobile user combined with the game addicts is the key for this voluptuous growth of the gaming software market, not forgetting the console gamers. Activision Blizzard, Inc. (ATVI) is one such company which is focused in the domain of entertainment and interactive gaming software segment. The company has recently hit great success with some of its latest release which we will discuss later in this article.
Overview of the second quarter
In August, the company released its second quarter results for fiscal 2014 and was much better than expected. Consolidated revenues were up 8% year over year, to record $658 million as compared to $608 million in the same quarter last year. The revenue also surpassed the consensus estimate of $607 million. In the second quarter, the digital segment contributed 73% of the consolidated revenue which is a record percentage for the company. Revenues from products recorded $587 million, down by 19.5% year over year. Revenues from licenses and subscriptions recorded $583 million, up 18.6% year over year.
The company performed well in personal computer and console games to leverage revenue growth. It witnessed a robust sales performance for "Diablo: Reaper of the souls" which is a personal computer game. In the console gaming segment, "Call of Duty" had strong sales. Heroes of Warcraft, which was launched for the iPad, also recorded a tremendous global response. All in all, we can say that Activision recorded strong sales for all its gaming software, and the sales continue to grow even in the current quarter (third quarter) which will have a positive impact in the third call earning for current fiscal.
Blockbuster hit in the third quarter
This month, Activision released its latest game "Destiny". It has been reported that the company had spent over $500 million to launch this game, and the result post launch was a blockbuster hit for the company. I would say it was a worthy investment of $500 million by Activision, which is illustrated with the mega response that it got post launch. On the day of the launch, it recorded global sales of around $500 million, setting a new record in the history of the gaming industry. Bungie had developed this game, and "Destiny" was the most preordered video game not part of an existing franchise in history. The game was released for console gamers for various versions of Xbox (Xbox 360 and Xbox One) and PlayStation (PS3 and PS4). Although the total number of copies sold is not yet recorded to endorse the success, but sale of $500 million certainly talks a lot about the success.
With Activision's Destiny available for pre-download in late-August, digital console proved to be the strongest category this month, showing an increase for both download sales and microtransaction revenue," wrote SuperData CEO Joost van Dreunen. SuperData said that mobile gaming declined to $281 million for the month.
Analysts speculating acquisition
The news has been spreading, that Activision is keen to acquire Take-Two Interactive and this acquisition would further enable Activision to have a stronger grip of the gaming and the entertainment industry market. The news originated from a note made by Benchmark investigator Mike Hickey, earlier this month. This can be a win-win situation for both the companies and would certainly shake up the gaming market.
Such a takeover bodes well for Activision. Take-Two is a cash-rich company with a healthy balance sheet that records over $1 billion cash, and low operational expenses. The company holds one of the famous gaming portfolios under its belt. That incorporates Grand Theft Auto, Borderlands, Rockstars, Bioshock and Civilization to name a few. I'm sure that every industry in this segment would love to have control of these mentioned gaming series. If we recall, Take-Two was already approached by EA with $2 billion but was turned down by Take-Two. So it is to be seen, how much does it take for Activision that can invoke a "yes" from Take-Two?
Moving ahead
During the second quarter call earning release, the company had a clea
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