Activision Blizzard May Soon Lose the Call of Duty Cash Cow

Every year since 2007, Activision Blizzard  (NASDAQ: ATVI  ) has released a new Call of Duty video game for the major game consoles and the PC. With the franchise selling more than 130 million copies, starting with the 2007 game Modern Warfare and excluding the most recent release, Call of Duty has become one of the most successful and profitable video game franchises of all time.

But how long can it last? A common criticism of the series is that each new game follows the same basic formula as the last one, and that very little is changed from the previous title. With formidable competition from Electronic Arts' (NASDAQ: EA  ) Battlefield series, it looks like Call of Duty's reign may soon be coming to an end.

More of the same
Both the Call of Duty and Battlefield series were born on the PC, but the PS3 and Xbox 360, with 160 million total consoles sold, offered an enormous audience to both Activision and Electronic Arts. Activision released Call of Duty 4: Modern Warfare in 2007, selling more than 16 million copies, and every year since then a new Call of Duty game has been released. Sales have increased dramatically over the years, with the 2011 release of Modern Warfare 3 selling 28 million copies.

But both sales and quality have started to fall off, with 2012's game selling fewer copies and critics giving the newer games in the series lower scores:

Ghosts was released recently so sales aren't yet comparable to older games in the series, but the game was given a lower score from critics than any Call of Duty game before it. While Ghosts will still sell enough copies to be one of the best selling games of the year, it will likely continue the sales downtrend started in 2012.

The problem that Activision faces is simple. Making any significant change in the Call of Duty franchise could ruin it as a cash cow for the company if gamers don't like the changes. On the other hand, churning out similar games every year will eventually end in the series losing its luster, and that appears to be already happening.

Call of Duty accounts for a significant portion of Activision's revenue, and the last thing the company wants to do is change a winning formula.

Quality over quantity: Take-Two Interactive's approach
The Battlefield series from Electronic Arts made the jump to consoles in 2008 with Battlefield: Bad Company. The game only sold 2.7 million copies, but the sequel in 2010 more than doubled this number. Then came Battlefield 3 in 2011, a game which proved hugely popular by selling 16.1 million copies. Battlefield 4 was released at about the same time as Ghosts, so meaningful sales numbers won't be available until after the holidays.

One big difference between Call of Duty and Battlefield is that Electronic Arts doesn't plan to create a new game every year, instead opting for an every-two-years approach. Activision's every-year approach with Call of Duty is likely the reason that the games are being increasingly poorly reviewed, since a fundamental shift in game-play can't happen in just a year.

Instead, graphics are updated and small changes are made, but each new game is essentially a clone of the previous game. With two years of development time, the Battlefield series has the ability to make each new game a big advance over the previous one.

Take-Two Interactive (NASDAQ: TTWO  ) takes this to the extreme with its Grand Theft Auto series. It took five years after the release of Grand Theft Auto IV in 2008 for the next title, Grand Theft Auto V, to be released. It's also clear that the focus is on advancing the series by leaps and bounds with each new game. While Grand Theft Auto IV sold 20.4 million copies on the PS3 and Xbox 360, Grand Theft Auto V has already surpassed this after less than three months, selling 25.6 million copies so far.

A game franchise like Grand Theft Auto has staying power because the developer doesn't try to milk the series by releasing new games every year. Call of Duty, I believe, will eventually fade away, taking Activision's top and bottom lines with it.

The bottom line
Call of Duty, while still wildly popular, is in the process of losing its status as a must-have game every year. Years of pushing out games which follow the same formula has opened the door to competitors like Electronic Arts' Battlefield series, and I suspect that the new console generation will not be dominated by Call of Duty like the last one. 

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Read/Post Comments (14) | Recommend This Article (7)

Comments from our Foolish Readers

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  • Report this Comment On November 30, 2013, at 2:02 PM, gradyjames wrote:

    I hear what you're saying about the two-year approach vs releasing every year, but BF4 is also a buggy graphical upgrade. I don't see EA taking full advantage of the quality vs quantity approach.

    I'm more inclined to believe FPS franchises just tend to peak on the second installment and fall off or die after the third installment. Quake, Doom, Halo (which was literally the same game for every installment), Unreal Tournament, and Rainbow Six are the ones that come to mind. It's just really hard to innovate in the middle of a franchise while maintaining the original's "soul" although Unreal's spin off into Tournament worked really well.

  • Report this Comment On November 30, 2013, at 2:31 PM, merkindanoobs wrote:

    UH, This article goes to show just how much these writers know about what is going on. ALL Call of Duty titles since COD4 have had TWO years of development between titles. Activision is the parent company and the 2 developers Treyarch and Infinity Ward produce games every other year. One year will be a Treyarch title and the next a Infinity Ward title. The company starts development right after their title is released and that in theory gives them 2 years of development time.

    The reason the COD titles have fallen off in sales is simply that the developers (Especially Infinity Ward) keep going in the direction they want to, and not listen to the complaints by the players on their forums. I have been a competitive COD player since COD4, and been playing since COD on the PC. IW has REFUSED to go the right direction with the game and the playerbase on Ghosts show it. 3 weeks into release and there are an average of about 230,000 people online at any given time. While that seems like a lot, the past 3 titles, Black Ops, MW3, and Black Ops 2, were in the 700,000 range for the 3rd week.

  • Report this Comment On November 30, 2013, at 4:36 PM, ChuyG wrote:

    *scores

  • Report this Comment On November 30, 2013, at 5:40 PM, lowkey wrote:

    Ummm, Battlefield made the jump to Xbox and PS2 with Battlefield 2.

  • Report this Comment On December 01, 2013, at 4:09 AM, codghostono wrote:

    COD ghost is the worst pc game ever made. I bought it and now have a paperweight. Was banned on their forums for speaking my mind. IF ANYONE SEES THIS DO NOT BUY COD GHOST ON ANY PLATFORM IT IS BAD.

  • Report this Comment On December 01, 2013, at 10:03 AM, JCarrier wrote:

    maybe they should take a year or two off, and start fresh.

    Maybe do something with WW1 or Napoleonic era. And I am sure people will say "that is not what Call of Duty is" But why not take a fresh look? Why can't they do something based in those eras? If it has to do with America, then go with the Spanish American war, Civil War or something that has not been done to a great extent.

  • Report this Comment On December 01, 2013, at 10:56 AM, jm090 wrote:

    activision/blizzard has 2 of its biggest franchises on the decline with call of duty and world of warcraft. im sure the activision side is hopping down blizzards throat to get titan out.

  • Report this Comment On December 01, 2013, at 3:50 PM, lolregistration wrote:

    That's a little inaccurate. COD is developed over a two-year period by two studios that leapfrog each other every other year. So development time for Battlefield and COD is the about same.

    Unfortunately, you'll notice the decline in sales started at about MW3, which was developed by Infinity Ward. Infinity Ward, however, is no longer the same IW from Modern Warfare 2. For those of you who unaware, IW was gutted by their Founders, Vince Zampella and Jason West. Zampella and West were fired for breach of contract, so they decided to take all of their developers with them and form a new studio, Respawn Ent.

    IW was left in pieces following their departure, and Activision rushed to fill in the gaps with no-name studios like Raven Software and Sledgehammer Games. The result? Terrible. MW3 should have been dubbed Modern Warfare 2.5. MW3 was huge step back for the franchise.

    Since then, COD has struggled regain the trust of many casual gamers. Black Ops 2, however, was a very real attempt to regain traction. It was the first COD to make significant changes in game-play, but it was still the same Quake FPS engine that many were now tired of.

    If COD is to have anymore life left, Treyarch, the next studio set to develop next year's sequel, needs to alter the franchise drastically. Treyarch had success in convincing Activision to make major changes during BO2, so let's see if they can make even greater strides for change this next go-around.

  • Report this Comment On December 01, 2013, at 9:27 PM, stevenatorr wrote:

    I thinks it all started when WOW came out with mists of pandaria. I liked WOW till MOP came out but quit 2 weeks after. I know alot of people who quit after MOP. millions have left WOW.

  • Report this Comment On December 01, 2013, at 10:16 PM, Bunnyking77 wrote:

    This writer doesn't get it. The reason why Ghost is bad is because it strayed completely from all the great aspects of Call of Duty and replaced them with less thrilling ones.

    Everything good about Black Ops 2, Modern Warfare 2 and the others, has been leeched out for something that completely gets rid of the effectiveness of explosives and killstreaks, and limits your firefights.

    The maps are out of balance and have no symmetry, the dynamic aspects of the map are limited to doors opening and shutting and maybe a tree falling down or a small piece of wall to break off.

    Ghost is a sad excuse of a game, unless you love dogs and camping, then this is your game.

  • Report this Comment On December 01, 2013, at 10:58 PM, spinod wrote:

    They are not losing it to anyone. People are just sick of modern shooters. They do nothing new. Same thing happened to Medal of Honor, suddenly every studio in the world made WWII shooters, and they all fell together.

    Battlefield isn't taking it, it can barely keep up. Activision will just transition to Destiny, and EA will go with titanfall. so far I'd say Destiny will be taking the cake, and Activision wins again for another generation.

  • Report this Comment On December 02, 2013, at 12:33 AM, scercro wrote:

    Really wish they would finally release a stand alone "Nazi Zombies" game.

  • Report this Comment On December 02, 2013, at 10:39 PM, esxokm wrote:

    I think the author's point that you can't change too much when you release a game every year is still valid even with the two development teams in place.

    The reason has to do with the power of brand equity: neither of the two development teams can just make what they want, they have to stick to a formula that is consistent with the brand. Therefore, releasing a game every year, even though both teams are on two-year cycles, might lead to consumer fatigue.

    In my opinion, the author's thesis remains intact, and it does give me pause in regard to Activision Blizzard's prospects.

  • Report this Comment On December 03, 2013, at 8:49 PM, lolregistration wrote:

    I don't see how the brand equity of Call of Duty has anything to do with either studio remaining creatively conservative. Understanding why it's valuable is much more important. COD has been defined by its engine, and this has been cited over and over again by developers. Activision, however, doesn't understand this. They pout and moan about profit margins without understanding why their product has been successful in past. There are also much more important factors causing customer fatigue, and that has to do with the creative leaps, if any, made with each installment. Treyarch has made significant leaps in creativity over its tenure as a developer for the franchise, but IW has fallen behind. It isn't the brand's equity holding it back, it's Activision and their unwillingness to understand why COD is consistently great.

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