New IPs have become something of a rarity in the gaming industry. Rising development costs and the often sure-fire success of sequels in popular franchises have created an environment that is frequently inhospitable to new properties. Going up against the likes of Activision Blizzard's (NASDAQ: ATVI) "Call of Duty" series, Electronic Arts' (NASDAQ:EA) "Battlefield" games, or Ubisoft's (NASDAQOTH:UBSFF) "Assassin's Creed" series would be suicide for most fledgling franchises.
When attempts to debut a new series are made, they often come at the beginning of a hardware cycle. This gives publishers the opportunity to grow their brands in conjunction with the console base and put forth their wares as reasons to purchase new hardware.
While blockbuster sequels are the lifeblood of the industry, gaming companies cannot survive without successfully introducing new properties. Last generation's megasellers have begun to lose steam, and it's time for the big publishers to turn the page in search of tomorrow's hits. The following new IPs absolutely must succeed in order for the respective companies behind them to remain healthy.
With Ubisoft's Assassin's Creed 4: Black Flag selling two million less than its predecessor within the same timeframe, the company desperately needs a new series to prop up its earnings. Watch Dogs was one of the first games revealed for the next generation consoles and has built up a substantial amount of hype. The property represents a sizable investment for Ubi. Prior to the game's delay from holiday 2013 to second quarter 2014, development spend on the game had eclipsed $68 million. This figure does not include marketing costs, which could match or exceed the production budget.
The Watch Dogs numbers might not seem like a lot in comparison to Take-Two's Grand Theft Auto 5, which has been estimated to have a development budget of $265 million, but the title represents a large investment for an untested property. With months of extra development tinkering, the development budget for Watch Dogs could wind up in the neighborhood of $100 million. Should the game fail to find suitable success, the opportunity cost for Ubisoft will be massive.
When the creative minds behind the success of Activision's Call of Duty 4 split from the company to form Respawn Studios, it didn't take long for EA to swoop in and secure a partnership. Titanfall is the product of their publishing arrangement, and it looks to be one of the year's biggest games. EA has repeatedly tried to wrestle the first person shooter crown from Activision, and Titanfall may represent its best chance of doing so.
The fact that Titanfall is exclusive to Xbox One, Xbox 360, and PC limits the game's sales potential, but it should still do massive numbers. What's more, the fact that Respawn's title won't be hitting Sony's PlayStation platforms means it is the first massive exclusive in this round of the console wars. The project is of great importance to both EA and Microsoft. An Xbox One bundle that includes the game will hit alongside Titanfall's March 11 release date.
Destiny should wind up as the best selling new IP released in 2014. Given that the title received Activision's biggest ever investment in an original property, anything less could be considered a spectacular failure. The "Call of Duty" series is suffering a sales decline and Activision's future outlook is dependent on its ability to produce the industry's premier shooter property. Developed by Bungie, the studio behind the blockbuster "Halo" series, the game certainly has the right pedigree.
Like Titanfall, Destiny is built around the online experience. The game represents a melding of MMO and first person shooter elements, and has been designed to keep players engaged for years to come. With the rising importance of in-game transactions and selling DLC expansions, Destiny has clearly been tailored to provide a continuous stream of revenue. Activision will first need to cement the game's status as a hit. A failure to do so would be disastrous for the company, whose valuation currently hovers around an all-time high.
It's more than just a game
The big game publishers exist in a symbiotic relationship with platform holders like Sony and Microsoft. With last generation's marquis properties losing some of their strength, the industry needs new properties to explode and drive hardware adoption. Of the three titles on this list, Titanfall and Destiny look primed for massive success. Watch Dogs remains a much more questionable prospect. Introducing new IP is a matter of sink or swim. While EA and Activision are gearing up to compete at an Olympic level, Ubisoft looks to be relearning the doggy paddle.
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Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.