Will Activision Blizzard's $500 Million Gamble on 'Destiny' Pay Off?

Will Activision's biggest-ever investment in new IP yield the most successful new gaming property in history?

Jul 6, 2014 at 12:30PM

Accelerator Destiny

Source: DestinyTheGame.com

Activision Blizzard (NASDAQ:ATVI) has been getting a lot of attention lately. With the new consoles from Sony (NYSE:SNE) and Microsoft off to successful starts, and the broader gaming industry expanding rapidly, the company looks well-positioned to continue its gains. The publisher's share price currently trades near an all-time high, and it has consistently beaten earnings-per-share estimates.

With major properties like Call of Duty, Skylanders, and World of Warcraft, the publisher maintains some of the most valuable series in gaming. That said, Activision seems to be aware that it cannot rely on these cash cows indefinitely. The outlook for gaming's leading publisher is largely dependent on whether its new IP, Destiny, lives up to the hype. With confirmations of a $500 million production and marketing budget, Activision is betting big that it can create the medium's next massive series. Is the game set to take the world by storm? How will its performance compare to that of publishing rival Ubisoft's (NASDAQOTH:UBSFF) most recent megahit?

Activision aims for the stars
Activision Blizzard President, Bobby Kotick, disclosed that the company had $500 million tied up in the production, marketing, and infrastructure of Destiny. As Kotick stated, this represents the company's biggest-ever investment in new IP. Perhaps unsurprisingly, these expenditures were made with the expectation that the game will become the medium's most successful new property. In order to achieve that feat, Destiny will need to outsell the recently crowned holder of that title, Ubisoft's Watch Dogs. The game sold more than 4 million units to consumers in its first week on the market.

Will Destiny set a new standard for success?
While the performance of Watch Dogs has been undeniably impressive, there are compelling reasons to believe that Destiny can surpass it. The voracious appetite for software on the new consoles is evidenced by Ubisoft's recent blockbuster, with the majority of units sold coming from the PlayStation 4 version of the game.

Destiny appears to be faring better in the press than Watch Dogs did leading up to its release. While Ubisoft's game debuted to mostly positive reviews, the months prior to its release were filled with controversies and negative slants. That didn't stop the game from achieving incredible success, but, by comparison, the most pervasive negative story attached to Destiny seems to be that voice actor and Game of Thrones star Peter Dinklage has delivered a substandard performance as the game's robot sidekick. Additionally, the available budget numbers suggest that Activision's game will have a much larger marketing push than Watch Dogs.

Activision and Sony partner to promote Destiny
With regard to the console wars, Activision appears to have, once again, backed the right horse. Destiny will have timed-exclusive content on PS4, and a white version of the hit console will be bundled with the game and available for purchase alongside the title's September 9 release. Considering that this will be the first new color for the hardware and the high-profile nature of Activision's game, the bundle should move an impressive number of units.

Will Destiny be the year's best-selling game?
Pre-order analysis provides yet another indicator that bodes well for Destiny's future. According to Cowen Research, looking at pre-order numbers suggests that Activision's game might set the new record for most successful new gaming IP and be the year's best-selling game. The analysis from Cowen projects that the game will move between 10 million-15 million units in the calendar year. With Activision's new Call of Duty also on track for an enviable performance, the company appears to be headed for an excellent performance in the console market this year.

What does fate hold in store for Activision Blizzard?
There's tremendous pressure on Destiny to deliver and set new industry records. With such enormous hype surrounding the game, and Activision Blizzard at large, failure could adversely affect the company's valuation. An otherwise good performance simply won't be enough. That said, the game looks to be in solid shape to fulfill the company's promises.

If the title lands to its anticipated success, it will be a massive win for Activision on multiple levels. In addition to opening the door for a lucrative and ongoing franchise, Destiny is also structured around creating ongoing digital revenue streams. With World of Warcraft still losing players, and the paid-subscription model looking increasingly untenable, Destiny will serve as a crucial testing ground for the future of online gaming experiences. For Activision Blizzard, Destiny's performance has prophetic implications.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Keith Noonan has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard and Apple. The Motley Fool owns shares of Activision Blizzard and Apple. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers