Last year, Activision Blizzard (NASDAQ:ATVI) announced it was working on an ambitious new mobile version of Call of Duty in partnership with Chinese tech giant Tencent. Also, at BlizzCon in November, the company announced Diablo Immortal -- a refresh of the classic Diablo franchise for mobile devices. But the scope of the company's mobile efforts goes way beyond these two franchises.
During the latest conference call to discuss first-quarter results, management made a few hints that suggest the mobile game initiative is an "ambitious" undertaking spanning several franchises to position the company in the fastest growing segment of the gaming industry.
Mobile technology is closing the gap with dedicated consoles
As part of the transition process to improve engagement in key franchises, Activision is currently allocating more resources to its development teams to release new content for existing games more frequently. During the first quarter earnings call, COO Coddy Johnson highlighted the company's mobile game initiatives as part of this effort:
We made important progress on resetting the foundation for future growth. Increased investment in our biggest franchises sets us up to better deliver on the upfront releases and in-game content that our communities demand, and to extend our franchises to mobile and new engagement models.
In the past, Activision hasn't made a significant effort to create original reworkings of its games on mobile, other than games like Hearthstone and King's Candy Crush. The reason is that mobile devices haven't provided the technology to create the types of immersive experiences that many gamers expect.
However, the pieces are coming together, particularly with the advancement in mobile processing power, that make mobile game development a much more viable way for Activision to introduce new players to its franchises, as well as connect with new audiences.
Mobile games have been growing faster than their console and PC counterparts in recent years. In fact, global mobile game sales grew 13% to $63 billion last year -- of which $50 billion was derived from smartphone games, according to market researcher Newzoo.
The latest smartphones finally have enough processing power to run first-person shooters like Fortnite and Playerunkown's Battlegrounds. These shooters and massive online battle arena (MOBA) titles are finding tremendous success on mobile devices.
Activision has plenty of aces up its sleeve
Tencent is putting a ton of resources into Call of Duty: Mobile, which could pay off big time for Activision. In China, mobile esports have become very popular, and Tencent develops several of the top-selling mobile titles in the region.
During the first-quarter call, Johnson also described the extent of the company's mobile efforts:
We're also meaningfully increasing the number of developers working on mobile initiatives. Across our key franchises, those resources are complementing experienced, creative talent, already working on projects including mobile expansions of existing games, mobile-first reimaginations of our franchises, and cross-platform titles. These are ambitious projects that will take time, but we're committed to delivering on the substantial opportunity they hold.
It's clear the company is taking mobile game development very seriously, and it's going to be a significant part of the company's long-term growth strategy.
Later during the call, President and CEO of Blizzard, J. Allen Brack, chimed in and provided another hint about what they're up to, "I said consistently that the Blizzard pipeline is larger and richer than ever before. It includes PC and console releases. It includes ongoing content for World of Warcraft, Overwatch, Hearthstone and a couple of mobile initiatives."
Back in November, at BlizzCon, a Blizzard executive mentioned that they were working on new mobile titles across all their franchises. Of course, we know one of those is Diablo Immortal.
The above quotes give the impression that Activision is taking a similar approach to what Walt Disney did with its major franchises -- updating classic titles with live-action blockbusters, which has injected new life into Disney's movie studios segment, all while introducing a new generation to beloved characters.
It seems Activision Blizzard is using this year -- in which adjusted revenue is expected to decline 14% -- as an excuse to move aggressively into mobile games and set the company up for better growth prospects, which may not be reflected in the stock's current valuation.