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3 Ways ‘Call of Duty’ is Changing the Game for Activision Blizzard

By Demitri Kalogeropoulos – May 19, 2020 at 7:12AM

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The venerable franchise is attracting a flood of new gamers and helping the publisher boost its profit margins.

Activision Blizzard (ATVI -0.71%) has benefited from an unusually positive operating environment as stay-at-home orders swept the globe in March and put a premium on digital entertainment options.

That situation helped the video game publisher trounce earnings expectations in the fiscal first quarter, with engagement and spending metrics swelling in franchises like Candy Crush and World of Warcraft. But the success Activision has seen in its Call of Duty brand has been even more important to the business because it points to a long runway for growth ahead in new platforms, geographies, and selling models.

Let's take a closer look.

A modern take on a classic

The standout product last quarter was Call of Duty: Warzone, Activision's biggest bet to date on the battle royale niche. The game attracted 60 million users at launch, which gives it a good start in challenging rivals like EA's Apex Legends, the most downloaded free-to-play game on the PlayStation 4 last year.

A young man and woman play a console video game.

Image source: Getty Images.

Warzone isn't nearly that popular, but Activision doesn't need it to be. The title is lifting demand for other parts of the franchise, after all. It helped the premium Modern Warfare game expand its engagement and sales in recent weeks, confirming that Call of Duty acts more like a valuable platform than just a popular intellectual property brand.

Extending its reach

Warzone is also extending the brand well beyond its already massive addressable market. That expansion includes millions of people who wouldn't normally interact with Call of Duty content at the premium $60 price point but are spending hours with the free-to-play title today.

Executives said in a conference call that, in addition to the lift that's giving the Modern Warfare brand, the success proves COD content can tap into underrepresented platforms like the PC and mobile devices along with new geographies. "Warzone adds yet more compelling content for our Modern Warfare community," COO Daniel Alegre said, "and also enables an entirely new set of players around the world to experience Call of Duty for free."

More is better

Activision in 2019 gambled on the idea that a stepped-up pace of content delivery could boost its business, and that bet is already paying off. The mobile version of the COD game has seasonal events launching every four weeks rather than every eight weeks. That same situation applies to most of the consumer giant's titles and is part of Activision's strategy of promoting live, event-driven releases.

This setup keeps gamers engaged well beyond a game's initial launch and supports greater total spending. Modern Warfare wasn't Activision Blizzard's most popular premium release in the franchise, for example, but many months of steady additional content releases have made it the biggest overall seller yet.

The COVID-19 pandemic hasn't threatened any of Activision's release plans. Despite its development processes moving entirely off site, the publisher still expects to launch the next premium COD title on time this fall.

Management's big-picture strategy has a few key pillars that include strong premium releases, a steady flood of seasonal content, and expansion into new geographies, platforms, and selling models. The Call of Duty franchise is proving itself up to the task of supporting each of those ambitious targets.

Demitrios Kalogeropoulos owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard. The Motley Fool recommends Electronic Arts. The Motley Fool has a disclosure policy.

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