As the video game industry prepares for a new generation of gaming consoles launching later this year, Activision Blizzard (NASDAQ:ATVI) and Take-Two Interactive (NASDAQ:TTWO) have been dipping back into the old library to pad sales. Activision Blizzard recently released Call of Duty: Modern Warfare 2, originally released in 2009 and remastered for current game systems. It reportedly sold 3.4 million units.
Releasing remastered versions of older games is not new. Game companies have been doing this for years. Most don't really move the needle for the big game companies, but occasionally, one emerges on the best-seller charts. For example, Final Fantasy VII Remake from Square Enix was the seventh best-selling console title in May, according to Nielsen's SuperData.
While rereleases don't typically generate as much revenue as a new Call of Duty or Red Dead Redemption title, there are good business reasons to do them. Here are the upcoming remakes from Activision and Take-Two, and why it makes business sense.
What's on tap from Activision and Take-Two this year
The demand for rereleases of classic games has been high. Digital revenue for the top remakes nearly doubled from 2018 to 2019, and SuperData says that 2020 is shaping up to be on par with last year's revenue total, if not higher.
During Activision Blizzard's fourth-quarter conference call in February, management announced it would continue to bring several remastered and reimagined experiences to players in 2020.
Activision got the ball rolling earlier this year with Warcraft 3: Reforged. It got off to a shaky start with poor reviews centered around bugs and other issues. Still, the Blizzard segment had a great first quarter, with revenue up 31% year over year, which management credited to strong results from both World of Warcraft and Warcraft 3: Reforged.
Activision's Tony Hawk franchise is also getting the remake treatment this year. Tony Hawk's Pro Skater 1 and 2 releases in September remastered for Sony's PS4, Microsoft's Xbox One, and PC. Tony Hawk was a long-running series for Activision through the early 2000s. Through March 2008, the franchise had sold $1.3 billion in lifetime sales.
There should be plenty of demand for Take-Two's Mafia: Trilogy. The original Mafia has been built from the ground up with new graphics, voice acting, and new game mechanics. During the last conference call, President Karl Slatoff said, "Mafia has been an incredibly successful franchise for us over a long period of time between Mafia 1, Mafia 2, and Mafia 3." He added that Mafia 3 has already sold-in about 7 million units.
The business side of remakes
Slatoff explained the rationale for remakes during the company's most recent call:
Even though they're not brand new experiences, there is always a new audience to catch and then there is always a new experience depending on the generation that each of those individual titles came out where even existing fans can enjoy in a different way.
Old games are not brought back for big sales. The main draw for remakes is the remastered graphics on current hardware. These are generally titles that were highly rated and very popular years ago, and it's a treat for a player to get to experience them again with updated features and enhanced visuals.
It's unclear what kind of profit margins remakes generate. It might seem that touching up an already made game with new graphics may not involve much investment, but it can be a substantial undertaking. For example, Square Enix had bounced around the idea of a Final Fantasy VII Remake for several years before finally releasing it this year. The studio's budget was one of the hold-ups.
Just as moviegoers like a bit of nostalgia, such as the hype building for Top Gun: Maverick releasing later this year, the same holds true for the video game industry. Whatever the investment required to bring a remake to life, these games carry very low risk, since they are considered classics and already have a dedicated fan base. Investors and executives place a high value on predictability, and remastered versions of beloved classics provide that.