Investors were expecting solid results from Activision Blizzard's (ATVI -3.58%) pandemic-influenced second quarter. Increased stay-at-home time has put a premium on digital entertainment, and that shift was obvious from recent reports from Netflix and Disney.
But the video game giant is capitalizing on the new consumer focus on its industry by delivering some of its most engaging content to date. CEO Bobby Kotick and his team said in a conference call with investors that these new releases, especially blockbuster additions to the Call of Duty franchise, set Activision up for even faster growth ahead.
Let's look at some highlights from management's Q2 presentation.
[W]e are delivering entertainment that inspires and unites, helps break down barriers, and enables players to forge and sustain friendships and community through gameplay. -- Kotick
Activision's casual gaming segment returned to growth by adding 13 million active users in the quarter. And Blizzard, the home of the World of Warcraft franchise, held steady at 32 million players. But the Activision segment was the runaway winner, adding 88 million players thanks to surging demand for Call of Duty games.
The company said hours played in the Modern Warfare title were eight times higher this quarter than for the previous Call of Duty game a year earlier. That success was partly thanks to booming engagement in Activision's free-to-play Warzone game, which is bringing many more users into the premium portions of the CoD franchise.
In-game spending in Warzone is healthy, too, leading to a fivefold increase in this category across the Call of Duty portfolio this quarter. "We've truly seen a step change in the engagement of our franchise," said Kotick.
The benefits of multiple pricing tiers
[W]e added more players outside of the launch quarter to the premium Call of Duty experience than ever before, with the majority coming through Warzone, reflecting the powerful combination of premium differentiated content alongside a free offering. -- COO Daniel Alegre
The Warzone title is proving its financial value in part by attracting lots of microtransactions within the game. But the bigger payoff has been its success in driving many of its 75 million players into Activision's premium products.
Executives said most added users in Modern Warfare this quarter started out in the battle-royale product before upgrading. The free-to-play game is also helping push Activision's reach into new geographies while lifting consumption in channels like PC gaming.
A sustained increase
We continue to experience strong momentum in the business even as tailwinds from shelter-in-place moderate. -- CFO Dennis Durkin
Activision is predicting that engagement growth will moderate from the record jump that the company saw when COVID-19 lockdown efforts were at their peak in April and May. But its upgraded outlook still implies a sustained increase in its expansion rate.
Management listed a few key assets that should support this faster sales boost, including a flood of new video game content on the way. It also helps that launches in the Call of Duty franchise will be supported by the biggest global audience for that brand to date.
While the short-term trends could be bumpy because of increasing virus outbreaks and volatile economic growth, Activision sees more reasons to be optimistic than pessimistic for the rest of 2020 and into 2021.
"The opportunity set for our business and [our] wholly owned franchises across platforms, geographies, and business models has never been greater," Durkin explained. It's a reflection of those opportunities that Activision is entering the second half of 2020 with 428 million active players across its universe of games, compared to 327 million a year ago.