This year's Electronic Entertainment Expo, or E3, illustrated a lot of interesting match ups in the world of video gaming; Microsoft vs Sony in the next-gen console war, Sony's Project Morpheus vs Oculus in the growing battle for virtual reality, and of course Nintendo's Wii U vs unadulterated failure. But investors should be aware of one long-standing battle that's only growing more fierce: EA (NASDAQ: EA) vs. Activision (NASDAQ: ATVI) in a battle of the largest developers on the market. Let's take a look at what both companies brought to the biggest show in gaming and who came out looking stronger.
Activision had plenty of headline acts
While Activision didn't have its own press event like a lot of the major companies do the day before E3, it shared the stage with Microsoft and Sony; Call of Duty: Advanced Warfare was the headliner for Microsoft's press conference, while Destiny was the opening act for Sony's conference. But Activision is more than just a lead-off batter; according to NPD Group last year Call of Duty: Ghosts was the best selling next-gen console game in 2013, and the "Call of Duty" franchise enjoyed its fifth year in a row as the top-selling game in terms of both dollars and units sold. In addition to that, Skylanders was the third best-selling game in 2013, and the number one game in the children's games segment. Clearly 2013 was not a bad year for Activision.
But that's the past—what about the future? Activision brought three big games to E3 2014; the first and perhaps most important was the new Call of Duty. This is one of the biggest franchises in gaming, and Activision is going to do its best to knock it out of the park like the company did last year when it sold a billion dollar's worth of the Call of Duty: Ghosts on day one. Of course, there's always the fear that gamers will be exhausted with the annual iterations of the game, but if last year was any indication that's not going to be an issue. There was also the newest Skylanders game, Trap Team, which is flipping the script on gamers; instead of plugging figurines into their console and seeing the character pop up on screen, gamers will trap the characters from the game in their figurines. While the concept sounds interesting, Skylanders will be facing more competition than ever from Disney Infinity, which is bringing Marvel's super popular super heroes to life, as well as Nintendo's amiibo.
That leaves Destiny, Activision's hugely anticipated new IP and the first non-Halo game from Bungie. Word on the street is that Activision is pouring half a billion dollars into the development and marketing for Destiny, which means that the company needs the game to be a huge success in order to simply break even. From what I've seen of the game so far, though, chances are good that it will be well-received; the gameplay is fun and fast, reminiscent of the old Halo games Bungie used to make, and the concept of a great first-person-shooter (FPS) massive multi-player game for the console is an enticing one. Investors absolutely need to keep an eye out for Destiny and the reactions to it when the game drops this September.
EA's pipeline is only getting stronger
Meanwhile, Activision's main rival EA didn't pull any punches at its own pre-E3 press conference. The company's pipeline of games can easily be divided into two groups at this point: the fan favorites and the old standbys. The old standbys are the games you see different iterations of every year: Madden, NHL, FIFA, and UFC are just a few of EA's incredibly strong list of popular game brands. These games are constantly updated and almost always best sellers, especially Madden and FIFA. Games like these give EA the breathing room it needs to work on the other stuff. Meanwhile, some fan favorites include Mirror's Edge 2, a sequel to the cult classic from 2007, as well as a glimpse at the development of the next Mass Effect game, part of the best-selling franchise.
But EA showed off its biggest fan favorite right off the bat by beginning its press conferences with a development preview of the newest Star Wars: Battlefront. A hit series that was produced by the old LucasArts studio, EA took over the franchise when it gained an exclusive license to old LucasArts games, as well as future Star Wars games. The audience ate up the footage, and you better believe gamers will be lining up for a chance to try the new Battlefront when it hits shelves in 2015. And of course that won't be the end of it; Disney has announced that Episode VII of the acclaimed "Star Wars" franchise will hit theaters in December 2015, which will only heighten interest in everything Star Wars. EA will be able to monetize that with multiple games now that it owns LucasArts, and that will be an incredibly popular endeavor.
In addition to all that, EA has also unveiled its latest Battlefield game, Hardline. The game takes a step away from the all-too-common military FPS and turns its attention to a cops vs robbers format. Although last year's Battlefield 4 didn't stack up well against Call of Duty: Ghosts (it's pretty tough to beat $1 billion in sales on day one), the franchise could become a nice answer to Activision's Call of Duty if EA decides to release a new one annually. The game doesn't necessarily need to outsell Call of Duty to be successful—it just has to draw some gamers away from it and toward EA's digital sales, which have become a larger part of the company's bottom line recently.
So who won?
It's coming down to the wire between EA and Activision. Both companies have strong franchises that will continue to produce solid top line results, and both have big games on the horizon that are drawing a lot of attention. In the end, there's no clear winner at this point—investors are going to have to wait and see what a new year of gaming brings. If it helps, think of the companies like they are each little mutual funds; Activision is putting a lot of its eggs into one big growth-oriented basket (Destiny), while EA plays it a bit safer with annual releases and some hopeful hits. Keep that in mind when you decide which company you'd rather invest in.
