Activision Blizzard's (NASDAQ:ATVI) Destiny is the most hyped upcoming game of 2014. With a reported production and marketing budget of $500 million, the fervor should only intensify leading up to the game's September 9 release. The title is being developed by Bungie, the studio behind defining entries in the critically acclaimed and commercially massive Halo series, and its new IP has been planned as the first step in a 10-year publishing plan with Activision.
Now, the publisher has announced its first post-launch support for the game. What do the recently detailed downloadable content expansions mean for Activision Blizzard and Destiny? How will the game affect the console competition between Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT)?
Timing is important for Destiny
The timing of the news is one of the most interesting things about the announcement of the Destiny expansions. While DLC has become a mainstay of the gaming industry and updates for Activision's biggest-ever new property had already been confirmed, the fact that two new content packs have been announced months before the main game's release is telling. By comparison, the first content expansion for Electronic Arts' much-touted Titanfall wasn't announced until roughly a month after the game's retail debut.
The early announcement of DLC sends clear messages about Activision's plans for monetizing the game and the confidence it has in its product. The company is looking beyond selling the entry-point, and is already devoting efforts to hooking players on the supplemental components of the broader Destiny ecosystem.
What do the expansion pricings say about the future of Destiny?
Activision's pricing for the two announced content expansions also conveys confidence. The two updates will be sold together as a so called, "Expansion Pass," at an MSRP of $34.99. Putting that in context, the main game will debut at a retail price of approximately $60. The DLC packs will also be sold individually at $19.99 . Once again using Titanfall as a point of comparison, that game's first DLC pack sold at $9.99.
Given the pricing and apparent regularity of updates, it's clear that Activision Blizzard is looking to generate enormous revenue with Destiny expansions.
How will Destiny factor into the console wars?
The announcement of the first two Destiny expansion packs was followed by news that the PlayStation versions would feature additional, exclusive content. This content will remain locked in to Sony's console ecosystem until at least fall of 2015, according to the official PlayStation blog. The fact that PlayStation 4 will play host to what looks to be the definitive version of the year's biggest game could be influential when consumers compare the console with Xbox One this holiday season.
Microsoft's lineup of exclusive titles for the year appears stronger than what its main competitor is offering, but Sony's machine typically delivers better performance for multi-platform titles. According to Cowen Research, Destiny has the strongest pre-release interest tracking of upcoming 2014 titles, while Halo: The Master Chief Collection has the second-best indicators.
Will Activision's premier new IP shape the industry?
The resources poured into Destiny provide evidence of the arms race currently under way. As titles become increasingly large in size and budget, additional revenue streams must be created by sustaining user interest and reducing the likelihood of players moving on to competing products.
The end result is that a smaller number of games will soak up an increasing portion of spend and time pools. This trend is beneficial for titles like Destiny, but games that lack similar marketing budgets will face greater challenges in creating a sustainable user base. A comparable scenario already played out in the MMORPG genre, in which Activision's World of Warcraft became so dominant that other titles had a hard time making the subscription model work.
Activision has the opportunity to shape the ground floor
The timing and pricing of Activision's Destiny expansion packs indicate that the company is very confident in the base product, as well as a desire to make downloadable content a bigger part its business. Monthly subscription fees from World of Warcraft generated incredible sums, but it can't rely on that model going forward.
All of the big gaming publishers are heading in the direction of persistent online worlds built around ongoing DLC revenue streams. Activision Blizzard currently enjoys an advantage because it is pushing this still-developing structure earlier and harder than its competitors.