When Activision Blizzard (NASDAQ:ATVI) said on Monday that Destiny was the most pre-ordered new video game in IP history, it was evident its launch the next day would be a smashing success.
Sure enough, Activision confirmed in a press release this morning that "extraordinary audience demand" at over 11,000 midnight openings around the world drove an incredible $500 million in retail and first-party orders for Destiny as of day one. For perspective, that makes Destiny Activision's biggest-ever new franchise launch and the highest-selling day-one digital console release in history, and effectively removes any shred of doubt the game will ultimately become Activision's next billion-dollar franchise.
It's easy to understand why gamers would jump on board. Destiny comes from Halo creator Bungie, which signed a 10-year publishing deal with Activision in 2010 following its 2007 separation from Microsoft (NASDAQ:MSFT). As it stands, Destiny's storytelling and vast playable universe are arguably the richest, most compelling that gamers have ever seen:
After an initial pop Wedneday, the market naturally rewarded Activision by pushing shares slightly into negative territory during early trading.
If Destiny's performance is so impressive, why the "meh" reaction from investors? For one, shares have already risen more than 30% year to date, and trade at a high(ish) 27 times trailing 12-month earnings -- so at least some of Destiny's outperformance might have already been baked into the stock price.
What's more, the stakes for this launch were unparalleled. Remember, Activision previously confirmed it had pumped $500 million into the production, marketing, and infrastructure to bring Destiny to fruition. That made it the most expensive video game in history to develop by a long shot, nearly doubling Take-Two Interactive's (NASDAQ:TTWO) reported $265 million production and marketing budget for Grand Theft Auto 5. It seemed reasonable, then, for Activision's investment to translate to the largest game launch in history.
But even then, while Destiny is easily Activision's biggest new franchise launch, it's not the company's biggest-ever overall game launch. Just last November, for example, Call of Duty: Ghosts sold more than $1 billion at more than 15,000 midnight openings in its first day. Meanwhile, without providing specifics, Activision said Call of Duty: Black Ops II had generated more revenue over the previous 12 months (including digital content) than any other console game had achieved in a single year.
All in all, while Destiny's performance is admirable, it still lives in the shadow of Activision's massive Call of Duty franchise.
Gaming from a long-term perspective
However, that's exactly why investors should be so excited today. That Destiny is off to such a strong start bodes exceptionally well for its long-term franchise potential. As more gamers discover (and likely get hooked on) what Destiny has to offer, future installments should only up the ante for Activision -- just as Call of Duty continues to do.
Also keep in mind that future Destiny titles won't necessarily require the same massive capital outlay. That's not to say Activision and Bungie can rest on their laurels and pump out halfhearted follow-ups, but it's obviously much more difficult and costly to build such an expansive game franchise from the ground up than to expand upon what's already there.
You can bet Activision is already thinking about its next steps. In fact, Activision CEO of Publishing Eric Hirshberg even insisted recently that "Bungie aren't just thinking about the content that goes on the first disc; they're thinking about a 10-year story." Over the near term, though, gamers will have to settle for two planned expansion packs, the first of which is titled The Dark Below and is scheduled for release in December.
Despite what the muted reaction in Activision's shares seems to indicate, Destiny's record launch has effectively proven the game has what it takes to become Activision's next franchise stalwart. In the end, this is great news for patient, long-term investors.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard and Take-Two Interactive. The Motley Fool owns shares of Activision Blizzard and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.