Activision Blizzard (NASDAQ:ATVI) recently announced that Bungie's Destiny had sold through $325 million worth of games within the first five days of its release. That figure makes Destiny one of the most successful new IP launches in recent history, but the first-person MMO shooter has received surprisingly mediocre reviews from critics.
At review aggregator site Metacritic, the PS4 and Xbox One versions of Destiny have received critic scores of 77% and 79%, respectively. Users were less generous, giving the PS4 a 6.6 out of 10, while the Xbox One version fared even worse with a 5.7. GameSpot called the game "cold and shallow," while IGN said the game was "ultimately unable to be all the different games it's trying so hard to be."
Those poor reviews highlight an interesting question: Did Activision doom Destiny with its yearlong hype, and will poor reviews hurt the game's chances of being expanded into a multiyear franchise?
Activision's hype machine
Back in February, Activision Blizzard CEO Bobby Kotick boldly claimed that Destiny would be the "best selling new video game IP in history."
While that statement quickly made headlines, it made no sense from a historical perspective. The best selling "new" video game IP in history is actually Nintendo's (NASDAQOTH:NTDOY) Wii Sports, which sold a whopping 82.1 million copies worldwide, although those numbers were inflated by being bundled with the original Wii.
In May, Kotick declared that Activision was spending $500 million on the development and promotion of Destiny, supposedly making it the most expensive video game in history. But in July, Bungie's Pete Parsons told GamesIndustry.biz that Destiny's production costs were nowhere near $500 million.
In my opinion, Kotick was trying to steal the spotlight from Take-Two Interactive (NASDAQ:TTWO), which spent $265 million developing and marketing Grand Theft Auto V, the most expensive video game in history. That's not the first time Activision has thrown huge, conflated numbers at the media -- last November, it claimed that Call of Duty: Ghosts had sold $1 billion worth of games in a single day, although the figure only referred to units shipped to retailers, instead of those sold through to customers.
Meanwhile, Destiny was dubbed the "next Halo" by gamers and the media, although it would have been tough for any game -- even one from Bungie, Halo's original creators -- to measure up to one of the most popular new franchises since the turn of millenium.
In short, Activision marketed Destiny as the best-selling IP in history, the most expensive game in the world, and the spiritual successor to one of the biggest franchises in modern gaming. There was no way any game could have lived up to that hype.
How hype can kill a franchise
While some hype is necessary to get gamers excited about a game, excessive hype, like the kind that we've recently seen for Electronic Arts' (NASDAQ:EA) Titanfall, Ubisoft's (NASDAQOTH:UBSFF) Watch Dogs, and Activision's Destiny, can cripple the game's chances of evolving into a successful franchise.
Titanfall and Watch Dogs were both previously hyped as the hottest new IPs of the year. To date, Titanfall has sold 3.4 million copies, while Watch Dogs has sold 5.8 million copies. Those numbers, while decent, definitely didn't set any records -- Grand Theft Auto V, for example, has sold over 32 million copies, while Call of Duty: Ghosts has sold nearly 23 million copies. In terms of a new IP, both games failed to top Halo: Combat Evolved (2001), which sold 6.4 million copies on the original Xbox.
This trend of expensive, overhyped, and disappointing games is troubling from a financial perspective. Halo: Combat Evolved cost $30 million to make back in 2001, but budgets for triple-A games now regularly top $100 million. According to cloud gaming service OnLive, a video game publisher keeps about $27 for every $60 game sold, and the remainder goes toward platform royalties, distributors, and retailers. Therefore, to break even on a $100 million game, a publisher must sell around 3.7 million units. That's why we're seeing more microtransactions and DLCs (downloadable content) for triple-A games.
To make matters worse, publishers usually increase budgets for sequels to make them bigger and more impressive than the original game. Ubisoft's original Assassin's Creed (2007), for example, was developed by one team for about $20 million, but Assassin's Creed IV: Black Flag (2013) required nine studios and a rumored production budget of $100 million. However, Ubisoft spent five times the money to sell fewer games -- the original Assassin's Creed sold 11 million units, compared to 9.2 million units for Black Flag.
Therefore, it might not make financial sense to follow up games like Destiny, Titanfall, and Watch Dogs with even pricier sequels if they sell fewer copies.
A Foolish final thought
Destiny certainly isn't a commercial bomb, but it's definitely a critical disappointment. Activision clearly wants Destiny to become its next pillar of growth after Call of Duty, Skylanders, and World of Warcraft, but over the next few months we'll see if it has the momentum to become the next Halo, or if it will fall short and stumble into the same pile as Titanfall and Watch Dogs.
Leo Sun 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. 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.
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