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Here's What Activision Blizzard, Inc. Has to Say About Call of Duty

By Ashraf Eassa - Feb 16, 2016 at 9:30AM

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Activision-Blizzard's management offers some interesting insight into one of its most popular video game franchises.

Call of Duty from game publisher Activision-Blizzard (ATVI -0.07%) is arguably the most well-known and successful first person shooter game franchise of all time. The games are known for their high-budget and over-the-top single-player campaigns and, perhaps more importantly, their addictive online multiplayer.

On Activision-Blizzard's most recent earnings call, management went into quite a lot of detail on what investors should expect from this franchise this year. Let's take a closer look at what they had to say.

Laying out expectations for 2016
Per CFO Dennis Durkin, Call of Duty: Black Ops 3 has "exceeded" the company's expectations "in practically every commercial and engagement metric," which he says helped to deliver upside for the year.

For 2016, Activision-Blizzard expects the Call of Duty franchise to "continue its strong momentum" and for Call of Duty revenues to be up for the year due to a number of reasons.

The first is that the company plans to roll out several new pieces of downloadable content, which essentially add additional multiplayer levels to the current Black Ops 3 game.

Although not all Black Ops 3 owners will buy this additional content, the company seems to have had solid success with downloadable content in prior Call of Duty titles, so I'm expecting this success to continue.

Additionally, in keeping with tradition, the company plans to launch what it refers to as an "innovative new Call of Duty game" in the fourth quarter of the year. Activision Publishing CEO Eric Hirshberg says that this title is being created by the company's Infinity Ward studio, the team behind the Modern Warfare Call of Duty games as well as Call of Duty: Ghosts. It will be interesting to see if this is an entirely new franchise or if this "innovative" title is more along the lines of a Call of Duty: Ghosts 2. 

More details on Call of Duty's overall performance
Encouragingly, Activision Publishing CEO Eric Hirshberg said that both operating income and margin growth associated with the Call of Duty franchise "continues to expand." This is no doubt driven by what the executive says is a "phenomenal reception to in-game content and services."

It's no surprise, then, that Hirshberg is so focused on improving "player engagement" metrics.

"Engagement creates the opportunity for us to earn additional player investment by providing more great content, which in turn leads to more engagement," said Hirshberg.

A final tidbit: Call of Duty in China
PC gaming is considered quite strong in China, which is no doubt why analysts on the call were interested in teasing out the performance of the Call of Duty Franchise in the country. Luckily for investors, management provided some insight there as well, and the news seems good.

"[Call of Duty] has been growing revenues month-over-month for the last six months in a row," Hirshberg said. "We believe that the updates we have planned for 2016 will further improve the game play and the performance."

Recall that back in early 2015, Activision released a "free to play" version of Call of Duty known as Call of Duty Online, published by Tencent Holdings. To monetize such games, the company relies on "micro-transactions" -- in other words, the game strongly encourages players to spend real money for virtual goods in the game.

"We remain optimistic about the game's opportunities," Hirshberg said. However, he did caution that it will take time to ramp up the revenue stream from the project. Indeed, after Hirsberg's comments, Durkin pointed out that despite the company's "great aspirations" with respect to Call of Duty Online, the ramp that it's planning for in 2016 is "very prudent."

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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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