I don't think I've ever seen a stock as polarizing as Activision Blizzard (Nasdaq: ATVI): Folks either love it or hate it. Anders Bylund even posed the question in a recent article: Why do we love it?
In case you missed it, Activision Blizzard was my very first pick for my Rising Stars portfolio. And I admit it took me awhile to actually come around, too. At the risk of dating myself, I am what my friends here at Fool HQ like to call "old school." I am a little more Galaga and Donkey Kong, and that's OK by me.
I don't see any trees
But with Activision Blizzard, I think some may be missing the forest for the trees. We need to focus on what the company is doing. As long as the company is performing, the stock price will follow. Eventually.
There is no question that Activision Blizzard relies heavily on franchises like World of Warcraft and Call of Duty. The trouble with comparing games like these to Guitar Hero, though, is that there are plenty of substitutes for Guitar Hero, like doing the real thing. I'm one who plays the real guitar and a little real piano, too, and games like that should get old, quick.
I wanna play something else
It's not so simple, though, with World of Warcraft, Call of Duty, and even StarCraft. No real substitutes exist (unless you want to go to jail). These franchises have an abnormal shelf life because there is nothing else like it. Don't get me wrong: This is still entertainment, pure and simple, and companies like Netflix (Nasdaq: NFLX) and Electronic Arts (Nasdaq: ERTS) are all vying for our entertainment dollars.
I've heard the argument that consumers are changing their tastes toward games like Farmville or Angry Birds, but I just don't buy it. Those are games you play while you're on Facebook or waiting in the doctor's office; World of Warcraft they are not, and serious gamers aren't setting aside time in the day to play them. Ask 'em yourself; I have.
That is why the Activision/Vivendi marriage was so important; it brought two gaming goliaths together under one roof. And their third-party development model gives them the ability to pretty much go wherever the talent is to develop the cutting- edge content that hard-core gamers, dare I say, need.
One big leap
Need an example? Look at the 10-year agreement Activision Blizzard just signed with Halo developer Bungie. The Halo franchise has sold more than 34 million copies over its nine-year history and has grossed more than $2 billion in revenue for Microsoft (Nasdaq: MSFT), which owns the franchise rights.
Now I know history doesn't predict the future. But gaming is here to stay, folks. Don't think so? I'll take that bet (in fact, I already have). Like I said in my initial write-up, "I love companies that shape industries." And Activision Blizzard is doing just that.
Wings of Liberty
Let's look at a few statistics: StarCraft II: Wings of Liberty sold more than 1 million copies in the first 24 hours of its release and more than 1.5 million copies total in the first two days alone. It has sold well over 3 million copies to date and set the record for the best-selling PC game of 2010 and the fastest-selling strategy game ever (at least for now).
World of Warcraft has grown its subscriber base to more than 12 million, and with 5 billion people in the world still without the Internet, I'd say there is still some potential there. Blizzard's battle.net is a virtual universe for gamers, and my bet is that as gaming goes digital, Activision will continue to lead the way.
And let's not forget Call of Duty. With the release of Black Ops, the early numbers (while still unofficial) are a staggering 7 million copies sold on day one, including pre-orders. This would make it the fastest-selling video game ever, surpassing Modern Warfare 2 by an estimated 10%.
It's worth mentioning, too, that the next iteration of Call of Duty may be set in the future. If that's the case, gamers may want to go ahead and get in line now. And with 3-D now available, I think this party's just getting started.
It's definitely not game over
Fools, stats like these catch my attention. There may be uncertainty in the market regarding gaming's future, but I just don't see any way Activision Blizzard doesn't play a huge role in it. Could I be wrong? Absolutely. But when a company generates sales like these with a war chest for a balance sheet and trades at a measly 13 times free cash flow, well, you already know I'm taking that bet. Agree? Don't agree? Drop on by my discussion board and let me know what you think. You can also follow me on Twitter.
