Activision Blizzard’s Q1 – Better Than Expected With a New Billion Dollar Franchise

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Activision Blizzard (NASDAQ:ATVI) have revealed their financials for the first quarter of 2017 and they're looking good. To be more exact, the figures for the company are beyond even their own expectations.

For the first quarter of 2017 Activision Blizzard saw total revenues of $1.726 billion, up from 2016's $1.455bn. Digital revenues accounted for 80% of the company's revenues and the surge from Overwatch, now their eighth billion dollar franchise, has led to the best first quarter in the company's history. Bobby Kotick, Activision Blizzard's CEO, stated "This quarter we delivered record revenues, earnings per share and cash flow, and over‐performed guidance".

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What may be a surprise is the division of growth. We've covered on multiple occasions the boom that is mobile gaming. It shouldn't be a shock that the largest growth comes from mobile and ancillary. Although this includes sales of non-platform specific merchandise, the revenue from King indicates the majority is mobile related. In addition, following the success of Overwatch and World of Warcraft, the growth of PC should come as little surprise.

Following on from a noted trend is the fall of retail as the significant distribution method. A year on year fall of 44% has been noted, with digital distribution rising 50%. The rise of the Asia-Pacific region also lines up with the boom of mobile as a revenue source. With future plans for King in motion, it wouldn't be a large surprise to see mobile generating over a third of the company's revenue in the near future.

Overwatch has led the line for Blizzard. As previously mentioned, it is now the eighth billion-dollar franchise for the company. Although others aren't mentioned, it's certain that Call of Duty, Warcraft, Candy Crush and Skylanders are part of this collection. Alongside Overwatch, World of Warcraft has seen a resurgence and great success for the start of the year.

These two titles, alongside Hearthstone which has seen a milestone of 70 million registered users, have led to Blizzard showing 41 million monthly active users (MAUs). This figure shows a 58% year on year growth. However, Activision revealed a fall to 48 million MAUs and King falling to 342 million MAUs. Total MAUs for the company has been revealed as 431 million, down year on year from 544 million MAUs.

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Leagues and Tables - A Look to the Future

Fortunately, the company has a number of plans to increase this flagging number of users. The foremost is the upcoming Overwatch League, the spearhead of a movement to further professionalise eSports. Bobby Kotick stated that Overwatch "now has over 30 million players globally. The Overwatch League is gaining momentum and weʹre excited to offer our community of players the best professional league experience". The Call of Duty World League Championship will also be held this August with a prize pool of $1.5m.

Plans are also in place to utilise King to develop a new Call of Duty experience. What this experience will be hasn't been documented, although earlier information from job listings on King's site indicates it will be a game rather than a companion app. King has also entered into a partnership with PlayStudios, where King will aim to enter the social casino genre of mobile games, offering competition to Zynga Poker, the game that helped Zynga (NASDAQ:ZNGA) regain some lost ground and increase revenues.

Following the success of Q1, Activision Blizzard are now predicting revenues for Q2 of $1.425bn and yearly revenues of $6.1bn. For the year, Activision are looking forward to the release of both Destiny II and Call of Duty: WWII. The latter, in particular, has been met with hugely positive fan reaction with the trailer also being the fastest in Call of Duty history to reach 10 million views.

The success of this quarter, alongside the potential of Call of Duty and Destiny II, could potentially see a bumper year for Activision Blizzard. New predictions for Q2 and the 2017 financial year certainly indicates a rise in confidence. Following the strong start, only time will tell how the year progresses. All things considered, there's little doubt that the potential is there.

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