I met Bobby Kotick (Activision CEO) as an Intern at Activision in 2008 and I asked him specifically if they were considering getting into "casual games" which were just starting to come into their own.
I'll never forget his answer: "No one has figured out how to really make money with casual games yet, but once someone does, we'll just buy them."
Companies like Activision are too big to innovate and they know it. They exist to provide stable cash flows to investors, and big payouts (exits) to the companies that do innovate. There's nothing wrong with that; but growth by acquisition is a double edged sword: a few bad purchases can sink your company.
The video game industry is largely moving toward the studio model used by Hollywood as a result.
The floor of that chart is 4.4 billion a quarter, there peak is 5 billion a quarter. That is stable income especially when compared to most game companies.
As an investment, you should treat Activision (or EA, or any other dev studio) like you would a movie studio. The business model is fundamentally the same, albeit with potentially bigger numbers on a per-project basis. Hell, most movies use a lot of the same production techniques that games do (motion capture, 3d modeling, etc).
As a result of that, it's a boom-bust company. A few bad releases can put them in trouble. Media is volatile because consumer tastes are fickle, and video games are no exception.
That's only partially true in the case of Activision Blizzard. World of Warcraft has provided them with something that very few gaming companies have ever had: massive, dependable monthly payments.
That has gradually declined of course, over a decade. They still have ~5.6 million paying subscribers to WoW, generate a billion in sales annually from it, and hundreds of millions in profit.
Yeah, but WoW is a once in a generation type of game. No MMO since (or likely ever to come) will capture the type of mindshare that WoW did. It's got staying power that can be rivaled by very few games -- CounterStrike and Starcraft the only other games that come to mind for maintaining that level of popularity for that long.
Yes. Like movies and music, games is a "hits" business. The model is wholly dependent on churning out 99% formulaic content and having 60% of it at least break even (and 10% breakaway hit, making back many times production costs to pay for the 30% of projects that don't meet expectations).
Games may have a longer shelf life than movies, but at the macro level, the same principles apply. EA and Activision are the MGM and Paramount of the games industry because they know and practice this. As unpopular as it may make them among industry insiders or hardcore fans, this is the way the hits business (as applied to conventional notions of a stable company) works.
And really, most of Apple's "innovations" are taking innovations created elsewhere and applying them to mass-produced consumer products. Not that what Apple does isn't innovative; but it's industrial-scale innovation.
Activision is a media marketing and investment company. Why bother being innovative when the mass-market AAA games they churn out earn $1-2 billion each in global sales? They're not trying to be innovative; they're trying to make mainstream video games.
Oh it is, but they sold half the company for $1.5 billion in 2013. Seems like a steal today, the other big mobile studios must be chomping at the bit seeing King go for $6 billion and knowing they are all that's left.
I'll never forget his answer: "No one has figured out how to really make money with casual games yet, but once someone does, we'll just buy them."