Activision’s Duty to Challenge ‘Fortnite’

By Anonymous
Activision’s Duty to Challenge ‘Fortnite’

Attendees play the Activision Blizzard’s ‘Call Of Duty: Black Ops 4’ videogame at a company's booth in Los Angeles, Calif., in June. Photo: Troy Harvey/Bloomberg News

Some may think “Call of Duty” has fought a few too many battles, but the storied videogame franchise appears to have plenty of life left.

The 15th sequel to Call of Duty doesn’t officially launch until next month. But strong buzz for the iteration, known as “Black Ops 4,” has been emanating from the videogame community since last week, when publisher Activision Blizzard performed a closed beta test of a game mode called “Blackout.” That mode offers a style of play called battle royale, where a group of gamers play until only one remains.

Such tests aren’t unusual. But battle royale is the same style of play that has turned “Fortnite” into a global gaming phenomenon. It has also not been available previously on big, established shooters such as Call of Duty, so interest among gamers and investors is strong.

Jefferies analyst Timothy O’Shea noted that Black Ops 4 viewership topped the Twitch network—which streams live gameplay—on Sept. 10, when the trial launched, and more than doubled the viewership of Fortnite that day. And Ben Schachter of Macquarie said the trial shows Activision “has been able to nail” the battle royale mode for its new game.

Activision’s share price has jumped more than 8% since the start of the beta.

The strong buzz bodes well for Activision, which already faced high expectations for its biggest release of the year. Analysts expect revenue from the Call of Duty franchise to jump 27% this year to about $1.9 billion, according to consensus estimates from Visible Alpha. That would help offset projected declines from other big games such as “Destiny,” which faces a difficult comparison with a major sequel launched last year.

Activision has other big games, including popular Blizzard titles such as “World of Warcraft” and “Overwatch” along with lucrative “Candy Crush” mobile franchise. But Call of Duty is Activision’s biggest property by far. Analysts estimate the franchise will account for nearly one-quarter of the company’s adjusted revenue this year, according to FactSet.

So Activision needs this game to do very well. And as popular as Call of Duty is, that wasn’t exactly a given, as this fall is crowded with other big shooter releases along with an expected new season for Fortnite. And while Activision’s stock may look a bit stretched with a gain of 25% already this year, a strong Call of Duty should help investors score a few more points.

Write to Dan Gallagher at [email protected]