Following the company's second quarter earnings report, analysts issued their usual investors notes on Activision Blizzard. One comment that raised some eyebrows came from Ben Schachter of Macquarie Securities, who said "we have significant concerns that CoD may have peaked in 2011."

GamesIndustry International followed up with Schachter to get a fuller explanation of his thoughts. He believes that Call of Duty will have a hard time showing growth for a number of reasons outlined below:

HD hardware and software as a whole have been declining all year (i.e., it is not just weak Wii sales that are impacting the industry)
Lifetime unit sales of Modern Warfare 3 are slightly below Black Ops
The genre seems tired
The futursitic setting may not have the same appeal for some
The macro economic environment is causing some gamers to hold back on upgrades
Currency fluctuations mean that European sales are worth less to ATVI shareholders

Michael Pachter of Wedbush Securities largely agrees with Schachter's assessment. "Annual sales at the 25 million level are unprecedented, so it's easy to say 'that's the peak.' I think that the growth in online multiplayer fueled CoD sales, since it was (and probably still is) the best multiplayer experience available. However, last year, Battlefield multiplayer probably cannibalized it a little bit, and this year, Halo and Medal of Honor could cannibalize CoD a bit more. Next year, another Battlefield plus the Respawn and Bungie games probably cannibalize it a bit more," he said.

That said, even if CoD doesn't show growth, it's bound to post massive sales again. "There's nothing wrong with 22 million units sold, or with 19 million or 16 million. CoD will remain the best selling game (at least until GTA) and Activision shouldn't be concerned if it loses some players at the margin. They created a phenomenon, and others are emulating them," Pachter continued.

Colin Sebastian of RW Baird believes that CoD may have peaked already too. "Activision has provided financial guidance assuming that Call of Duty is lower this year than last year, so I think that is a rational comment, especially given the tough console market right now," he said. "Also, if new consoles are coming next year, that is typically a disruptive period for game sales, and that could drive sales lower as well, at least temporarily. The bigger question I think is whether the franchise (or any franchise) is in a continuous period of decline. Personally, I don't know which competing console title would take so much share from Call of Duty."

Of course, these days, thinking about a product's retail life is not the only way to measure success. Call of Duty lives in an online world, and with Elite, and the expansion to China via Tencent, it could be argued that the brand's potential hasn't peaked at all.

"With the movement to digital and opening of new markets like China there will be an entirely new source of revenue for Call of Duty that will both replace some of whatever is lost at retail and also not be tracked in retail sales data," remarked Jeremy Miller of DFC Intelligence. "We feel that Call of Duty is a very strong brand and has plenty of ways to monetize. Tracking retail unit sales year over year is not really a fair comparison as they could be down but overall revenues might be up. So it may very well have peaked at retail but one needs to look at the entire picture. In that sense we do not feel Call of Duty has peaked."

Posted: Jun 16, 2011 5:17 pm
Last Updated: Sep 01, 2020 4:20 pm
Related Forum: Call of Duty Forum