Activision - Going Back To The Future At Gamescom

| About: Activision Blizzard, (ATVI)


ATVI bringing back '90s software favorite Sierra Entertainment with new games.

First expansion of Destiny to come out in December.

Total Destiny franchise price tag to equal $500 million by end of 2020.

This week, the world's top game developers descended on Gamescon 2014 in Cologne, Germany for the biggest video game convention of the year. As we come out of the summer months and look ahead to the fall, it's a chance to boast about the past year in the industry as well as serve up trailers and teasers for the most expected titles. The future may be the main topic at hand, and Activision Blizzard (NASDAQ: ATVI) gave attendees that with news that Bungie's Destiny will have its first expansion come out in December - two months after the game's official launch, but also a blast from the past with the revival of '90s software developer Sierra Entertainment, complete with a new slate of games and expansions of old ones. Both announcements made gamers race to their laptops and circle dates on their smartphones, and was a confirmation that Activision's recent retail and investment popularity is not without cause.

Into the past with Sierra

A cult favorite with '90s techies, and really anybody who grew up during that decade, Sierra Entertainment entered into a long decline by the early 2000's until Activision bought the company in 2008. It was then wound down and appeared to be gone forever until recently when the studio's website was edited to contain a message about a new development for Gamescon 2014.

What was the news? Sierra is back!

Now under the auspices of Activision, Sierra will be releasing new "edgy" games for PC and consoles (titles haven't been announced yet for this new genre), but also will be bringing back new editions of classic games, such as the point-and-click trailblazer King's Quest and Geometry Wars. Popular games two decades ago, they will be given a 21st century makeover in terms of graphics as well as complexity that should win over a new generation to the Sierra fan-base, while reigniting nostalgic feelings from older fans, who can remember pointing-and-clicking for hours on their Windows 95 computers.

The games will be under new developers, though. King's Quest will be made by The Odd Gentlemen studios, while Geometry Wars will be under Lucid Games since its original creator, Bizzare Creations, was dissolved by Activision long ago. Developer differences aside, this was a welcome surprise for Gamescon goers, and the publicity of the announcement may translate to yet another successful (if not small) corner of the market for Activision, justifying their recent good fortune with gamers and investors excited for the company's future.

Back to the future with Destiny

While the nostalgia trip with Sierra's return brought a smile to many of the '90s babies at the convention, most Activision and Bungie fans were waiting on news of highly touted new release Destiny. Coming off the revelation that the entire franchise will cost $500 million over 10 years starting in 2010 in development costs, as well as the unfortunate news that everybody's beta characters from the pre-launch trial will be erased before the September 9th release, some fans were a little concerned that Destiny was making unforced errors. This made Gamescon an important, though not necessarily game-changing, moment for Activision to cool the waters one month from judgment day.

It did that by announcing that the first expansion of Destiny will be available for download by December, which went down well because for a lot of beta players, the edition of the game they were playing was very limited, especially with the much-touted open world dynamic that is supposed to be the sticking point. An expansion was thus necessary so soon after launch to prevent burnout from players, especially the ones that accumulated so much armor and loot in the beta only to find out they have to part with it.

The issue wasn't the loss of the beta characters per se, many game analysts actually agree with the decision because it would've given an unfair advantage to those that pre-ordered the game if they began so far ahead of everybody else. The issue was the fact that this wasn't made clear by either Bungie or Activision prior to, or during, the beta test, which would've allowed testers to spend more time trying out game mechanics and combat rather than item collecting. This might wind up being a small speed bump on the way to legendary status for Destiny (can investors expect less for a $500 million price tag?), but it was important to keep the vast majority of customers onside for such a highly touted launch.

A big but nimble company makes investors happy

Activision has been having a dream 2014 in the eyes of investors. The share price has risen 33% over the past 12 months, emphasized by the Q4 2013 earnings report this February. Since then, strong releases of marquee titles Call of Duty and Diablo have kept revenues and profits up, while new franchises Skylanders and Hearthstone have impressed gamers and investors with big revenues and great global sales figures. Adding Sierra Entertainment gives Activision another area to thrive in, and Destiny's imperfect but successful beta launch creates a lot of confidence among investors. Activision has a lot to live up to for its "biggest second half" ever, but so far the ingredients are in place. All that's left is to bake the cake.

Disclosure: The author is long ATVI. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.