Activision (NASDAQ:ATVI) recently announced the launch of its new "Call of Duty Elite" platform to coincide with the release of "Call of Duty Modern Warfare 3" on November 8, 2011. The network will be available for use with computers, smartphones and consoles. The new platform will help to capitalize and monetize the growing base of online players.
The details provided by the company were not very clear as to what is being offered. The monthly subscription price and more details are expected to be released by CEO Bobby Kotick next week at the annual video game conference.
Activision Blizzard also owns "World of Warcraft" and has been successful at getting monthly subscription fees from its eleven million monthly subscribers. These subscribers each pay $15 a month to play the game. This represents almost $2 billion a year in subscription fees.
Currently there are 7 million daily online players. If Activision could turn half of these users into subscribers it would represent $336 million at $8 a month per subscriber. This is my guess of where the company will and should put the service. "Call of Duty" subscribers spend an average of 58 minutes online. The company said in the press release that this is more than the average Facebook user. As an Activision shareholder it is nice to see the company come up with a way to monetize this time spent playing the game.
Subscribers to the Elite service will be able to compete against friends, join groups, play in tournaments, win prizes, and track statistics. A Facebook like service called Groups has been getting good reviews and allows players to be part of groups to play players that are in your affiliation. Players will then be able to play people with similar skill levels or friends. The Elite service will also likely include Maps (released separately for downloads) and extra levels.
The last "Call of Duty" game, "Black Ops," sold over 18 million copies. The last "Modern Warfare" game sold over 20 million copies. The latest version, "Modern Warfare 3," I predict will sell 20 million copies. The Elite service could boost sales by another million or two.
Possible negatives would be:
- Low subscriptions of the Elite service
- Bad reviews of the service
- Failure for the price point to catch on
The biggest worry on Wall Street right now is that users are going to be unwilling to shell out $60 for a video game and then pay $10 a month to use the live network and $5 to use the "Call of Duty Elite" service. This would represent a spending of $240 in a year on a single video game.
There will be a beta test using "Black Ops" before the newest "Call of Duty" game goes out. This should be a good way to work out kinks and get users excited about the new software. There will also be a free version of Elite which will help increase word of mouth and try to get people to upgrade to the monthly subscription price.
I am highly optimistic of this service and Wall Street seems to be as shares are up since the announcement. Shares are trading close to the company's 52 week high of $12.65. Shares have not hit the $14 mark since 2008. I think the shares are headed to at least $15 by December 2011 which represents a gain of 25% at the least by the end of the year.
The company will be releasing several Activision games this year and next year. The big drivers other than the "Modern Warfare" release will be on the Blizzard side next year with the releases of "Diablo 3" and the Starcraft expansion pack. This could help the shares in 2012 get back up to the $18-$20 level which would be a gain of 50% and upwards.
Disclosure: I am long ATVI.