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As a follow-up to my two my recent Activision Blizzard (ATVI) articles found here and here, I wanted to put into perspective just how well ATVI stock has done since, and where I think the stock is going.

Currently ATVI trades at around $12.00, and at the time of the previous articles, it was close to $13.00. The previous articles were bearish, and this stance has not changed. In fact I am even more bearish as of today.

Many investors and fans have agreed with the consensus that ATVI's 8 year old flagship game World of Warcraft or WOW is finally in decline. In fact, just reading the mixed reviews on the latest WOW expansion, Cataclysm (found here) will give the reader a general idea of where the fan base is split.

The main issue is this: those millions of WOW subscribers do contribute a fair amount of revenue to ATVI, and there is no guarantee that this is sustainable, nor that any new proposed MMORPG produced by ATVI can make up for the WOW one trick pony of residual revenues. Once this reality sets into the financials, look out if you are holding ATVI shares.

Many investors thought Diablo 3 was going to be a hit and propel ATVI past $13. Sure, the game sold millions of copies, but who is still playing it? In fact, the number of Diablo 3 players has fallen off a cliff (a 65% drop). Carrying this fact forward, it doesn't matter about the D3 real money auction house or RMAH, because if there are no players, nobody will buy items with real money. I personally played Diablo 3, had my fun running through the 35 hours of game play twice, and now I am done. I never spent a penny of real money on the RMAH, and I am pretty sure that the majority of players are in the same boat.

As for Skylanders, I was at Wal-Mart (WMT) last week, and saw that the shelf was fully stocked with the toy, and had a thick layer of dust on the boxes. Maybe there is a place where these toys are still flying off the shelves, but not where I live. At this point, I truly feel that Skylanders will be another fad toy that doesn't pass on to the next generation of kids. As for Call of Duty, it will be one of the only titles that will keep ATVI afloat. With that said, how many sequels of Call of Duty are you going to make, and where is the residual revenue going to come from? Furthermore, is StarCraft 3 going to be released within the next 10 years, and before Vivendi (OTCPK:VIVHY), the parent of ATVI, dumps their majority holding of shares?

Onto the proposed WOW killer: there are a few contenders. The one in which I will mention in this article is NCSOFT's (OTC:NCSCF) Guild Wars 2. For starters, there is no subscription fee to play this game. No matter how you shake a stick at it, free is quite a compelling marketing ploy versus a paid subscription. As mentioned in the previous articles, free to play or F2P is definitely a force to be reckoned with, and is not to be discounted (pun intended). After paying roughly $60 to purchase GW2, the player is treated to breathtaking new graphics, and updated in-game play fixing many gripes players have with WOW. There is an optional micro-transaction setup for additional revenue streams for NCSOFT. The micro-transaction type of model is where I think the industry as a whole will move to, and gone will be the days of the $15 /mth subscription gravy train. For example look at Electronic Arts (EA) Star Wars The Old Republic title, which has moved to F2P - something many would have guessed would have taken a lot longer to have happened, if ever. Examining EA's share price, it is currently at half of its 52 week high.

There might be a few that disagree with my assessment that GW2 is a better game than WOW. That is fine, however the point is that it doesn't matter. What matters is that WOW is getting old, plain and simple, and as a result this is like a drug coming off patent for a big pharma company. It will affect ATVI's bottom line, period. The proof is in the current share price. A trader may be able to make 50 cents to a dollar a share when the hype of Mist of Pandaria for WOW is about to release, but the outlook for a long-term buy and hold investor is bearish at best.

Source: Look Out Below, Activision Blizzard: Finally A True WOW Killer