Bungie's Destiny Provides Nice Upside For Activision Blizzard Shares

| About: Activision Blizzard, (ATVI)
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From the creators of Halo and the publisher of Call of Duty comes Destiny, the next evolution of entertainment. With an unprecedented variety of FPS gameplay, Destiny is an incredible story set within a newly-imagined, always-connected universe filled with action and adventure. In Destiny, you are a Guardian of the last safe city on Earth. You must defend the City. Defeat our enemies. And reclaim all that we have lost.

This is what greets people who go to the website for "Destiny", the new game from Bungie Studios. Bungie announced details of their highly anticipated game over the weekend. The details from the game should be of particular note to investors in several companies. Activision (NASDAQ:ATVI) has a ten year publishing deal with the "Destiny" game. Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT) have consoles and future consoles that will play the game.

The game will be released for the Playstation 3 and XBOX 360. In the future, the game will also hit new consoles from Sony and Microsoft. Bungie will not be releasing the game for PCs, because apparently no one plays computer games. Bungie's Jason Jones had this to say, "We made the game (HALO) run without a mouse and keyboard. And now nobody plays shooters the way they used to play them before Halo 'cause nobody wants to."

Bungie promises that "You are a guardian of the city." The game is a sci-fi first person shooter that uses storytelling and social gaming to take the video game experience to a new level. Bungie is hoping to change the first person shooter genre like it once did with the "Halo" franchise. Eric Hirshberg, the CEO of Activision Publishing has similar thoughts by saying, "Bungie defined first-person action games over a decade ago with Halo, and with Destiny they will evolve the genre once again." Bungie hopes to expand the small genre of "shared world shooter".

"Destiny" will be set 700 years in the future, giving gamers the task of protecting the last city left on Earth. Bungie has announced 7 pillars around the game:

· A world players want to be in

· A bunch of fun things to do

· Rewards players care about

· A new experience every night

· Shared with other people

· Enjoyable by all skill levels

· Enjoyable by the impatient and distracted

Bungie, based in Bellevue, Washington, is focusing the majority of its attention on "Destiny". Bungie has said that it needs more time to get the game ready, but rumors have the E3 Convention (June 11-13) as a date for more gameplay videos. Since launching details on its "Destiny" game, Bungie has taken to social media to get the word spread on its game. The game's twitter account (@DestinyTheGame) has over 23,000 followers. A Facebook page dedicated to the game has 90,000 likes.

The Halo franchise, designed by Bungie Studios, has sold 55 million copies. "Halo 3" remains the bestselling of the games, with 11.7 million copies sold (7.7 million in North America). The first game in the "Call of Duty: Modern Warfare" franchise sold 8.86 million copies on XBOX 360 and 6.3 million on the Playstation 3.

The game is available for pre-order on Amazon, with a $59.99 retail price. The game is modeled after MMO games, but will not have a monthly subscription price. This is rather surprising considering Activision's Blizzard unit depends on monthly subscription revenue from "World of Warcraft" to give the company its large profits.

"Destiny" will instead rely on micro-transactions in the game. Gamers will collect gear that customizes their characters. I'm guessing that users will also be able to purchase these items to bring in additional revenue for the game. Activision could also change their minds about the monthly subscription model at a later date. Downloadable content could also become a key revenue driver for the game. "Call of Duty" gets extra revenue from map packs and Bungie could have a similar impact on additional revenue for Activision.

On the flip-side of the positive announcement come the high expectations associated with the game. Bungie, with its experience with "Halo", has a lot of weight on their shoulders from Activision. Bungie was once owned by Microsoft, before it split off on its own. The studio lost the rights to create "Halo" games for the XBOX. Activision came along as a potential savior and signed Activision to a ten year deal. If "Destiny" sells well, Activision and Bungie will be able to release follow-up games. However, if sales don't meet expectations, Activision's deal could hurt the company. Activision has relied on the sales from its blockbuster franchises, but continues to need a new franchise to get shares a boost going forward.

"Destiny" requires a constant internet connection to play. Despite the majority of gamers having immediate access to the internet, this reality may hurt sales of the game. Amazon has listed a release date of December 31st, 2013. Bungie has not given a release date, but the game is not expected to be released in the current fiscal year. In fact, no guidance for the game's sales has been built into any revenue targets.

Shares of Activision Blizzard trade at $14.37 and recently made new 52 week highs. Shares hit the $14 mark for the first time since November of 2008. In a recent article, I pointed out several key games that will impact 2013 including: "Call of Duty: Online", "Walking Dead", "Starcraft II" expansion pack, "Blizzard All-Stars", and "Skylanders SWAP Force".

"Desitny" now gives the company a head start on 2014, which could also include Titan, the long awaited MMORPG to follow-up "World of Warcraft" and its declining subscription base. Investors should buy into Activision before an exciting 2013. Shares still trade at around 14x this year's expected earnings. Activision shares traded in a small range of $10-$13. "Destiny" could be the kick that Activision shares need to stay above the $13 range going forward.

Disclosure: I am long ATVI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.