As we go into the holiday season we can figure that there will be a lot of little thin wrapped rectangular boxes under every tree. With no new major console releases planned (not counting the Nintendo DS3, which will be a sleeper hit, at best), the "must-have" items are going to be games. Electronic Arts (ERTS) has a lot to bring to the table, especially since a NFL strike was avoided, and they were able to release the latest installment in their highly lucrative Madden franchise., and another update to their Sims franchise Electronic Arts can expect to have another solid year. In addition, the upcoming release of its Star Wars Massive Multiplayer Online Role Playing Game (MMoRPG) The Old Republic looks like it has the potential to be a huge hit based on pre-sale data. However, ActivisionBlizzard(ATVI) looks like it has a much better lineup of upcoming releases, and with the World of Warcraft already established and providing a stable source of revenues, Activision looks to be the much better play in this sector.
There is no doubt that this industry lives and dies by the games it releases, and I can positively say that ATVI has a great lineup. Its release of StarCraft II: Wings of Liberty estimated to have sold more than 4.5 million units shows that there is large demand for the StarCraft franchise, and for well designed PC Games. StarCraft II still has two more versions to be released in the future, meaning we can expect to see these significant numbers from the PC division over the next couple of years. Additionally, there is the upcoming release of Diablo III, another popular PC franchise from Blizzard, can be expected to sell over 2 million units (based on sales of Diablo II and Diablo) providing a significant bump to the PC division. The upcoming release of the latest Call of Duty looks to be a definite hit. With the special edition retailing for $99.99 a unit and the regular edition retailing for $59.99 both the 12th and 8th highest selling video games on Amazon.com and having total pre-order numbers standing at appoximately 1.6 million (as of 9/17/2011). Finally, the company's MMoRPG division is a stable source of continuing revenue, and as countries such as China continue to see rising standards of living, we can expect to see more users in developing countries bringing the number of continuing subscriptions over 11 million.
Electronic Arts also looks like it is in a great position for the upcoming year. Its Battlefield 3 is currently number 5 on Amazon.com's best selling video games and has pre-orders of over 950,000, and is Madden NFL games remain popular and lucrative for the company. However, its Electronic Arts upcoming release of Star Wars: Old Republic that looks to be the major wild card in the company's future. Electronic Arts, unlike Activision does not have a solid MMoRPG franchise. The pre-sale numbers for the Old Republic have been solid currently at 463,121, however I have serious questions about whether or not the game will be able to gain significant traction in the MMoRPG market. With a significant number of people already playing World of Warcraft, will users split their attention with the new Star Wars game? Or will the Star Wars name be a big enough draw for people who have not played MMoRPGs in the past, and will they stay active subscribers?
In this economic environment, with the continued high unemployment and lower consumer confidence, I suspect many parents will be cutting back on "big" ticket items for the holiday season. Video games, always a favorite, can be expected to maintain the same level of sales as last year, if not get a bump up as parents shift from $150-$200 dollar items to one or two $60 dollar items, such as video games.
Both companies look to do well this holiday season. However, with BlizzardActivision's established MMoRPG, and the continued growth opportunities in Asia, and current upcoming releases before the year-end, and longer-term releases such as the future StarCraft versions, I think Activision is the better choice for your portfolio.