Reports have indicated that Activision Blizzard (NASDAQ: ATVI) will not issue a new Skylanders adventure in 2017 for the major consoles. Indeed, this is confirmed early on in the recent earnings-call transcript by COO Thomas Tippl.
There are two ways to look at this. Either it's a smart decision, or it is something less than that, an opportunity cost that does not take into account that core fans of the series will feel as if they are missing out this year.
Indeed, it isn't an easy decision to make. Upon first hearing this, as a shareholder, I was disappointed and wondered about the lost revenue. For many gift-givers, it has become a tradition over the last several holiday seasons to seek out the new Skylanders software starter packages and deliver them to gamers.
But there is a danger to iteration after iteration of any franchise, especially in gaming. It's important to know what's going on in the marketplace as a whole and in the minds of the target gamers. Take this article from June of last year as an example --- it discusses growth issues pertaining to the toys-to-life category.
Proper management of a brand portfolio is harder than it appears, and when the inevitable slowdown occurs, the true value of a management team will reveal itself. I'm bullish on Activision Blizzard stock, but I'd be less than truthful if I said that recent news about Call of Duty didn't somewhat discourage me. As this piece from last summer argues, the series could be at a crossroads, and at the very least, new thinking about its future is certainly requisite. A more recent article mentions the challenge Duty has faced in the context of an overall thesis recommendation.
With Skylanders, which might be experiencing some fatigue, the idea of a reexamination is likewise obligatory, and I am taking it optimistically. In fact, I am hoping it will encourage management to truly look at that game as not just a universe set in a humorous fantastic world, one with weird creatures and strange action figures, but as a device that could be used to tell more interactive stories. The portal could be used not just for Skylanders adventures but for other franchises as well. Could a Pitfall! adventure land on the portal and feature action figures based on that property? Yes it could, and yes it should. So could Duty be given the toys-to-life treatment. And, of course, Activision Blizzard could come up with new games that would use the platform.
When I look at the company, I find that there is ample room for flexibility in terms of franchise cycles and rest periods. The business is doing well and is becoming more diverse. The tale is told in some SA pieces. Earnings were beat. The company is getting into original content and consumer products (see this piece). There's opportunity in the mobile sector (Candy Crush) and opportunity for further acquisition strategies. The way I see it now, I'm hopeful that management, when it sees a franchise suffering in sales, will have no fear in terms of relying on other parts of its model for purposes of giving a brand a rest so that it may be positioned to grow later on.
Skylanders will obviously be back, but for now, let's hope management focuses on the big picture of eSports and content and all the rest. There will be some disappointed fans, and that's okay, because sometimes in business you have to think of how best to keep a property going. I don't see this as anything affecting the long-term thesis of the stock, although I will be watching the toys-to-life category carefully the next several months.
Disclosure: I am/we are 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.