If you followed Activision closely in the past year, you would know the stock ignored weak sell-through data from Call of Duty Ghosts (-30% vs. the previous Call of Duty), Skylanders, and even a one million subscriber decline in World of Warcraft over 6 months. Actual sell-through data for Activision’s catalog from reliable sources in the last 5 quarters were: -26% y/y, -6% y/y, -28% y/y, -44% y/y, and -10% y/y. The weak sales did not matter; the stock kept going up because of the narrative that “Destiny will be as big as Call of Duty/Halo/Grand Theft Auto and was going to save the day.”
On September 9th, Destiny came out. Conspicuously Activision didn’t send out review copies to web-sites like they normally do a week before launch. Then the reviews came out a few days later. They were awful. Three of the largest, most prestigious game sites gave Destiny a 6/10, which rarely happens for big games. I spent 19 hours finishing the game and I agreed with these negative reviews.
It was the biggest critical flop relative to expectations for a large budget title in a very long time. The market focused on the poor quality of the game as being detrimental to the future potential of the franchise’s DLC and sequel sales. The Destiny franchise was now severely damaged.
The stock started to fall. Activision then added fuel to the sell-off with a Destiny sell-through press release of $325 million in 5 days. The market quickly realized Destiny is selling at a fraction of the rate of Call of Duty (COD: Black Ops 2 sold $500 million in 24 hours) and Grand Theft Auto (GTA V sold $1 billion in 3 days). The hopes and dreams of Destiny being the next Call of Duty or Grand Theft Auto were dashed.
The narrative of Destiny is “going to save the day” was no more and the market could also no longer ignore the secular decline of the core Call of Duty, Skylanders, and World of Warcraft franchises in the past year and the future.
-week 2 sales sell-through down 78% week over week
-week 4 sales sell-through down 30% week over week
-leaked Bungie contract with Activision showing a 2 year cycle for Destiny sequels, Destiny intellectual property ownership by Bungie not Activision, and large royalty split
-Destiny game discounts: 17% off, 33% off
-Michael Pachter: “Destiny..is all but assured a solid Metacritic..We expect between 88-92″
-Michael Pachter after Destiny gets a Metacritic of 76: “That’s not good enough, I think, to support a recurring franchise”
-examples of “damage the relationship” to customer post , another one , another one
-Activision uses reviews from no-name sites like Pocket Lint, Biogamer Girl, and Rebel Gaming in the center of national TV commercials
-6 key people left Bungie
-Veteran game journalists on Rebel FM podcast episode 230: Destiny nothing like what was promised when he visited Bungie for 8 hours “(promised) big place..personalized..what happened? Not what we have” “not only is Destiny critical disappointment..it will be a sales disappointment” “I don’t understand how it took 500 people to finish this game” “It’s doesn’t make sense to me” “where did all that !@#$ money go” “Call of Duty is falling down faster than they expected it to” “Call of Duty..fall apart faster than they can replace it..Destiny is not the game that’s going to do it”
-Game journalist Patrick Klepek on Destiny “it’s so tremendously bad”
-Shane Satterfield’s (ex-GameTrailers) insightful take on Destiny DLC
World of Warcraft
-September 23, 2014 World of Warcraft successor gets canceled
-Michael Pachter quote on MMO cancellation: “(news is) a problem..It is a blow, for sure, They need to stem WOW declines..”
-World of Warcraft subscribers are down over 40% from peak of over 12 million
-“Blizzard will move forward with an eye toward more small, experimental projects”
Call of Duty
-Cowen says pre-orders for this year’s Call of Duty are down more than 50% vs. Call of Duty Ghosts in 2013 and down 80% from the Call of Duty in 2012
-Call of Duty Ghosts sell-through was down 30% from Call of Duty Black Ops 2
-8 quotes from gamers on the damage Call of Duty Ghosts did to franchise and how it will hurt this year’s COD sales
-Call of Duty Ghosts is the 54th most played game on PC today
-Google searches for “call of duty preorder” are down 64% y/y
-Skylanders sell-through is declining
-6 quotes from consumers on Skylanders fatigue
-one day after launch Skylanders Trap Team is 98th on Amazon’s videogame bestseller list and below Disney Infinity which was released 3 weeks prior
-Google searches for “skylanders” are down 46% y/y
Call of Duty Online
-Bad pedigree: Call of Duty Online is being developed by Raven Software which developed Call of Duty Ghosts multi-player, widely criticized as the worst in Call of Duty history
-Call of Duty is mainly a Western console brand and doesn’t have same power in China where PCs and the game Crossfire is dominant
Heroes of the Storm
-League of Legends and Valve’s Dota2 dominate the MOBA market. It will be very difficult to compete against these two entrenched players
There is a clear lack of buzz for Skylanders this year vs. previous years. Here’s a roundup of posts that show Activision’s Skylanders franchise is showing fatigue with this year’s Trap Team version. I also read a number of posts saying they have decided to buy Nintendo’s Amiibo characters instead this year.
Kemal86 – “This is the first Skylanders that I’m not super interested in. The “Trap gimmick” isn’t as cool to me as the Giants and Swap-Force. I really want them to spend as much time working on the game-part as the toy-part.”
TI82 – “Also skipping this one. The gimmicks for each game are getting out of hand. How about just a new storyline using the million figures we already have and not having to buy yet another portal? Sorry skylanders, I’m out for good.”
fernoca – “I’m out this year for a couple of simple reasons: -Basically every game now needs a new portal.”
Lijik – “Im not really into the gimmick at all (and requiring trap masters for entry into what are otherwise normal elemental rooms is really fucking bogus)”
TheYanger – “Sheesh I hadn’t followed the iteration enough to know you needed another portal again. That’s a bit ridiculous. Nothing inherantly annoying with the trap concept, but forced portal buying multiple years in a row is dumb.”
ChewyWaffles – “Gonna pass on this one – first one my son and I won’t be getting.”
Amazon Top 100 Video-games Best-seller List
It’s stunning to see Skylanders starter kit one day after its launch day ranked only 98th on Amazon’s Top 100 List. It is even below Disney Infinity Marvel, which came out 3 weeks ago.
At the beginning of each year I write a top 10 predictions post. Here’s a current report card on the 2014 post thus far:
1. T-Mobile will continue to take big market-share from Sprint, AT&T and Verizon Wireless as they simply have the best value proposition in the industry: good enough quality (far better than Sprint) at a lower price.
2. Microsoft will be forced to lower the price of the Xbox One console to compete with Sony PS4’s sales dominance.
3. Apple will launch a larger screen-size iPhone, which will be a huge success leading to significant earnings acceleration.
4. The rise of little-to-no profit margin Chinese Android smart-phone companies like
Xiaomi will compress margins at Samsung Electronics.
5. Amazon will launch a Kindle Fire phone with a free or low-cost data plan like FreedomPop. It will not get traction just like the Kindle Fire tablet. Amazon’s media sales growth rate will mysteriously tumble in early-to-mid 2014 due to comp-ing the 3P to 1P ebook accounting shift, which added billions of misleading revenues in 2013.
6. Electronic Arts and Activision will both disappoint the street as gamers revolt at the publishers’ deteriorating game quality.
We’ll see. Destiny was a critical disappointment and Battlefield Hardline got delayed.
7. Sears Holdings’ digital transformation strategy into e-commerce, digital marketing, and 3rd party marketplaces will fail miserably.
8. The Zynga turnaround will fail leading to a large layoff.
9. Uber’s private valuation will sky higher as the startup has a killer profitable business model with a powerful viral network effect. The company will eventually establish a platform for other verticals outside of transportation.
10. Twitch.TV and Oculus Rift virtual reality headset gaming startups will both become massive success stories.
leng jai – “I’m not even exaggerating when I say that Destiny’s utter garbage excuse for a story is one of my biggest disappointments in a long time. It completely soured me on the game before I even got into the multiplayer”
jurgen – “It honestly feels as if I’ve spent $60 on a tutorial/demo”
ryanmac – ” it’s pretty obvious that someone took a big knife and started cutting stuff out of this game. Whether it was because content was bad or they needed to make deadlines you can’t deny that an experienced developer like Bungie wouldn’t release a product with such a thin layer of story”
Jobbs – “I think it’s just an abortion overall. They ended up with a mess and no story and not sure what to do with time running out”
Sage Shinigami – “The story isn’t just bad, its almost nonexistent”
NervousXtian – “Well, honestly, it’s not just that story is incoherent, but the actual structure of the story missions is broken. There’s NOTHING compelling about the missions structure at all. Most of them are run to point A, hold down SQUARE, wait… maybe defend a bit, then go to point B.. .hold down SQUARE.. defend and/or boss fight.”
qa_engineer – “This is why I’ve yet to plop down any more cash on the season pass. You disappoint me, Bungie. You had a chance to tell a great story and introduce gamers to a whole new world and you botched it. There is no turning back now, the story is lost and all you have left is this vague, cryptic half-assed story that no one cares about. All we’re doing is running around the same areas killing bullet sponges for shiny new things. So much potential wasted. Oh well you have my 60 dollars so I guess there’s that right”
Bungie Forum Posts
sleepyswis – “I love you guys. But this hurts. I’ll hang on for pre paid dlc, but this might be the last you see of me bungie. Feel like I’m breaking up with a great girl that lost her mind 10 years down the road”
Deltron3040 – “The story is terrible, the out of game grimoire makes no sense, and everything else is rinse and repeat”
JDubsH – “You crushed my dreams for this game”
GoodCull – “fact is, there’s no where near enough content in the game as it is, compared to how long they’ve been making it. The fact that a lot was cut is pretty much just that, a fact by this point. Especially with the painful embarrassment that they call a “story”. Too many things are just, “there” in Destiny, with no rhyme or reason as to why or how they are”
profilewon – “Where is all the content? Why am I forced to replay every mission 10 times? Why do you mask old missions by calling them “new events.” Why do I feel so bored?”
After the excellent reviews for Shadow of Mordor came out last night there was much rejoicing from gamers online to move on from disappointing Destiny. Who would have thought that Monolith would develop a much better quality 2014 game than Bungie?
Message Board Posts
Laekon – “Will hop on the hype train for this game. Destiny didn’t do it for me and nothing else is coming out till November”
Eggbok – “PS4 Physical, will lay Destiny to rest”
sjay1994 – “I am buying this game. I can’t grind in destiny anymore”
Jinaar – “Destiny is wearing thin and after watching the 101 Trailer above, holy hell, this is Day One PC Purchase material”
rhfb – “those reviews are good. So glad I returned Destiny, just bought this instead”
rev09 – “After being disappointed by Destiny I may pick this up as a positive surprise”
Valar – “these scores are incredible. Looks like Destiny is getting shelved this Tuesday”
Chesterton – “Was cautiously excited, but after all these solid reviews, I’ve pre-ordered for my PS4. It’s been dusty after the Destiny disappointment. Can’t wait until Tuesday!”
Gator86 – “thrilled by these reviews. I’ve been waiting for this game to cheer me up from the disappointment of Destiny” 2nd post – “I think we’re in for a great fall/winter slate of games. Our Destiny sadness will be a distant memory soon”
Apathy – “Gonna drop Destiny like a hot sack of crap and go for this”
markedbravado – “I am concerned about the story but I need a game to wash Destiny off my skin”
oti xeor – “I’m so happy right now. Will definitely get this (after selling off Destiny)”
Steph – “player count is destiny is about to drop heavily…”
jellies – “this will substitute for Destiny very nicely, thank you”
B-Dubs – “it seems like all that Destiny hype should have been applied to this game”
EventHorizon – “If you are going to trade Destiny, I suggest you do it soon. My guess is that the asking price for Destiny will drop quit a bit now that Shadow of Mordor is turning out to be a good game. I’ve been trolling EBay waiting for the price to drop to somewhere where I feel the game would be worth it, but now my interest in Destiny has gone to near zero. I now think a lot of people will try to trade in Destiny, and a lot of other people like myself who wanted to buy the game will realize that we were only interested because it was something new”
Fracas – “reviews + Destiny being an utter disappointment means I’ll probably pick this up day one”
— David Abrams (@CheapyD) September 26, 2014
Monolith’s nemesis system is the new standard for free-roaming adventure games. There can be no going back, anything less bores me now.
— Alexa Ray Corriea (@AlexaRayC) September 26, 2014
— Taryn Beach (@InTransit74) September 26, 2014
I was seriously only kind of into Shadow of Mordor and now I’m picking it up. These reviews are crazy.
— Ben Kuchera (@BenKuchera) September 26, 2014