Activision Investors, Do You Believe in Destiny?

Jason is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Anyone who's owned shares of Activision Blizzard (NASDAQ: ATVI) over the past few years knows how frustrating this investment can be.  And with shares trading near four-year highs (where they remained for about three weeks last time, before losing all of their gains and returning to the "normal" range of between $10 and $12 until recently,) you're likely in one of two camps: You're ready to sell before the price drops back to its "normal" range, or planning to hold even though you know you should sell, because Activision shares just don't stay above $13 for very long. 

I can relate. I've been through it with you, and I've got a really good reason to hang on to your shares: Destiny.

Did you bump your head?  Maybe too much World of Warcraft?

Not that kind of Destiny. This kind. And this kind. From the Bungie website, on Feb. 10:

"So, our game is called Destiny.

In a matter of days, we're going to give you your first glimpse into the vision and ambition that's driving the creation of our brave new world. To make room for the resulting chatter, we've launched some official social media channels."

And it seems that gamers are going nuts. The new Facebook page for Destiny had 12,000 "likes" and close to 9,000 twitter followers, just 2 1/2 days after the announcement above. And considering that this buzz was created by essentially a handful of cryptic images, and confirmation of the name, Bungie is working hard to create massive buzz around this new franchise. And it's working. 

From Wired.com, April 2010, a quick history lesson as to why this matters for Activision Blizzard investors (bold mine for emphasis:)

"Game publisher Activision has secured a 10-year publishing deal for the next action game series from the creator of Halo, the companies said Thursday. Bungie said that its next franchise is currently being developed by a team led by studio cofounder Jason Jones. Bungie will own the intellectual property, but Activision will have a 10-year license to publish all videogames created around that franchise, for multiple platforms."

Outside of Activision's own Call of Duty mega-franchise, Bungie's Halo series of games is easily one of the most popular and financially successful console game franchises of the past decade. And while the Halo series was limited to release only on the Microsoft (NASDAQ: MSFT) Xbox console, Destiny appears slated to expand to both the PC and Sony (NYSE: SNE) Playstation, meaning that the potential market for sales is significantly larger than it was for Halo. 

Okay, so a bunch of basement dwellers are excited.  What does that mean for me?

Nothing for the next few months, and as David Sanchez at Gamezone pointed out, maybe not much this fiscal year:

"While Destiny may indeed still launch this year, nothing is set in stone. Add to that the fact that the project was left out of the earnings call for 2013, and it further seems to indicate that it may not release this year after all."

But I disagree, just based on what Bungie has made public this week.  After the scheduled announcement this coming Sunday, we will have a better indication of when. I will make one bold prediction: Destiny will be a huge success, easily outpacing the Halo games. The question is, will they be billion-dollar successful? I think that there is a very good chance the answer is, "yes." And I think that it will be this year. 

But what about the new consoles?  It will hurt sales if they're not out in time for the game launch.  

It looks like the timing for new consoles is coming together, and I am not concerned about console overlap hurting game sales. If the rumored Xbox 720 comes out at the end of the year, it will have been 8 years since the Xbox 360 was introduced, in 2005. In technology terms, that's an eternity, and frankly, Microsoft needs their new console to be a major hit. It's no longer about something only used to play video games, and a successful new console that connects users to more streaming and social content, with the ability to interact with tablets and smartphones as controllers, will go a long way toward helping Softy remain relevant in a world that's becoming less dependent (especially in visible ways) to Microsoft products. We should know by the end of the E3 in June, if not sooner, when the new console will launch, but early indications are pointing to late October. 

The world has moved on when it comes to Sony. What was the brand to own in consumer electronics less than a decade ago has seemingly fallen so far behind the innovation curve that they're almost out of sight. Their investment in 4K (super-HD) TV  technology could help turn things around, but I'm not convinced as an investment there's anything worth considering today.  Turnaround opportunity? Ask me in a year.

So while it's obvious that I'm not going to recommend that you invest in Sony, the PlayStation console has a strong following, and a refresh will be well received. And it looks like we might find out on Feb. 20 when it's coming. 

So what's the bottom line? 

Activision Blizzard is a lot easier to understand if we ignore that it's part of the maligned (and fairly so) video game industry, and look at it like it was a pharmaceutical company. It's all about the pipeline, and Activision consistently produces some of the most "addictive" products out there by feeding the pipeline and keeping fresh content coming out. 

And if you were to ask me how the Bungie deal fits into this analogy, I'd tell you that it's Destined to produce the next big "therapy." After all, these games are just as therapeutic as they are addictive, and they don't even have to go through clinical trials. 

If you can get past my terrible puns and heed my advice, you'll see why hanging onto those Activision shares is a good idea.  I'd even buy at today's price, because the future has a name, and that name is Destiny. 


Jason Hall owns shares of Microsoft and Activision Blizzard. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus