At the beginning of February, Activision Blizzard reported their Q4 earnings for fiscal year 2020. Most gaming companies follow the traditional fiscal calendar of year ending March 31st but Activision Blizzard is one of the few who end their fiscal year on December 31st. As for the annual report that should be expected sooner than later as they have all the information they need, it’s just about putting the report together, which isn’t an easy task and the 2019 annual report was around 150 pages.

Better Than Expected

Activision Blizzard lacked quantity for major releases in 2020 with the exception of Call of Duty: Black Ops Cold War, which turns out might be all that is required as without fail the series continues to dominate. World of Warcraft has seen great engagement since the Shadowlands expansion and their King Mobile sector is a consistent performer.

Over the course of the year, Activision Blizzard saw revenues grow 25%, operating income increase 70% and earnings per share increased 45%

Looking at the hard figures, the fourth quarter revenue was 2.4B, which was well above the projected 2B and brought the fiscal year to 8.08B which was also well above the projection of 7.675B. Clearly, Activision Blizzard has been benefiting from all of the gamers staying at home and being invested into their live service franchises with 4.8B of in game purchases which include downloadable content and microtransactions.

It’s easy for the media to focus on the negative but one aspect of the earnings call that I was unaware of and likely most are unaware of is that Activision Blizzard has a program called the Call of Duty Endowment. This program is designed to place actual military veterans into high quality jobs within their company as well as thousands of other employers. In 2020, the program was able to place of 15,000 veterans into jobs.

Not only was this the programs most successful year but to be able to find this many job placements during the pandemic when unemployment was skyrocketing is something to be proud of. This program has actually been around since 2009 and has helped 81,000 veterans find jobs. This just seemed like something positive worth noting.

In 2020 over 250 million people were playing Call of Duty which is more than tripling the amount that were playing Call of Duty just a few years ago in 2019.

2021 Projections

Following up on 2020, which saw most gaming companies produce astronomical results due to the majority of people staying indoors safely, Activision Blizzard is projecting even higher numbers for 2021. Overall in 2020, net revenue was 8.08 billion and the projections for the year ahead is 8.225 billion.

Since Activision Blizzard reported their earnings at the beginning of February, Blizzcon happened virtually. This is part of the reason why those projections are higher than 2020, which we will get into but it also has to assume that they expect that even if the vaccine is rolled out in an efficient manner, that many people will not have a rush to get back outdoors and will continue to game.

With Activision titles, specifically Call of Duty, accounting for nearly 60 percent of the total net revenue in Q4 and approximately 50 percent of the total for the whole fiscal year, there is only so much that Blizzard releases can do. This means that Call of Duty will need to release another blockbuster hit, which can be done, but it also means that Warzone needs to continue to engage its current audience.

Even though both of those tasks seem simple, there is no guarantee that Call of Duty can repeat its annual success because in 2020 they were basically the only premium shooter released in the fall. We already know that EA is moving all eggs into the Battlefield basket with news coming last week that they are moving Criterion from Need for Speed onto Battlefield to make sure it ships on time and in the condition they need. It will have been three years since Battlefield released a new entry and people are hungry for change. There is a large opportunity for Battlefield to seize a lot of the shooter market.

Then other big shooter that is due out this fall is Halo Infinite. We have seen this before when too many shooters are released at the same time, there will be losers. Back when Titanfall 2 released near Battlefield and Call of Duty, the best game out of that group performed the worst commercially.

The other issue that Call of Duty faces is that Warzone also hasn’t faced a lot of new competition. There was already plenty of competition on the market when Warzone launched in March 2020, but since then there has been little in the way to steal some of that audience.

The previously mentioned Halo Infinite and Battlefield 6 both reportedly have Battle Royale type modes in development. Then there is any other game that could release and become the next PUBG or Fortnite. Most gamers would agree that the state of cheating in Warzone combined with the next to minimal improvements of the game and the map are leaving the door wide open for a strong competitor.

Finally, Sledgehammer was supposed to be the team that released their Call of Duty entry in 2020 but clearly it wasn’t coming along as executed as Treyarch was forced to push up the date of their game and launch a year earlier than expected.

If problems were bad enough to push the game for a year, will Sledgehammer have enough fresh ideas to rival games like Halo Infinte and Battlefield 6. It’s also worth mentioning that the last game Sledgehammer shipped was Call of Duty: WW2 and that was back in 2017 when founders Glen Schofield and Micheal Condrey were still at the studio. Both of these industry veterans have now moved on to head their own studios elsewhere.

Blizzconline

As mentioned the potential drop in sales for the Call of Duty franchise will likely be offset by some of the Blizzard announcements, mainly in the Diablo realm. Diablo 2 Resurrected is the Diablo 2 remake that will be releasing later this year and based on what they showed they are taking lessons learned from some of their previous remakes and remasters and delivering a remake that stays true to the original. Diablo 2 is the popular choice for many as the best entry in the series so far and people that might have been too young to play it the first time around will now have a chance to give it a try.

More Diablo 4 was shown at Blizzconline but there is no chance that the highly anticipated sequel releases this year. 2022 would be nice but it wouldn’t be surprising if it didn’t come out until 2023 either. The other Diablo project that has a chance to release this year is the initially hated mobile game, Diablo Immortal.

There have been closed alphas that have garnered a mostly positive reaction from many of the outlets that got a chance to play the game. Obviously the mobile market is potentially huge and Diablo would likely thrive on phones.

Leaning into saying Diablo 4 being released in 2022 based on comments from CEO Bobby Kotick when referring to the whole Activision Blizzard portfolio “ 2022 should see even more significant growth given our planned release of new content across multiple platforms” Currently the only title that has a release date in 2022 is OverWatch 2 and I don’t expect that series alone to cause significant growth. This likely has to be referring to Diablo 4 as well as Overwatch 2 and other unannounced titles.

Both of these Diablo games will likely perform very well for Blizzard and will help generate goodwill and anticipation heading into Diablo 4. Moving forward Activision Blizzard had 400M monthly active users on their path to one billion according to the report. The company plans to do this by applying the Call of Duty framework to other franchises, which includes mobile versions, free to play versions, and live service features.