Just as movie studios depend on franchises to help bolster profits while reducing the risk of making new films, video game publishers depend on franchises to keep players engaged and buying more titles. Activision Blizzard‘s (NASDAQ: ATVI) latest, Overwatch, could be most profitable new franchise the industry has ever seen.
“We think Overwatch will achieve record launch year revenue for a Blizzard game this year,” CEO Bobby Kotick said in the latest earnings call with analysts, according to comments transcribed and provided by S&P Global Market Intelligence. Over 20 million active players log into the game with “an even split between East and West,” Chief Operating Officer Thomas Tippl added during the call. The message? From the U.S. to South Korea and beyond, Overwatch is already a huge winner for the company.
Further growth seems likely thanks to the e-sports movement. Overwatch is ideally suited for tournaments because of competitive dynamics that pit teams against each other. A built-in ranking system pushes players to spend time and money achieving elite status.
Already there’s evidence of hundreds of Overwatch tournaments having taken place. In June, the organizers of the first Overwatch Invitational disbursed $25,000 in prize money to competing teams. And this weekend, Blizzard is teaming with Next Generation Esports (NGE) to put on the “Winter Premiere,” an open play North American tournament offering $100,000 in total prize money.
Events like these could also help to explain why Activision has hired experts and acquired e-sports leagues. Having the infrastructure to attract broadcast coverage of competitions could drive even more players to Overwatch and spawn off-line branding opportunities — from clothing to movies.
Either way, Activision Blizzard seems to be in a better position today than it was on May 23, the day before Overwatch was released to the world, yet the stock trades for a slightly lower multiple to both trailing and estimated future earnings. As a result, investors buying now — before we actually know the full impact of Overwatch on financial results — may be getting a bargain.
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