November 7, 2012 10:39 pm

Returning gamers lift Activision profits

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Activision Blizzard, the biggest video game publisher by revenues, reported earnings ahead of Wall Street expectations as players returned to its World of Warcraft online game.

The Santa Monica-based company also raised its outlook for the year and predicted its latest Call of Duty game, out next week, would be “one of the most successful launches of any form of entertainment in history”.

Activision has bucked the trend of rapidly declining video game software sales with the strength of its long-running World of Warcraft and Call of Duty franchises, as well as success with newer titles such as Diablo III and the toy-related Skylanders series.

It reported third-quarter revenues of $751m and earnings per share of 15 cents, beating an analyst consensus of $708m and 8 cents. Net income almost doubled to $168m from $87m a year earlier.

A trend of declining World of Warcraft subscribers was reversed, with the company reporting numbers had risen to more than 10m by September 30, up from 9.1m in the second quarter. They were boosted by the release late in the quarter of the Mists of Pandaria expansion title for the online world, which sold 2.7m copies in its first week.

“Players are coming back,” Bobby Kotick, chief executive, told the Financial Times.

“People have tried other things, but Mists has done a very good job of getting people energised again about the game.”

Activision says people took a break from Warcraft to play Diablo III, another successful online game, released in May.

The company predicted $2.4bn in revenues and earnings of 70 cents a share for the final three months of the year, by far the biggest quarter for the game industry due to the holiday season. It raised its guidance for the full year from $4.6bn to $4.8bn in revenues and to earnings per share of $1.10 from 99 cents.

Call of Duty: Black Ops II was off to a successful start in pre-orders, said Mr Kotick.

“It’s likely going to be the most successful Call of Duty ever. I think audiences are going to be excited about it and that was part of the basis for our increasing the outlook for the year.”

He added that the Wii U, a next-generation console from Nintendo launching next week, was unlikely to give an immediate boost to Activision’s revenues, even though he expected it to sell out during the holiday season.

Activision said $427m or 57 per cent of third-quarter revenues came from digital channels such as subscriptions, down from 62 per cent a year earlier.

Activision shares rose 1.5 per cent in after-market trading to $11.30 on Wednesday following the release of the results. The shares are down nearly 20 per cent over the past year, with the industry in a slump as it nears the end of the current generation of home consoles.

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