February 8, 2013 12:07 am

Activision Blizzard warns over consoles

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Activision Blizzard, publisher of the video game industry’s biggest franchise, Call of Duty, has warned that the introduction of next-generation consoles could hit its business in 2013, with uncertainty surrounding their success and game development costs increasing.

Activision reported record 2012 earnings, driven by sales of Call of Duty: Black Ops II, its Diablo III PC game and Skylanders: Giants, a game that combines with physical toys.

“We were somewhat disappointed with the launch of the Wii U [in November] and it’s a challenging environment this year,” Bobby Kotick, chief executive, said. “One of the things we are concerned about is what the installed base [of next-generation consoles] will be like [in 2013].”

Nintendo last week lowered its forecast for sales of the Wii U from 5.5m units worldwide to 4m units for its fiscal year ending in March.

It lowered software predictions from 24m units being sold to 16m.

Sony is expected to reveal details of its successor to the PlayStation 3 at an event in New York on February 20, while Microsoft is expected to launch a follow-up to the Xbox 360 later this year.

“In every single console transition, we have seen an increase in development costs,” said Mr Kotick.

“It requires new skills and investment in tools and technology and engines, so yes, [cost increases are] likely.”

The console transition, combined with a higher expected tax rate, difficult comparisons with the 12m copies sold of Diablo III in 2012 and general macroeconomic uncertainty, led Activision to give guidance for a less successful 2013.

It forecast sales would fall from $4.99bn in 2012 to $4.17bn and earnings per share would drop from $1.18 to 80 cents.

Analysts had expected revenues to fall to $4.57bn and earnings per share to 98 cents.

However, the Los Angeles-based company tends to be conservative in its outlook and did not include in its figures two big new ventures analysts expect to be launched this year.

These are a game from the developer Bungie, creator of Microsoft’s Halo franchise, and a version of Call of Duty for China being produced in partnership with the Tencent game company there.

Activision gave no indications of launch dates for either and said that, in working with a partner and needing government approvals, some things were beyond its control for the Chinese version of Call of Duty.

China also influenced fourth-quarter earnings. The company said subscribers to its World of Warcraft online game declined from 10m to 9.6m, with the majority of lost users coming from China.

Fourth-quarter sales of $2.59bn and earnings per share of 78 cents beat Wall Street expectations of $2.44bn and 72 cents respectively.

Its shares rose 5 per cent to $12.71 in extended trading on the news.

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