‘Call of Duty’ aims to capture digital sales

Call of Duty: Black Ops from Activision Blizzard, which launches on Tuesday, is expected to crush formidable opposition and become the biggest selling action video game of the year.

The game, made by developer Treyarch, is expected to sell 13m-15m units this quarter, slightly less than its Modern Warfare predecessor made by the Infinity Ward studio. But this will only be the start of a campaign to fulfil the game’s earnings potential.

Its predecessor, Call of Duty: Modern Warfare, remained the top game in the following three quarters after its release a year ago, helped by significant digital sales of add-on map packs that extended the battlefield and the franchise.

Digital revenues are a bright spot for an industry that has seen an 8 per cent decline of its traditional “packaged goods” disc-based business so far this year, according to the NPD research firm.

Retail sales have become a double-edged sword for publishers – the game discs that are sold are often traded back once played by consumers and exchanged at the stores for other used games, denying publishers further revenues.

Digital extensions of games cannot be traded and neither can mini-games sold online through stores such as Xbox Live Arcade. Publishers are also selling virtual goods and pursuing subscription models for games that can be played online.

“Digital is really starting to have an impact this year – the publishers have started to figure out what’s working and what’s not working,” says Doug Creutz, video game analyst at Cowen and Company.

“[Video game publishers’] stocks are trading as cheaply as they ever have been, but I think there’s the potential for their economics to improve as revenue shifts more to digital, which tends to reduce the problem of used games sales.”

Last week, Activision reported 15 per cent growth in digital sales in the first nine months over 2009, while Electronic Arts, creator of the Medal of Honor game, reported 35 per cent growth over its past two quarters compared to the year before.

This came from growth in social gaming, iPad and iPhone game sales and downloadable content related to its packaged goods, where such sales were up 200 per cent.

NPD, the official source for industry figures, has tended to ignore these sales in the past as it has charted declines in hardware and software sales over the past two years. One telling statistic though is that its accessories category is no longer dominated by sales of controllers.

For every month since March, the Xbox Live 1600-point card – used to buy virtual goods and digital games from the console’s marketplace – has been the top-selling accessory.

Xbox Live membership allows players to fight one another in online multiplayer extensions of the console’s titles, where gameplay is free on standard battlefields.

Michael Pachter, video game industry analyst at Wedbush Morgan Securities, says the billions of hours of free play taking place there, by gamers choosing not to go on to buy the extra map packs, is a “high-class problem” for the publishers.

“This kind of gaming is becoming so addictive that when the publishers choose to monetise it they will have a willing audience, so it’s a great thing,” he says.

NPD is now responding to industry pressure and looking at the bigger picture.

It reported last month that while US consumers spent $3.7bn on new physical video and PC game software in the first half of this year, another $2.6bn to $2.9bn was spent in other areas.

These were used games, game rentals, subscriptions, digital downloads of full games, social-networking games, downloadable content and mobile game apps.

This holiday season, publishers are turning back to the traditional hard-core gamers and their staple first-person shooters. While social gaming on sites such as Facebook and mobile gaming on Apple devices are big growth areas, Doug Creutz says they serve a different audience.

“The console gaming experience can’t be replicated on Facebook or the iPad, where there is a different type of consumer, who maybe got interested in the Wii and Guitar Hero and has moved on, but it’s a consumer the publishers were not really counting on in the first place.”