Sci-fi shooter never lived up to Activision’s goals, but videogame publisher needs to show what else it has in the chamber. The trick to surviving in the videogame business is knowing when to use the reset button—and when to pull the plug.
After attempting the former with its “Destiny” franchise, Activision Blizzard is effectively doing the latter. The company is selling all rights to the title back to Bungie, the independent developer that produced the game under a deal first struck with Activision back in 2010.
Bungie, which recently scored a $100 million investment from Chinese Internet giant NetEase, says it plans to keep working on the game. Financial terms of the deal announced late Thursday were undisclosed.
Activision once considered “Destiny” its next “billion dollar franchise,” but the sci-fi shooter has never lived up to that billing. The company conceded in its last earnings call two months ago that the “Destiny 2” sequel was falling short of expectations. Analysts believe “Destiny” generated about $370 million in total revenues in 2018, according to consensus estimates from Visible Alpha.
That would rank the game fifth on Activision’s slate—well below its other big properties such as “Call of Duty,” “World of Warcraft” and “Overwatch.” The game also was less profitable than the others due to Activision’s profit-sharing deal with Bungie.
The move will bring some near-term pain for Activision, which already was facing questions about its coming release slate. The company’s stock took a beating late last year after it became clear that no major new releases from its Blizzard unit were planned for 2019.
The loss of “Destiny” will make the company even more dependent on its annual “Call of Duty” refresh and its popular “Candy Crush” mobile-game franchise, at least for the near term. Activision’s share price fell 9% Friday morning.
Activision has been here before, though. The company has a history of cutting underperforming games that bear high costs, such as its once-popular “Guitar Hero” franchise. And today’s videogame market is rather unforgiving to big, expensive properties that can’t maintain a strong continuing stream of service revenues.
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Activision’s shares also look rather cheap now at 16.5 times forward earnings—near a three-year low. The publisher just needs to show where its new destiny lies.