Is Activision Blizzard Reaping The Benefits Of Its R&D Investments?

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ATVI: Activision Blizzard logo
ATVI
Activision Blizzard

Money that Activision Blizzard pours into research and development and software licenses is primarily responsible for churning out new games and expansions, which plays a crucial role in governing the company’s sales. Money put into IP licenses gives the company access to software, technology, music, other intellectual property, or proprietary rights that help it improve game quality, features, and overall experience.

Ideally, the impact of the aforementioned investments should be a consistent improvement in Activision’s overall revenues relative to its investments in R&D, IP licenses, and software royalties. However, revenue generated per dollar spent of product development related expenses declined notably in 2015, and is expected to go down further in 2016, with a mild recovery in 2017. It appears that Activision requires next gen console game sales to peak in order to reap the benefits of investment in the development of those games. Therefore, while the benefits of product development related investments appear limited in the near term, they make much more sense from a long term perspective.

Activision product development

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Activision Blizzard

 

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