Activision Confident With Skylanders Franchise Despite Tough Competition

by Trefis Team
Activision Blizzard
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The American gaming giant, Activision Blizzard (NASDAQ:ATVI) unveiled early designs and concept visuals of its new innovative title from Skylanders brand- Skylanders Trap Team at the recently held 2014 Electronic Entertainment Expo (E3). The game is one of the most awaited titles of the year 2014 from the Activision brand. Eric Hirshberg, President and CEO of Activision Publishing, has high expectations from this franchise going ahead. The game is played along with toy figures that interact through a “Portal of Power”, reading their tag through Near Field Communication (NFC) technology. Launched in 2011, the game is now available on all major gaming platforms including the twin next generation consoles: Sony PlayStation 4 and Microsoft Xbox one.

According to the company, Skylanders was launched as an experiment to enter into the platform gaming market and to see if the company was able to hit two targets with a single arrow: to get kids to buy the game, as well as the action figures required to play it. This experiment worked out pretty well for the company as Activision has sold over 175 million toys since the launch of the franchise, generating over $2 billion in revenues from this franchise as of February 2014. [1] The gaming developer expects the toy sales to reap huge profits after the launch of the new edition game, which is going to be launched on October 5 in North America. For its promotion, the company has also initiated a special pre-order plan for toys.

Our $22 price estimate for Activision Blizzard’s stock is in line with the current market price.

See our complete analysis of Activision’s stock here

Skylanders has been designed to make its audience want to buy more figurines to expand their options, driving toy sales. The franchise is gaining more from toy sales than the actual title sales. The toys cost less than $10 for a single new character and around $20 for a multi-figure set. The Skylanders franchise accounted for 20% of the total platform games sold worldwide in 2013.

Increasing Competition In The Platform Game Segment

In April 2014, Walt Disney (NYSE: DIS) introduced more characters to its Disney Infinity universe after the game was ranked as the 10th best selling game for 2013 by the research group NPD. Disney Infinity, which allows gamers to mix Disney and Pixar characters in self-constructed adventures, has sold 3 million starter packs worldwide over the last 12 months. Skylanders SWAP Force overtook Disney Infinity in terms of units sold last December, according to NPD report: sales for Infinity totaled 551,000 units in comparison to 597,000 units of Skylanders SWAP Force. Disney is upgrading its Infinity franchise to compete with Skylanders’ new edition. Walt Disney expects revenues from Infinity to reach $1 billion after it reported revenues of $550 miliion from the franchise last month. [2]

On the other hand, the Japanese gaming giant, Nintendo unveiled a toy figure line called “Amiibo” at the E3 that will provide toy figurines for platform gaming franchises to companies such as Activision and Walt Disney. The company mentioned that the figures will also be compatible with the upcoming Wii U fighting game “Super Smash Bros” and other games such as “Mario Kart 8”.

The competitors have been stealing the market share from Skylanders for the last few months now, but Activision is confident of its new edition and believes that it might reap huge profits for the company. When the last edition of the Skylanders franchise was released, it topped the games in the platform segment for the next two months and generated handsome profits from toy sales. If this edition gets to a similar start, we might see a 5% increase in the revenues from other platform games.

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  1. Activision Blizzard’s (ATVI) CEO Michael Morhaime on Q1 2014 Results – Earnings Call Transcript []
  2. Disney’s Infinity []
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