Activision (NSDQ: ATVI) swung to a profit for Q3, after posting a $108 million loss for the same quarter last year. The game publisher’s revenue (excluding charges) dipped by one percent to $703 million. But it met analysts’ non-GAAP EPS expectations, and at $755 million, its non-GAAP revs thoroughly beat the Street’s estimates for $724 million.
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In a statement, CEO Bobby Kotick said its core franchises — World of Warcraft, Guitar Hero and Call of Duty — drove most of the sales. He also talked up the fact that U.S. music game sales were up 72 percent in September, attempting to quell market sentiments that the music games genre is overly saturated. Still, the year-over-year growth for September, specifically, is likely a result of both Guitar Hero 5 and MTV’s The Beatles: Rock Band being released at the same time this year, and less an indication of the health of the genre itself.
— Wither the music game? The company’s reliance on its music games could negatively impact revenue growth in future quarters. For example, it’s currently facing a lawsuit from rock band No Doubt over their appearances in the latest game, Band Hero; the suit could wind up being quite expensive for Activision, as the band is asking for damages, a game recall and a ban on future sales. Meanwhile, analysts lowered their initial forecasts for sales of the company’s new game, DJ Hero, citing lower demand from retailers (via Kotaku).
— World of Warcraft: Activision recently added “virtual pets” to its money-maker MMO World of Warcraft; players are able to purchase pets for their avatars with real world money. The $10 pets can’t be earned in game, and in a research note, Broadpoint AmTech analyst Ben Schacter says they could serve as a “meaningful new revenue stream” for Activision subsidiary Blizzard Entertainment. “We expect [that Activision] will look to incrementally, yet carefully, increase ARPU for the core Blizzard franchises via add-on services,” Schacter said. Still, the company is facing problems getting the franchise up and running again in China. Release | Webcast