Activision Blizzard‘s net bookings of $2.49 billion in the fourth quarter ended December 31 fell short of expectations on Wall Street, with the net bookings down 18% compared to $3.05 billion a year ago.
That means that Call of Duty: Vanguard did not, as analysts suspected, perform as well as last year’s Call of Duty: Black Ops — Cold War. The company noted it had “lower than expected performance” in its Activision division, which produces Call of Duty. It was offset by record performance at King, as mobile net bookings grew 18% from a year ago and represented 33% of net bookings in the quarter.
Analysts had noted earlier that gamers weren’t enthusiastic about the return to World War II with Call of Duty: Vanguard, and so they expected it to sell fewer copies than both Cold War and Call of Duty: Modern Warfare in 2019. Activision Blizzard acknowledged the title had lower engagement, though player investment in the title remained well above the level prior to the March 2020 launch of Call of Duty: Warzone.
On a GAAP basis, revenues were $2.163 billion for the fourth quarter, down from $2.413 billion a year earlier. Non-GAAP earnings per share were $1.01 a share, compared to 76 cents a share a year earlier. The revenues were still above the company’s own outlook of 62 cents a share on revenue of $2.02 billion.
In after-hours trading, Activision Blizzard’s stock is flat at the moment at $78.96 a share.
Analysts expected earnings of $1.31 a share on revenue of $2.82 billion for the fourth quarter ended December 31. For the first quarter ending March 31, analysts expect earnings of 76 cents a share on revenue of $1.88 billion.
“They missed by $300 million on the revenue line, all Call of Duty Premium,” said Michael Pachter, an analyst at Wedbush Securities, in an email to GamesBeat. “Blizzard and King were fine, they probably sold around 19 million of Vanguard compared to 25 million a year ago, that’s pretty much the difference. Warzone down vs. their expectations, but no detail provided.”
The report comes against a backdrop of huge industry changes. Microsoft has agreed to buy Activision Blizzard for $68.7 billion, or $95 a share, and that triggered Sony to buy Bungie for $3.6 billion. The weak performance in the quarter is probably one reason Kotick decided to sell the company, in addition to stated reasons of not being able to hire enough AI and machine learning help in addition to traditional game developers. Many developers were also leaving for startups flush with cash from investors inspired by the game industry’s boom during the pandemic and the ensuing merger mania.
On top of that, there is constant talk about the need for game companies to invest in the metaverse, where gamers will be able to connect socially and traverse a wide range of connected game worlds. Meta/Facebook announced yesterday it was fine with losing $3.3 billion per quarter on its investment in its Meta Reality Labs division for the metaverse.
The California Department of Fair Employment and Housing sued this summer, alleging Activision Blizzard had a “frat house culture” that made life difficult for female employees. And Kotick’s position as CEO was increasingly fragile as it was revealed by the Wall Street Journal that he knew about harassment allegations in some cases and did nothing to remove the alleged perpetrators.
Since the deal could take until 2023 to pass regulatory approvals, Activision Blizzard still has multiple quarters of limbo ahead of it where it will have to stand alone as a business.
“I’m so incredibly proud of our teams for their commitment and passion as we continued to engage the world through epic entertainment in 2021,” said Bobby Kotick, CEO of Activision Blizzard, in a statement. “As we look to the future, with Microsoft’s scale and resources, we will be better equipped to grow existing franchises, launch new potential franchises and unlock the rich library of games we have assembled over 40 years. Our 370 million players around the world and workplace excellence remain our focus. For investors, our recently announced transaction is the culmination of three decades of providing superior shareholder returns.”
Normally, Activision Blizzard said it had 371 million monthly active users (MAU) in Q4, compared with 397 million in Q4 2020 and 390 million in the previous quarter. The shortfall was in Activision, which had 107 million monthly active users in Q4, compared with 128 million a year earlier. The company said Blizzard had 24 million MAU, down from 29 million a year earlier and 26 million in the previous quarter. King had 240 million MAU, flat with a year ago and down from 245 million in the previous quarter.
Repeating a claim it made earlier, Activision Blizzard said more than 20 individuals have exited the company in recent months related to the ongoing investigations. The company plans to invest $250 million over the next 10 years in initiatives that foster expanded opportunities in gaming and tech for under-represented communities.
The company also plans to increase its percentage of women and non-binary people in its workforce by 50% in the next five years. The company has 10,000 employees, and it has thousands of openings for games going into production.
Hiring people will be difficult to do with the state lawsuit hanging over its head as well as the Microsoft acquisition pending. In the release, the company said that growing its developer base remains a strategic priority and it was able to increase its developer headcount in the fourth quarter and add hundreds of people in 2021.
The company promised “groundbreaking new experiences” in the Call of Duty franchise later in the year, and Blizzard is planning “substantial new content for key franchises.” Blizzard has postponed its launches of both Overwatch 2 and Diablo IV.
“Activision Blizzard is committed to ensuring an inclusive and safe working environment for its employees, and in the fourth quarter continued to implement previously announced initiatives to strengthen its practices and policies,” the company said. “The company also announced the conversion of nearly 500 temporary workers to full-time employees at Activision Publishing studios, along with securing increased wages and expanded paid time off benefits for a large portion of temporary workers.”
Activision Blizzard confirmed that Infinity Ward is working on this year’s premium title, which is expected to be revealed as Call of Duty: Modern Warfare 2. Infinity Ward is also working on this year’s Warzone experiences, which will add to the company’s live services battle royale mode for Call of Duty. It is working on “the most ambitious plan in franchise history.”
Call of Duty: Mobile saw net bookings grow in the fourth quarter, mainly from activity in China. To date, consumer spending on Call of Duty: Mobile has surpassed $1 billion.
On the Blizzard front, World of Warcraft’s reach and engagement continued to benefit from the combination of the modern game and World of Warcraft: Classic under a single subscription. Hearthstone’s Q4 net bookings grew year over year, driven by a steady cadence of new content.
Blizzard’s said that it is planning more Warcraft content for 2022, including new experiences in World of Warcraft and Hearthstone, as well as in mobile. Diablo II: Resurrected sold more units since its September release than any other Activision Blizzard remaster so far, and Diablo Immortal, the mobile title, concluded its public testing with positive feedback.
Blizzard is making strong progress on its pipeline, the company said, with Diablo, Overwatch, and a new title in the works.
And King saw its net bookings grow 14% year-over-year to a new record, driven by 20% growth year-over-year for Candy Crush. Hours played also grew in Q4, and ad revenue was up 60% in Q4 compared to a year ago. In 2021, King surpassed $1 billion in annual operating income.