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Activision spending $500 million on developing and marketing Destiny

C

ComputerMKII

Banned
Buy me if old

Activision places $500 million bet on its next blockbuster franchise

Activision Blizzard Inc intends to spend $500 million developing and promoting "Destiny," potentially breaking industry records as it seeks to build the sci-fi role-playing videogame into its next multibillion-dollar franchise.

CEO Bobby Kotick revealed the number, which dwarfs Hollywood spending on some of its biggest firms, during the Milken conference in Los Angeles last week. A company spokesperson said on Monday the number was accurate but also included marketing, packaging, infrastructure support, royalties and other costs.

Activision, eyeing the flagging growth of its long-running "Call of Duty" action-shooter franchise, is eager to lay the foundation for its next multi-game blockbuster series.

Investors hope that "Destiny," scheduled for release on September 9 from Bungie, the same studio that created Microsoft's best-selling "Halo" franchise, could re-invigorate Activision's revenue, which slid 6 percent in 2013.

The company signed a 10-year contract with Bungie in 2010 that gives it worldwide distribution rights and significant control over the potential franchise's development.

"If you're making a $500 million bet you can't take that chance with someone else's IP," Activision CEO told the Milken conference. "The stakes for us are getting bigger."

"Destiny" is a cross between a traditional shooting game format and a role-playing game in which gamers play characters in a real-time online world. The title allows gamers to play "Guardians" who protect the last city standing on a post-apocalyptic Earth.

Analysts said $500 million would likely be a record spent on a single game - especially one without an established track record. To break even, Activision would have to sell about 15 million to 16 million units of a $60 game, analysts said.

"It's a head scratcher, said Sterne Agee analyst Arvind Bhatia. "For brand new IP, it's tough but it could post a big surprise."

Bhatia expects the game will sell 8 million units. "Grand Theft Auto V," which hit stores last September, was a runaway success with over 32.5 million units as of February this year. But it was the fifth installment of a critically acclaimed series that had become an indelible component of popular youth culture.

RECORD BY ANY NAME

Some analysts estimate that Take-Two Interactive, the publisher of "Grand Theft Auto," spent over $260 million to develop, produce and market the fifth installment, though it's unclear whether that's comparable with Activision's own $500 million figure.

GTA is on track to reach $2 billion in retail sales, according to analysts.

"Bungie's very ambitious plan is designed to unfold over a 10-year period, "said an Activision spokesperson. "The depth of creative content, scope and scale is unprecedented and is required to bring Bungie's vision to life."

The spokesperson added that investment in the next generation engine and a "robust backend infrastructure are upfront expenditures that should reduce future product development costs."

"Over the long term, we expect the ultimate product costs to be roughly in line with other Triple-A titles."

Activison's big bet comes as hits are getting harder to come by. The industry is struggling with a years-long sales slump, the result of increasing competition from free-to-play games on smartphones and tablets. Video game software sales plummeted 11 percent last year from 2012.

Sales of Activision's 2013 title, "Call of Duty: Ghosts," proved weaker than its 2012 installment.

Over time, Activision's "Destiny" could hit large numbers "but there's no way they would come close to Grand Theft Auto," said Mike Hickey, an analyst at the Benchmark Company.

Still, Activision's executives say they see franchise potential in its new game.

"We expect 'Destiny' to be Activision Publishing's next billion-dollar franchise," Kotick said when the company released its fourth quarter earnings on February 6.

The company, which reports first-quarter earnings after the closing bell on Tuesday, saw earnings slide 12 percent to $1 billion in 2013. Its revenues dropped to $4.6 billion, from $4.9 billion the year before.

It generates significant revenue from its franchise properties, but many of those are several years old. "Call of Duty" has had a decade-long run while "World of Warcraft" was first released in 2004.

Franchises enable game publishers to generate steady revenue from several iterations, as well as digital sales from additional downloadable content.

Activision could use another money-making shooter game franchise, said Hickey, the Benchmark Company analyst.

"It's up to management to create new experiences to drive forward growth over a game that could be aging a bit," he said. "I'm not saying 'Call of Duty' is like that, but everyone is concerned about fatigue and competition."
Click to expand...

http://www.reuters.com/article/2014/05/06/us-activision-destiny-idUSBREA4501F20140506?feedType=RSS
 
R

Riki

Member
Betting that much on a single game seems like such a bad idea, regardless of how good the game is.
 
C

cancerdancer

Member
Good luck and God speed. Hope this game turns out to be as good as it has looked in game play previews. Burnt out on FPSs at this point but I would like to see this in action.
 
A

Alchemy

Member
This article has convinced me not to buy Destiny. Tired of marketing budgets getting out of control, time to vote with my wallet.
 
N

noobasuar

Banned
Crazy, especially if it ends up selling like 3 million copies. It really doesn't look good enough to move much more units.
 
Chobel

Chobel

Member
To break even, Activision would have to sell about 15 million to 16 million units of a $60 game, analysts said
Click to expand...

For a new IP and no PC version? Good luck with that.
 
J

JayEH

Junior Member
Wow this game is destined (no pun intended) to fail with that budget.

Seriously though, this is getting out of hand.
 
P

Pajamas

Member
spending that much money on a single game's marketing kinda seems to me like games publishing has finally crawled up its own ass.
 
I

IHaveIce

Banned
I wonder where the promotion is? I mean even Bungie themselves put out barely any info...

That will backfire, backfire really hard.
 
M

MasterForm

Member
I feel like they couldn't used some of that to give cod a new engine. Aren't they still using some ancient, yet heavily modded, engine?
 
M

Mushroomer25

Member
I thought that was a semi-reasonable budget until they brought up the GTA V estimate. Considering that game had one of the most visible ad campaigns of any game this past generation, it's safe to say we're due for an absolute overload of Destiny this fall.

Still think the game looks sub-par, though. It's Borderlands with less personality.


And they really couldn't have spared a dime for a PC port?
 
L

LowSignal

Member
I hope destiny is good but it looks like a Borderlands game with a different art style. Anyone else think it's a smart move to keep bungie from competing against Activisons's yearly onslaught of Call of Duty titles by supporting Destiny?
 
U

Uncle Rupee

Banned
It makes sense that they'd bet so much on Bungie, the company that arguably made the Xbox a success. The game itself is probably going to be huge, could be bigger than Halo now that it's multiplat.
 
C

coolasj19

Why are you reading my tag instead of the title of my post?
They aren't budgeting half a million for the Destiny the game, they're marketing for Destiny the franchise. I doubt they expect to make that money back just from initial sales but the awareness raised will reach throughout the entire length of the franchise.

I wonder how much Sony ponied up to get in on this.
 
A

Auto-Reply

Member
I don't like these numbers... they couldhave made several games with that amount of money i guess but they rather bank it all on one. Even if it's successful in the end, it's still not justified in my eyes.
Then again, i'm looking at it from the perspective of someone who doesn't really know much about financials of this sort.
 
G

gatti-man

Member
Destiny is going to be such a huge bomb. Literally nothing I've seen so far makes me think it will sell even 8 million let alone 16 million. This is a huge mistake.
 
D

Dugna

Member
Might've gotten used to stupid high numbers for media now but 500 mil seems kinda small for somebody like Activision.
 
H

hodayathink

Member
IHaveIce said:
I wonder where the promotion is? I mean even Bungie themselves put out barely any info...

That will backfire, backfire really hard.
Click to expand...

I'd imagine most of that money isn't going to start being spent until E3 at the earliest. Would make sense to spend the most money closer to release.
 
R

Raitosaito

Member
I usually won't say an absolute, but this games awareness with the hard core and mainstream is in no way beyond GTA.

It will not meet expectations.
 
G

Gorillaz

Member
all on one game?

tumblr_mdckwhimGD1ralt7qo1_500.gif
 
M

Mr.Fox

Member
The game looks alright, but it's kinda greedy of them to expect the game will be that much overrated, specially for a new IP.
 
V

VariantX

Member
This feels like an incredibly bad idea. It's a bad idea even for CoD, a game that grew into what it is for around nearly a decade, and its an even worse idea for an unproven IP.
 
Duxxy3

Duxxy3

Member
Hopefully this isn't a trend, because this industry can't support such high expectations. Shit, Hollywood doesn't have those standards.
 
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