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Call of Duty: "Significant concerns" that it's peaked, "genre tired" says analyst

A number of analysts weigh in on the future of Activision's Call of Duty franchise

Following the company's second quarter earnings report, analysts issued their usual investors notes on Activision Blizzard. One comment that raised some eyebrows came from Ben Schachter of Macquarie Securities, who said "we have significant concerns that CoD may have peaked in 2011."

GamesIndustry International followed up with Schachter to get a fuller explanation of his thoughts. He believes that Call of Duty will have a hard time showing growth for a number of reasons outlined below:

  1. HD hardware and software as a whole have been declining all year (i.e., it is not just weak Wii sales that are impacting the industry)
  2. Lifetime unit sales of Modern Warfare 3 are slightly below Black Ops
  3. The genre seems tired
  4. The futursitic setting may not have the same appeal for some
  5. The macro economic environment is causing some gamers to hold back on upgrades
  6. Currency fluctuations mean that European sales are worth less to ATVI shareholders

Michael Pachter of Wedbush Securities largely agrees with Schachter's assessment. "Annual sales at the 25 million level are unprecedented, so it's easy to say 'that's the peak.' I think that the growth in online multiplayer fueled CoD sales, since it was (and probably still is) the best multiplayer experience available. However, last year, Battlefield multiplayer probably cannibalized it a little bit, and this year, Halo and Medal of Honor could cannibalize CoD a bit more. Next year, another Battlefield plus the Respawn and Bungie games probably cannibalize it a bit more," he said.

That said, even if CoD doesn't show growth, it's bound to post massive sales again. "There's nothing wrong with 22 million units sold, or with 19 million or 16 million. CoD will remain the best selling game (at least until GTA) and Activision shouldn't be concerned if it loses some players at the margin. They created a phenomenon, and others are emulating them," Pachter continued.

"It may very well have peaked at retail but one needs to look at the entire picture"

Jeremy Miller, DFC

Colin Sebastian of RW Baird believes that CoD may have peaked already too. "Activision has provided financial guidance assuming that Call of Duty is lower this year than last year, so I think that is a rational comment, especially given the tough console market right now," he said. "Also, if new consoles are coming next year, that is typically a disruptive period for game sales, and that could drive sales lower as well, at least temporarily. The bigger question I think is whether the franchise (or any franchise) is in a continuous period of decline. Personally, I don't know which competing console title would take so much share from Call of Duty."

Of course, these days, thinking about a product's retail life is not the only way to measure success. Call of Duty lives in an online world, and with Elite, and the expansion to China via Tencent, it could be argued that the brand's potential hasn't peaked at all.

"With the movement to digital and opening of new markets like China there will be an entirely new source of revenue for Call of Duty that will both replace some of whatever is lost at retail and also not be tracked in retail sales data," remarked Jeremy Miller of DFC Intelligence. "We feel that Call of Duty is a very strong brand and has plenty of ways to monetize. Tracking retail unit sales year over year is not really a fair comparison as they could be down but overall revenues might be up. So it may very well have peaked at retail but one needs to look at the entire picture. In that sense we do not feel Call of Duty has peaked."

Scott Steinberg, CEO of TechSavvy Global, agrees that retail sales can't be used as the sole barometer for Call of Duty anymore.

"While temporary signs of concern may exist, and some attrition may be experienced this holiday season in keeping with the dampening of retail uptake and shifts in consumer habit, it's far too early to determine the extent or degree to which the Call of Duty franchise has peaked. Ancillary products and services should continue to be introduced over the coming years, and additional ventures explored in the online, digital and service-based realms, including possible expansion onto added devices and formats. Which is to say that while sales of physical product for PC and console may not reach the dizzying heights previously attained, the franchise continues to offer many possiblilities for growth and expansion, and remains one of the strongest IPs in the gaming space," he observed.

"It's likely to take some shots this holiday season, but none should prove lethal: A grizzled veteran of the gaming space, it remains one of the sturdiest warriors in the industry and - whether it suffers glancing wounds or no - may yet sound a rousing call to arms in coming years. The big question here - to what extent will a dip in retail sales, by far the franchise's bread and butter, affect the future shape and direction of the franchise. While it may be fighting a losing battle for the immediate and foreseeable future on one front, it may yet win the war."

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James Brightman avatar

James Brightman


James Brightman has been covering the games industry since 2003 and has been an avid gamer since the days of Atari and Intellivision. He was previously EIC and co-founder of IndustryGamers and spent several years leading GameDaily Biz at AOL prior to that.