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‘Cataclysm’ Comes Through for Activision

Holiday sales of the online game are the gift that keeps giving


Activision Blizzard (NASDAQ:ATVI) continues its record-breaking sales streak that began last November with the release of its Call of Duty: Black Ops — that game sold 7.4 million copies worldwide within its first 24 hours.

The company’s December release World of Warcraft: Cataclysm, didn’t quite match that, but it moved an impressive number of copies in its first 24 hours, especially for a retail PC game, a segment that continues to decline due to the consumer shift towards digital distribution. Activision Blizzard sold 3.3 million copies of Cataclysm, an expansion for the multiplayer online role-playing game World of Warcraft that was originally released in late 2004. On Monday, the company said it sold 4.7 million copies in the game’s first month.

Even though that’s half the sales of Black Ops, it’s important to keep in mind that significantly more revenue is being generated by the PC game expansion. While Call of Duty games like Black Ops and 2009’s Modern Warfare 2 typically enjoy steady sales for up to 12 months on Microsoft (NASDAQ:MSFT) and Sony’s (NYSE:SNE) Xbox 360 and Playstation 3 consoles, they tend not to stop being profitable beyond the initial point of sale.

Call of Duty releases are supplemented with DLC, downloadable add-ons distributed via Xbox Live and the Playstation Network, the consoles’ online networks. (First Strike, the first DLC pack for Call of Duty: Black Ops is due out Feb. 1.)

The subscription-based World of Warcraft brings in an additional $15 a month from each registered account in the game, meaning that each $40 sale of Cataclysm comes with the promise of growing revenue each month afterward. Considering that World of Warcraft had a 12 million-user subscriber base prior to Cataclym‘s release on Dec. 9, the 4.7 million total sales as of Monday means that ATVI’s shareholders will probably be celebrating when the company reports its year-end earnings in March.

What’s more, even though Cataclysm‘s reported sales include both boxed copies bought at retailers and digitally downloaded copies, the company didn’t specify the division between the two. It’s possible that digital downloads of Cataclysm outstripped physical sales. Research firm NPD Group found last summer that about half of all PC game sales were digital downloads, meaning that as many as 2.3 million copies of Cataclysm were sold without any fees taken from retailers like GameStop (NYSE:GME) or Best Buy (NYSE:BBY).

Activision’s stock has enjoyed a runup along with the rest of the market since last fall. Although it’s sitting near a 52-week high, the possibility of more upside following the company’s earnings report can’t be ignored.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here.

Article printed from InvestorPlace Media,

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