Bolstered by the continued dominance of the Call of Duty military shooter franchise and a new hit in its Skylander video game and toy line, Activision Blizzard Inc. swung to a profit in its fourth quarter, beating Wall Street's expectations and pumping up its stock price Thursday by 1%.
The Santa Monica game publisher also reported that subscribers to its World of Warcraft online game fell to 10.2 million as of Dec. 31, down from 10.3 million customers three months earlier. The fantasy role-playing game, which is in its seventh year, had been steadily losing players since it peaked in October 2010 with 12 million customers.
Some analysts had feared that the online game — the company's most profitable property — would suffer worse declines because of competition from the mid-December release of rival online game Star Wars: The Old Republic, published by Electronic Arts Inc.
But aggressive marketing and discounting, along with an injection in November of fresh game content, helped stem customer defections. However, that came at the cost of reducing the game's average revenue per customer, executives said during a Thursday earnings call with analysts.
Activision's financials were also helped by its blockbuster Call of Duty franchise. The latest game in the series, released in November, raked in $1 billion in retail sales within 16 days of hitting store shelves. Moreover, 1.5 million players have ponied up $49.99 a year for access to additional downloadable online content for the Call of Duty games.
"They're in a pretty nice competitive position, despite World of Warcraft subscriptions falling," said P.J. McNealy, president of Digital World Research. "They have the biggest console game cranking in Call of Duty."
Longer term, Activision's online game platform, dubbed Battle.net, will allow the company to sell its titles directly to players online, McNealy said.
"They have a tremendous opportunity to leverage the 50 million Battle.net users with new games down the road, which is a unique advantage," he said.
The company, known for its uncanny ability to surf from one hit franchise to another, also rode high on a wave of popularity for its new Skylanders property — a video game introduced last year aimed at kids that ties into physical toys sold at major retailers such as Toys R Us. Skylanders action figures and games generated $200 million in sales last quarter for Activision.
For the quarter ended Dec. 31, Activision posted net income of $99 million, or 8 cents a share, on $1.41 billion in sales. It had reported a loss of $233 million, or 20 cents, a year earlier on slightly higher revenue of $1.43 billion.
Its shares gained 11 cents to close at $12.66 in regular trading prior to the earnings release, but popped an additional 9 cents to $12.75 after the quarterly financial announcement.