Activision Sinks After Gloomy Forecast Overshadows Esports Push
(Bloomberg) -- A gloomy outlook is casting a shadow over Activision Blizzard Inc.'s latest push into esports.
The video-game company gave a second-quarter earnings forecast that fell well short of analysts' estimates, sending the shares down as much as 5.8 percent in late trading. Activision provided the downbeat guidance on the same day it announced the first five franchises of a new city-based Call of Duty league, part of a wager that competitive gaming will help fuel its next wave of growth.
The hope is to turn esports leagues into something akin to the major professional sports organizations, letting marketers reach a young, male demographic that may not watch football or baseball. Activision's Overwatch League is now in its second season.
But investors remain cautious about Activision's prospects. The company has said this year that sales of key titles have been disappointing, with in-game purchases not meeting expectations. It also announced plans in February to lay off 8 percent of staff as part of a turnaround plan.
The Santa Monica, California-based company expects adjusted earnings of 23 cents a share this quarter, short of the 37 cents predicted by analysts. But it reported first-quarter sales and earnings that beat estimates. Activision cited increased time spent by consumers playing games such as Candy Crush and the latest Call of Duty release.
Call of Duty, a first-person shooting title based on military combat, is routinely one of the top-selling video games in the world. All the investors in the new franchises, which include Atlanta's Cox Enterprises and New York's Wilpon family, also own teams in Activision's Overwatch League.
Franchise terms weren't disclosed, and no date was given for the start of the competitions. But Chief Executive Officer Bobby Kotick said they sold for more than the initial prices for Overwatch League teams. They went for $20 million.
The new cities with teams are:
- Atlanta, owned by Atlanta Esports Ventures, a collaboration between Cox Enterprises and Province Inc.
- Dallas, backed by Team Envy, owner of the Overwatch League's Dallas Fuel.
- New York, owned by Sterling.VC, which is backed by the Wilpon and Katz families that own the New York Mets.
- Paris, owned by cOntact Gaming, which is behind the Overwatch League's Paris Eternal.
- Toronto, backed by OverActive Media, owner of Overwatch's Toronto Defiant.
To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net
To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Rob Golum
©2019 Bloomberg L.P.
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