A recent buy cheap wow gold report from The Information asserts Activision Blizzard (NASDAQ:ATVI) has plans to launch a film and TV studio in order to create small and big screen adaptations of its wildly popular gaming franchises.
There has already been a lot of speculation and comparisons to the Marvel franchise, although there aren't near the characters available for Activision to justify that comparison.
With the attempt to produce a World of Warcraft movie going on for about eight years, it points to the high probability if it has plans to introduce films and TV shows based upon its franchises, it is going to do it in house.
Reportedly that's why in the early stage of the project producer Sam Raimi left apparently because he resisted the stringent oversight of Activision.
With CEO Bobby Kotick saying this: "Movies based on video games rarely please devoted fans and could taint the brand." You can see Activision isn't going to allow its franchises get damaged from the creative types of Hollywood that can't resist putting their own spin on things, which can totally disrupt the series for serious fans whom can be very unforgiving. If it makes and releases films that don't pan out, it would take a big hit.
The company sees the strong potential for its franchises, but it's very cautious, maybe too cautious in going forward.
Bringing everything in house is the answer, but then there can be no excuse if it flops. There are a lot of variables to consider when releasing films, including time of year, competition and the number of screens to have the film released on, along with the size of the marketing budget. All of this takes experienced people, and they, for the most part, don't exist at this time at the company.
Evidently the company is attempting to put together a team for that purpose, and that will be the key metric for investors to delve into as it would give the best hint at the chances for success.
In its most recent quarterly report, the company beat with revenue of $970 million. It also had an operating margin of 32% with earnings per share of $0.28. All on a GAAP basis. Non GAAP it generated $658 million in revenue, with an operating margin of 17% and earnings per share of $0.06.
Operating cash flow in the latest quarter was $106 million, with free cash flow of $81 million. On a trailing 12 month basis, it generated almost $1.1 billion in operating cash flow. Cash and investments at the end of June were $4.2 billion. This is the major reason the company doesn't want to make any mistakes with its franchises if it takes on the very different film and television markets.
Management and its Outlook
There are a couple of important things to note about this possible venture, and that is the management has some strengths and weaknesses concerning launching into this, as evidenced by how cautious almost to a fault it has been with the World of Warcraft project, although that isn't under its direct control, so maybe it's an anomaly because of that.
What it's attempting to balance is the protection of its brands and the potential revenue and earnings a hit film franchise specifically could generate. Even a hit TV show could be a huge producer, especially if it has legs to it.
This is why I tend to think this is a true story, and the company is trying to put together a team it can trust with its franchises. As Marvel has already proven, when it's done right you can release hit after hit. Of course there is always a miss in there, but if a studio launches the right franchise in a quality way, it can gain momentum, and can take an occasional underperformer, as long as the major franchises perform as expected.
In other words, by not releasing films or TV shows, Activision is leaving potentially billions on the table. But as mentioned earlier, gamers are a fickle bunch, as are many readers, where a book or book series is made into a film. If they like it, it's a big plus for the company. If not, it not only results in potential film losses, but could damage the brand and bring about lower sales for the games.
At this time with Call of Duty sales dropping, it could be pressing management to take another step to boost interest in the franchise to a wider audience. As a matter of fact, its Call of Duty: Ghosts has done very well on the next generation consoles, as has Skylanders SWAP Force.
What's even more exciting concerning Activision is its ability to create new franchises that provide it continuity and longevity. Among them are Destiny, Hearthstone, Diablo and Toys for Bob, among others.
The point is, whether it's in gaming, film or TV, the success in entertainment is the ability to produce a high percentage of hits to offset the occasional miss, or to add new impetus when a former popular franchise is slowly dying. I think of American Idol in that regard for 21st Century Fox, which has yet to find something to replace it.
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