Activision's Diablo III Expansion Pack: A Hit


Activision Blizzard (ATVI) recently released the Diablo III: Reaper of Souls expansion pack for Microsoft’s (MSFT) Windows and Apple’s (AAPL) Macintosh. Diablo III continues to enthrall gamers, as more than 2.7 million copies of the expansion pack were sold in the first week.

These are impressive sales figures for an expansion pack. Launched in May 2012, the original Diablo III sold more than 6.3 million units in the first week. The game’s unprecedented success earned Diablo III the coveted title of ‘the fastest-selling PC game ever’ after its first-day sales figure touched 3.5 million.

The pack introduces a new class of warriors in the game known as “The Crusader” and brings back Malthael as the antagonist. Reaper of Souls increases the game’s level cap to 70 and features new adventures.

Diablo III: Reaper of Souls is currently available in the United States, Canada, Australia, Europe, New Zealand, Taiwan, Hong Kong, Southeast Asia, Hong Kong and Macau. The game is also available digitally.

Apart from English, the expansion pack is available in Latin American Spanish, European Spanish, Brazilian Portuguese, French, German, Italian, Polish, Russian, Korean and traditional Chinese.

According to market research firm DFC Intelligence, the video game industry is expected to generate revenues of about $78.0 billion by 2017, which underscores the prospects of video-game developers like Activision.

We believe Activision will continue to release downloadable content (:DLC) and expansion packs for its major franchises such as Call of Duty and Diablo. The expansion packs help aging gaming franchises to remain fresh for a long time by offering new content. The company recently launched a DLC pack called Onslaught for Call of Duty: Ghosts.

Activision is expected to benefit from its strong product pipeline in 2014. The upcoming release of its blockbuster franchise Call of Duty: Sledgehammer presents a significant growth opportunity . Going forward, the higher mix of digital revenues is expected to help margins as well.

Activision is expected to gain from superior product offerings, although competition from rivals such as Electronic Arts (EA) and Take-Two Interactive Software may rationalize growth prospects, going forward.

Currently, Activision has a Zacks Rank #3 (Hold).

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