Earlier this year, Overwatch became the eighth title to join Activision Blizzard's (NASDAQ: ATVI) coveted list of $1 billion franchises. Overwatch is without a doubt a runaway hit for the game maker, and I believe this franchise will be making money for Activision for a long time.
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The company has big plans in consumer products and movies. As Activision Blizzard pursues these new opportunities, the game maker is looking more like the Walt Disney of video games, and Overwatch has all of the ingredients to make this vision a reality.
Overwatch is branching out to diverse revenue categories
Activision has several ways to capitalize on the growing popularity of Overwatch, which, as of the second quarter, had grown its player base beyond 30 million. The franchise gives the game maker a treasure trove of 25 diverse characters to monetize outside of gaming.
The company launched a new Consumer Products division earlier this year to broaden its reach. Activision has been launching branded accessories, such as Overwatch branded computer peripherals for gaming, in addition to collectibles and comic books based on characters in the game.
The company doesn't break out sales related to consumer products, which implies that revenue isn't very meaningful at this point. But that could change. It's not just about collectibles and comic books, either. Other initiatives, such as Activision's new Studios division -- which is tasked with the job of turning Activision's library of content into blockbuster movies -- is where I believe even more potential lies in store for Overwatch.
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Overwatch has great potential in the broader world of entertainment
The Studios team is already at work on a Call of Duty film for the silver screen, which is a few years away from release. If a Call of Duty movie is successful -- and that's a big if, considering the poor track record of video game movies -- expect to hear about plans for an Overwatch cartoon or TV show.
The action-packed orientation of Overwatch's gameplay, coupled with a jazzy presentation, make it seem like a game tailor-made for a potential TV show adaptation which could appeal to a young audience. The game has a colorful mix of 25 characters, each with their own background stories, and Blizzard has shown a commitment to regularly releasing new characters since the game was released, which is creating a growing library of Marvel-like character content over time.
Another trait for Overwatch that could make it very successful as a movie or TV show is its universal appeal, something that was obviously part of the game's design. This is evident in the ethnic diversity of the characters, and the game's setting across exotic locales around the world. The character roster is also well-balanced between male and female. This, combined with the playful presentation of the game may be helping more female gamers play Overwatch when they haven't historically shown nearly as much interest as males for mililtary-themed shooters. Research from Quantic Foundry found that Overwatch's player base is 16% female, about double other first-person shooters.
The most telling sign of Activision's ambitions
Perhaps, the most telling sign of Activision's long-term goals is who the company hired to oversee its Consumer Product and Studios divisions. The head of Consumer Products is Tim Kilpin -- former executive vice president of franchise management for Walt Disney. While residing at the House of Mouse, Kilpin was in charge of global cross-category franchise plans for Disney Princess, Winnie the Pooh, Mickey Mouse, and Pixar properties.
For the Studios division, Activision hired Nick van Dyk, a longtime Disney senior executive who played an important role in Disney's acquisitions of Pixar, Marvel, and Lucasfilm.
At the time of Dyk's hiring, Activision CEO Bobby Kotick said, "We intend to approach film and television development with the same unwavering commitment to excellence we are known for in game development."
That statement makes it clear that the effort in consumer products and movies is much more than a sideshow to Kotick. These initiatives are clearly seen by him as genuine long-term growth opportunities that can be significant contributors to Activision's annual revenue.
Kotick is one of the industry's most visionary minds. His track record speaks for itself -- 400 million monthly active users in the most recent quarter and eight games with $1 billion in life-to-date sales. All of that has translated to handsome gains for longtime shareholders. So when Kotick speaks about the future of the company, it usually pays to listen.
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