Bobbie Johnson
The video game giant Activision Blizzard made a substantial loss over the last three months, despite having the world's No 1 game this Christmas.
The California-based company registered net losses of $72m (£50m) over the three months ending 31 December, according to financial results issued yesterday.
The figures come regardless of the fact that the company – which was formed last year in a $19bn merger between Blizzard, the games division of French company Vivendi, and Santa Monica publisher Activision – is responsible for some of the world's most successful games.
Guitar Hero World Tour was the bestselling game globally over the Christmas period, shifting an estimated 3.4m copies. Other hits include the first-person shooter Call of Duty and the online role-playing game World of Warcraft.
Much of the loss was attributable to the merger between the two companies, which was concluded over the summer. Excluding charges related to the deal and other charges and deferred revenues, the company would have earned $429m profit.
The chief executive, Robert Kotick, chose to focus on the company's figures across the whole year, which, he said, were better than expected.
"Activision Blizzard has finished the calendar year as the largest and most profitable third-party publisher with more than $5bn of net revenues. These results exceeded the 2009 financial goals that we outlined over a year ago … we achieved these results one full year ahead of our original plan."
However, Kotick said he expected difficult times over the coming months, which are traditionally a slower time for games publishing.
Other companies have also felt the pinch, despite videogaming being considered by some to be a "recession-proof" industry. Activision's shares have lost nearly 50% of their value since last summer, but the company has fared substantially better than rivals such as Electronic Arts, which is 69% down on last summer, and the Grand Theft Auto maker Take-Two Interactive, which is down 74%.
Last month analysts suggested that a slump in games sales after Christmas could force major publishers to consider drastic price cuts to help stimulate sales.
"We believe several software publishers are likely to consider additional markdowns," said Colin Sebastian of Lazard Capital Markets in a note to investors – adding that unsold copies of games such as Guitar Hero "may also require price concessions".
Faced with the economic downturn, however, Kotick said the company had no plans to change its tactic of focusing on building major franchises rather than developing brand new titles.
"Ninety per cent of the top 10 best-selling games worldwide were based on proven franchises, validating our strategy," he said. "During the year, we will continue to employ our proven strategies that have worked so well for us over the last decade."
