Analysts respond to and attempt to explain the thinking behind Activision and Bungie’s Destiny divorce.
Bungie and Activision shocked the gaming world Thursday when the companies announced that they were no longer working together on the Destiny franchise. Activision would no longer publisher the series, including the ongoing Destiny 2.
Bungie is now going it alone, and analysts are chiming in with how this could impact both companies. It’ll have a financial effect on both. But the analysts also explain why this decision happened, and why it made sense for both Activision and Bungie.
Baird Equity Research revised its projections for Activision Blizzard’s revenues in financial year 2019. The group believes that losing Destiny will cause Activision to miss out on $300 million in revenue.
Colin Sebastian, senior research analyst at Baird Equity Research, notes, “… it was not altogether surprising given the declining performance of the franchise, Activision’s history of pulling the plug on underperforming games, and management’s desire to reduce costs. While the stock is understandably trading lower, we think the value of Destiny to Activision is meaningfully less than the 12 percent reduction in market cap, or implied value of roughly $4 billion. To put into further context, the market appears to be valuing the Destiny contract at [greater than 10 times] revenues for a product that is declining and is less profitable than other core franchises.”
In other words, Destiny 2 wasn’t making as much money as Activision wanted. But the perception of the company losing the franchise could be worse than the actual dollars it loses because of the decision to give up Destiny.
