Digital sales help Activision Blizzard beat expectations

Digital sales of video games and downloadable content helped Activision Blizzard surpass Wall Street expectations for the second quarter of 2014.

But increased digital revenues from games such as World of Warcraft and Diablo III -- making up 49% of all revenues -- weren't enough to prevent the company from seeing a decline in net income of $204 million, down 37% from $324 million in the same quarter last year.

Growing acceptance of consumers to buy video games digitally -- to download them online, rather than buy retail boxed versions in stores -- helped the company's better than expected performance, Activision Blizzard CEO Bobby Kotick said in a statement accompanying the company's earnings release.

Strong digital sellers were Blizzard's World of Warcraft and Diablo III: Reaper of Souls computer games and Hearthstone: Heroes of Warcraft iPad game, as well as Call of Duty: Ghosts for console game systems.

The company also improved its revenue forecast for the rest of the year to $4.7 billion from $4.68 billion.profit of $1.27 a share.

On the way later this year: World of Warcraft: Warlords of Draenor, which already has more than 1.5 million pre-orders; Destiny, the first game from Activision's relationship with Halo developer Bungie, Skylanders Trap Team and Call of Duty: Advanced Warfare.

Destiny, out Sept. 9 for PlayStation 4 and Xbox One, could set a record for most pre-orders of a new intellectual property, the company said. Call of Duty: Ghosts has been the top-selling game on the new consoles and Activision expects Call of Duty: Advanced Warfare, due Nov. 4 for PS4, PS3, Xbox One and Xbox 360, to have the highest number of pre-orders of any game in 2014.

"We obviously have spent a lot of time investing against not just this year but for the next few years," Kotick told analysts during a conference call after earnings were released. "I think we have a great roadmap for opportunity."

Michael Olson, senior research analyst with Piper Jaffray, agreed, expressing confidence that saying that "the company can benefit from renewed industry software growth" in the second half of 2014 as more consumers migrate to the PS4 and Xbox One.

And with Take-Two Interactive's Tuesday announcement to postpone fall release Evolve until February and Electronic Arts' delay of Battlefield Hardline until next year, he says, "the runway is clearing for Destiny."

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