People often ask me about contracts with publishers and some of the things you might find in them. While the Activision-Bungie contract is not typical for most independent game studios, it still is worth reading to get familiar with some of the terms and clauses related to the development process, milestones, and obligations of both parties. I’m not sure how the LA Times originally got this, but since it’s on the Internet, I figured I would link to it so others can learn from it. http://documents.latimes.com/bungie-activision-contract/

Our friends at Baird put out a new research brief that explained growth in Activision’s digital revenues for the second quarter:

  • Digital products generated $386 million (+16% Y/Y) in revenue, accounting for 60% of the total in Q2.
As digital sales increase for the major publishers, we’ll likely see a lot of new emerging distribution platforms both publisher-backed and independent. The market is wide open for additional third-party distributors to get into the space and the prevailing model of 30% of digital revenue going to distributors is much more palatable than the cut that physical retail stores currently take.

Activision Blizzard had $1.14 billion in digital sales during the second quarter of 2011, up from $967 million for the same period last year.

Digital sales were 37 percent of the company’s revenue, which as a percentage of overall revenue, was up 27 percent over the previous year.

These numbers underscore the growing importance of digital distribution for games and are additional data points showing that the market is shifting to a greater percentage of products being downloaded directly by consumers.

One thing that needs to be considered is California’s internet taxation where online sales will be subject to sales tax, regardless of where the consumer resides since the majority of Activision’s business is in Santa Monica, California. This will be an area to watch as online game companies start to fight the newly passed bill that will definitely cut into profits.

Unfortunately, California’s lawmakers don’t have the foresight to see how digital commerce jobs will be moving out of the state and into new corporate entities. For a parallel, they need only look at how Amazon has reacted to taxation of internet sales by moving operations from states that choose to impose the taxes, to those that would rather have their citizens employed and taxed on payroll and income.

We would expect to see more online game companies moving their operations and especially billing outside of California in the next 18-24 months to remain competitive and protect shareholder value.

Our friends at M2 Research recently put out a report called Kids and Games: What Boys and Girls Are Playing Today, which outlines the major gaming trends and preferences among children. Some of the report findings include:

  • Nintendo still dominates with kids in the portable space
  • Apple is becoming a significant player especially with girls.
  • 44% of tween girls (8-11) are now using an Apple device to play games
  • 58% of teen girls (12-15) are now using an Apple device to play games
  • 17% of teen girls (12-15) play games on the Sony PSP
  • 44% of teen boys (12-15) play games on the Sony PSP
  • The videogame franchise girls prefer is the Mario series
  • 36% of teen boys prefer Call of Duty: Modern Warfare
  • The key demographic for online games are boys and girls ages 8-11.
  • 91% of tween boys play games online
  • 93% of tween girls play games online
  • Facebook is now the favorite website among tween (8-11) boys and teen (12-15) girls

The report also includes:

  • Overview of Markets and Trends Specific to Kids Gaming
  • Companies to Watch
  • Buying Habits
  • VC Investment Update
  • Marketing Games to Kids
  • Survey data collected from 5,000 kids

M2 analysts Louise Curcio, Billy Pidgeon, and Wanda Meloni developed Kids and Games: What Boys and Girls Are Playing Today in partnership with KidSay, a research company that has been tracking kids’ preferences for over 10 years. M2 Research and KidSay have formed a strategic partnership to create this ongoing report series, which will be released twice per year.