When the latest Call of Duty title launches Friday, it will mark the end of one of gaming’s most enduring, lucrative, and influential series.
Call of Duty isn’t disappearing, of course, but its future stands to change in both subtle and dramatic ways in the coming years. A transforming game industry and Microsoft’s pending acquisition of parent company Activision Blizzard, combined with a potentially bitter breakup from longtime partner Sony, have set the shooter series on a collision course with the kind of radical change franchise leadership has avoided for much of the last two decades.
Activision resisted adapting to major trends such as live service gaming and free-to-play business models until comparatively recently, keeping the money flowing and its hardcore audience satiated with each annual release. For a majority of the last 16 years, Call of Duty has been the best-selling video game in the U.S., its largest and most dependable market. But when just one entry misfires, like last year’s Call of Duty: Vanguard, it can throw a wrench in the gears of Activision’s well-oiled machine.
Activision already plans to skip its fall Call of Duty release next year for the first time since 2005, Bloomberg reported in February, by which point the franchise may be in Microsoft’s hands. Microsoft, in turn, plans to begin offering Call of Duty on its Game Pass service — pending concessions it makes to regulators to appease rival PlayStation.
The all-you-can-play monthly subscription model, in which consumers pay $10 or $15 to access hundreds of games, stands in stark contrast to how Activision has monetized Call of Duty throughout its existence to date. Game Pass also includes a cloud gaming component, which could make Call of Duty available on screens of all sizes — no console required.
Activision has yet to disclose its official plans for next year. A company spokesperson told Protocol, "Across the Call of Duty ecosystem, the teams are well positioned to support these launches with substantial live operations while also continuing development of new premium content planned for 2023 and beyond.”
But taken together, these shifts could have major consequences for the gaming market. Console gaming accounts for almost a third of the global business by revenue, but the console market also stands to shrink by more than 2% this year, as economic pressures, delays of big releases, and weak hardware supply have strained the game industry’s pandemic-era growth.
“For a period of time, releasing a new Call of Duty every year from a different studio worked well in the traditional console space,” said Joost van Dreunen, an assistant professor at New York University and former game analyst. But that market has for years been eroding, as game makers adopted models from mobile gaming to keep products alive for longer and increase recurring revenue.
“In a service context, you could think more along the lines of what you see with Minecraft and Fortnite, where you have battle passes and seasons. It seems to work really well with Call of Duty Mobile,” van Dreunen said, referring to Activision and Tencent’s successful mobile Call of Duty spinoff that has so far amassed more than $1.5 billion in player spending. “Rather than ‘Let’s hold our breath and hope this one doesn’t suck.’”
Vanguard sold so poorly that Activision cited it as the primary culprit behind last quarter’s $271 million year-over-year operating income decline and player base contraction of 33 million users. That puts pressure on this year’s installment, Modern Warfare 2 (not to be confused with the 2009 release also named Modern Warfare 2), to bring players back.
But beyond 2023, the series’ direction remains up in the air, especially as Microsoft and Sony wrangle with regulators over the franchise’s future.
Activision’s game of catch-up
There are signs Activision is finally starting to play catch-up with its peers in the industry — and even with other games under the Activision Blizzard umbrella. Blizzard’s revamp of hero shooter Overwatch, for example, launched earlier this month as a live service free-to-play title with a more modern business model, attracting more than 25 million players in 10 days and achieving a peak player count three times larger than its pay-to-play predecessor.
Activision has been trying to position Call of Duty for a similar transition, building off the success of the 2020 battle royale sensation Warzone and the franchise’s fast-growing mobile component. But Call of Duty’s reliance on selling tens of millions of copies every year has kept it stale, safe, and conservative. It may take new leadership, like Microsoft Gaming CEO Phil Spencer, to push it outside the comfort zone of Activision executives.
“At some point the success of a large publisher becomes somewhat of a curse — they have to keep feeding the beast. How do you innovate on these successful franchises without alienating your customer base?” van Dreunen said. “Perhaps the transition to different ownership allows for some breathing room to make exactly those types of changes.
“I think [Activision] has proven themselves capable,” he added. “You can take these big old-school franchises from before gaming was cool and reposition them on a different platform or cater to a different audience and be successful. What would really add fuel to the fire is an acquisition from a platform like Microsoft.”
At some point the success of a large publisher becomes somewhat of a curse — they have to keep feeding the beast.”
"In my opinion, I actually view the size, gravity, and momentum of the [Call of Duty] franchise as a reason that it can push through some more radical changes," said Dennis Yeh, the gaming insights lead for market research firm Sensor Tower. "Free-to-play and live services help with consistent patches or adjustments and a low barrier to entry to extend the revenue runway for a game. In addition, Game Pass may also offer a transitory zone for pay-to-play content to survive, at least in the short to medium term."
Microsoft has outlined big plans for Activision Blizzard, if the deal secures approval from regulators. The company told regulators in the U.K. it wants to build a universal game and app store that spans mobile, console, and PC, and offering Activision Blizzard hits such as Call of Duty and Candy Crush is central to its ambition.
Game Pass, which had more than 25 million subscribers as of January, stands to benefit greatly if it can include new Activision Blizzard titles at launch, as Microsoft plans to do with upcoming Bethesda Softworks releases such as Starfield and future Elder Scrolls installments.
“Building on Activision Blizzard’s existing communities of gamers, Xbox will seek to scale the Xbox Store to mobile, attracting gamers to a new Xbox Mobile Platform,” Microsoft said in statements to the U.K.’s Competition and Markets Authority. “Shifting consumers away from the Google Play Store and App Store on mobile devices will, however, require a major shift in consumer behavior. Microsoft hopes that by offering well-known and popular content, gamers will be more inclined to try something new.”
Speaking at The Wall Street Journal’s Tech Live conference Wednesday, Spencer said, “Call of Duty specifically will be available on PlayStation. I’d love to see it on the Switch, I’d love to see the game playable on many different screens. Our intent is to treat CoD like Minecraft.” Spencer went on to stress how Xbox’s ambitions are about reaching consumers beyond the console market. “This opportunity is really about mobile for us,” he said. “When you think about 3 billion people playing video games, there's only about 200 million households on console."
Sony and the status quo
Standing in the way of this ambition is, of course, Sony, which has for years enjoyed an exclusive financial relationship with Call of Duty that has helped keep the PlayStation platform dominant. PlayStation is the primary destination for Call of Duty games, with an install base of more than 150 million consoles, ensuring Sony gets a cut of every game sale on its platform and also a commission on in-game microtransactions. Activision and Sony have also had a multiyear publishing deal in place that ensures, among other things, that Microsoft cannot put Call of Duty games on Game Pass for at least several more years.
The corporate spat between the rivals has grown bitter and petty after a number of hostile statements and filings, which U.K. regulators are now sifting through as part of the CMA’s phase two review. But the result of the investigation has very real consequences for the future of Call of Duty, and whether Microsoft can ferry Activision’s shooter into the future or if it must stick to a business-as-usual plan to placate PlayStation.
Sony has been appealing to U.K. regulators to try and squash the Activision Blizzard deal by playing up the importance of Call of Duty and warning of the threat of anticompetitive conduct if Microsoft is allowed to own one of Sony’s largest moneymakers. PlayStation chief Jim Ryan also publicly rebuked statements from Spencer last month by saying Microsoft’s olive branch, in which Spencer said Xbox would support Call of Duty on PlayStation for “several more years” after the end of its existing agreements, is “inadequate.”
You can take these big old-school franchises from before gaming was cool and reposition them on a different platform or cater to a different audience and be successful. What would really add fuel to the fire is an acquisition from a platform like Microsoft.”
There are a number of other avenues regulators may try to restrict to rein in Microsoft’s power in the cloud gaming, subscription, and console markets. Microsoft could be forced to keep Call of Duty available on PlayStation in perpetuity, or it could also be forced to keep the series off Game Pass for many years after Sony’s publishing agreement with Activision.
“The CMA is concerned that having full control over this powerful catalogue, especially in light of Microsoft’s already strong position in gaming consoles, operating systems, and cloud infrastructure, could result in Microsoft harming consumers by impairing Sony’s — Microsoft's closest gaming rival — ability to compete,” U.K. regulators wrote in their decision to move to a phase two review.
But despite Sony’s demands that it continue collecting a hefty slice of the Call of Duty pie, the way games make money is changing, fast, and the old models may not hold up for much longer. “Call of Duty has set the bar in many ways. I don’t think it’s fading in that sense,” van Dreunen said. “But as the audience expands and the market becomes more mainstream, it’s not just about catering to audiences. That’s a big piece of it, but you also have to start thinking about novel revenue models.”
Update 2:30PM ET, October 28: Added statement from Activision.
