--Activision says more than 1.5 million customers paid for annual memberships to "Call of Duty" social network --Activision's Internet-based sales represented more than 34% of total sales last year --Company has several big titles in the pipeline for the year By Ian Sherr SAN FRANCISCO -(Dow Jones)- Activision Blizzard Inc. (ATVI) said it had record fourth-quarter earnings as consumers flooded videogame stores to buy its latest war and fantasy offerings. The Santa Monica, Calif., company said more than seven million accounts had been created on its new social gaming network, "Call of Duty: Elite," since it launched in November. More than 1.5 million customers paid annual membership fees, the company added, creating a potential new revenue stream for the gaming company, though net sales fell 1.4% compared to the same time a year ago. "It's fantastic," Bobby Kotick, Activision's chief executive said in an interview, noting that the speed at which customers signed up for premium accounts rivaled that of other services like Hulu and Netflix Inc. (NFLX). "The time we were able to attract premium members is faster than almost any other subscription service." Activision also said sales of its new children's game, "Skylanders: Spyro's Adventure," had performed well above expectations and that more than 20 million companion toys had been sold. Activision swung to a profit for the quarter ended Dec. 31 of $99 million, or 8 cents per share, compared with a loss of $233 million, or 20 cents per share, a year earlier. Revenue fell to $1.41 billion from $1.43 billion a year ago. On an adjusted basis, Activision said, it earned 62 cents per share on revenue of $2.4 billion. Analysts, on average, had been expecting adjusted earnings of 56 cents per share on sales of $2.2 billion, according to Thomson Reuters. Activision's stock was recently up nearly 1% at $12.78 in after-hours trading following the announcement. The strong sales came as the game industry has been struggling to find new footing amid the sudden growth of online and mobile titles. Games like Rovio Entertainment Ltd.'s "Angry Birds" are the must-have title on nearly any casual gaming platform. Meanwhile, companies like Electronic Arts Inc. (EA) have invested heavily in games that can create recurring revenue, either through selling virtual goods, such as with its new "Sims Social" game on Facebook, or charging subscriptions, such as with its multiplayer online game "Star Wars: The Old Republic." Activision's Blizzard unit broke ground in this area with its "World of Warcraft" online fantasy fighting and role-playing game. Gamers pay as much as $15 per month for access to the game, which has garnered 10.2 million subscribers as of the end of last year. Now, Activision is attempting to expand that model to its popular "Call of Duty" war simulation franchise with its "Call of Duty: Elite" gaming network, which this company said will be bolstered by another title in the series later this year. Activision has also created a digital auction house for its "Diablo III," dungeon horror-themed game in which customers can buy virtual items with real-world money. The highly anticipated game, made by Activision's Blizzard Entertainment unit, is expected to be released sometime this year. So far, Activision's Internet-based sales strategy, including subscription memberships and additional game content, have grown to represent more than 34% of it revenue last year. For the current first quarter, Activision forecast earnings, excluding items, of 3 cents per share on revenue of $525 million. The company said the outlook does not include any new releases from its Blizzard Entertainment unit. Analysts polled by Thomson Reuters had been expecting earnings of 14 cents per share on revenue of $771 million. -By Ian Sherr, Dow Jones Newswires; 415-439-6455; ian.sherr@dowjones.com
