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Activision Blizzard profits are down, but Hearthstone helps drive digital

Activision Blizzard's continued transition to a digital game business is moving along, as the company raised its annual outlook and reported better-than-expected results for the quarter.
Activision Blizzard's continued transition to a digital game business is moving along, as the company raised its annual outlook and reported better-than-expected results for the quarter. But profits for the company were down 35 percent to $293 million, compared to the same quarter a year ago. Revenue was down 16 percent to $1.1 billion. CEO Bobby Kotick was still confident in recent digital gains, specifically noted record digital sales, driven by Blizzard's World of Warcraft, Diablo, and Hearthstone: Heroes of Warcraft. Hearthstone as a revenue-driver is particularly notable, as it is a bit of a departure from Activision Blizzard's typical heavy-hitters. It's a free-to-play trading card game for PC, Mac and iPad, and instead of being developed by a large team, like other games under the Blizzard umbrella, Hearthstone came from a smaller team within the company. Hearthstone had over 10 million users as of March 11, according to the company. Those record digital sales Kotick mentioned made up over one-third -- 34 percent -- of Activision Blizzard's total revenues for the quarter. Looking ahead, Activision Blizzard plans to launch September's Bungie-developed shooter Destiny, which Kotick recently said will cost the company $500 million between production, marketing and manufacturing. While that cost is high, Kotick expects Destiny will become Activision Blizzard's next billion-dollar franchise. As for World of Warcraft, the game continues to be the most popular subscription-based MMORPG at 7.6 million subscribers during the quarter, but its growth is stagnant (it was at 7.8 million as of last quarter). The expansion Diablo III: Reaper of Souls sold 2.7 million units through to customers in its first week. Thanks to the better-than-expected results for the quarter and the strong 2014 portfolio, Activision Blizzard bumped its annual revenue guidance to $4.2 billion for the year, up from $4 billion. Profits are now expected to come in at $667.5 million, up from a previously-expected $570 million.

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