Activision is betting big on Destiny, the new shooter from Halo creators Bungie Software. They're spending a record-breaking amount on the game.
CEO Bobby Kotick said during the Milken Conference last week that they're going to spend $500 million on Destiny in total. The company clarified yesterday to Reuters that the figure isn't limited to development costs. It also includes marketing, packaging and other expenses.
Activision has shown in the past that they're willing to spend big money on their AAA games. Call of Duty: Modern Warfare 2 was the most expensive game ever produced back in 2009. However, even that game's budget ($200 million) seems paltry compared to Destiny's.
To put the numbers in further context: Destiny's budget is 2.5 times the amount that EA spent on building Star Wars: The Old Republic. It's nearly twice what Rockstar Games spent on Grand Theft Auto V. GTA 5, the previous record holder for largest game budget, cost $265 million.
The figure even looks crazy when it's compared to Hollywood blockbusters. Pirates of the Caribbean: At World's End, the most expensive film ever made, had a budget of $300 million. The Dark Knight Rises's total cost was $237 million.
What's even more surprising about the Destiny budget is that it's for a brand new IP. Call of Duty, Star Wars and Grand Theft Auto were all established franchises before publishers spend hundreds of million dollars on releasing sequels.
Why is Activision willing to spend half a billion dollars on Destiny? Well, as Kotick said earlier this year, they believe that it's a billion-dollar franchise. They think that Bungie's fame from the Halo series and Destiny's innovative "shared-world" multiplayer will be enough to deliver huge sales.
Destiny's sales will have to be very huge with a budget like this. Analysts said in the Reuters report that the game will have to sell 15 to 16 million copies just to break even.
Sterne Agee analyst told Gaming Blend that the franchise could be a billion-dollar franchise in time. However, optimistic as he is, his sales estimate from today's report (8 million) is well below what Activision needs to recoup their costs. Destiny may have a revered development team but it's still a new IP.
Activision's plan makes more sense, though, when you remember that they have a ten-year exclusive partnership with Bungie. They probably don't expect to profit, or break even, with Destiny at launch. Once the franchise is established, though, they could begin to reap the rewards with sequels or expansions to the first game. Their optimism is probably informed by the Call of Duty series; nearly every COD game released since Modern Warfare 2 has broken the sales record set by the preceding installment.
Nonetheless, Destiny is a huge gamble on Activision's part. The huge sum of money they're spending on the game certainly explains the delays. They want to give Bungie as much time to polish the game as possible. If they're going to establish a billion-dollar franchise, they're really going to need to wow gamers right out of the gate.