2. Activision

FY08 Revenue: $2,898M, +92% (Rank: 5)
FY08 Profit/Loss: $345M (Rank: 4)
FY09 Revenue Expectations: At least $4,000M after merger with Vivendi Games
Titles in Global Top 100: 10 (Rank: 3)
Units in Global Top 100: 27.3M (Rank: 3)
Review Average: 62% (Rank: 17)
 

Explanation of Ranking: Second only to EA in third-party revenue prior to the merger with Vivendi Games, Activision's revenues have nearly doubled, profits have tripled and it holds the leading positions in music games, shooters and movie licensed games. Activision Blizzard marks a significant shift in power.

Activision was a power player in three important areas of software in the past year: music games, shooters, and movie licenses. The Guitar Hero franchise has generated over $1 billion in sales (most of that for Activision), with over $820 million just since the October 2007 launch of Guitar Hero III. Call of Duty 4 has shipped more than 10 million copies worldwide and the Xbox 360 version of the game stayed in the top 10 games for six months (in the U.S.), according to the NPD Group. Activision says that its Spider-Man 3 and Transformers: The Game were the two top selling movie games from April 2007 to March 2008.

Looking ahead, Activision has the potential to neutralize competition from its primary competition in the music space, Rock Band (developed by Harmonix, published by MTV Games and distributed by Electronic Arts). The summer release of Guitar Hero: Aerosmith was an event pushed heavily by retailers and appears to have had a kinder reception than 2007's Guitar Hero: Rocks the 80s. During the second half of the year Activision will release Guitar Hero: World Tour which will incorporate drums and vocals. Finally, the Guitar Hero franchise made the leap to the handheld market in June with Guitar Hero: On Tour, developed by Vicarious Visions for DS.

The merger with Vivendi Games puts Blizzard and World of Warcraft under the Activision roof. According to Activision executives, the merger was the most cost efficient means to get the company into the massively multiplayer online game market. While Activision could simply let Blizzard remain an extremely profitable part of its business, it would be wise to leverage Blizzard's expertise to enrich its other properties.

Wedbush Morgan's Michael Pachter recently stated that he expects the combined company to report revenues of $5.26 billion during the next 12 months. Should the new Activision Blizzard achieve revenues on that scale, they might not only reach parity with Electronic Arts, but could even begin to surpass their closest third party rival.