Why Did Activision Go Beyond the Call of Duty?


Activision Blizzard (NAS: ATVI) unveiled the third installment in the hit Diablo franchise last month. The no-brainer blockbuster came with a side of controversy -- and Activision is surprisingly nimble in its handling of the criticism.

Not that the company had much incentive to plug any holes in the brand-new game -- Diablo III set preorder and sales records by the bushel anyhow, with 6.3 million copies sold in the first week alone. At $60 a pop, that translates into nearly $400 million in first-week sales. Oh, and more than half of that cash pile arrived in the first day -- hardcore gamers can be a rabid bunch of big spenders.

To put that number into perspective, it's in the ballpark of the $455 million that record-breaker The Avengers rang up for Walt Disney (NYS: DIS) in its first week on the global stage. But Disney collected more than $40 billion of revenue over the past year while Activision saw just $4.5 billion -- the importance of one hit is an order of magnitude larger for the game builder.

In Diablo III, gamers can buy and sell virtual goods for real-world money. This is a popular idea, as really devoted players can make some decent cash from their gaming habits -- but it also raises the specter of security problems. Exchanging digital currency is one thing -- security breaches there can be corrected by restoring backups of in-game characters, so there's little harm done.

But once you raise the stakes to real dollars and cents, you're tying bank accounts or credit cards to the process. Just ask Sony (NYS: SNE) how much it hurts when a cash-based trading model breaks down. The PlayStation Network is still the butt of computer security jokes, and it's tough to even put a price tag on that kind of negative PR.

But Activision secured its Battle.net platform with two-factor authentication just in time for the dollar-based auctions to go live. Using either a smartphone app (free!) or a hardware key ($6.50 plus shipping), you'll need to enter an ever-changing security code before touching your in-game credits. If this sounds familiar, you're probably using an RSA key from EMC's (NYS: EMC) security division, or maybe the two-factor login process for Google (NAS: GOOG) Apps and Gmail. This is the kind of security you see from banks or enterprise-class IT systems.

That's Activision going above and beyond the call of duty (pun intended). That's how casual customers become loyal regulars, and how you ease the tension over a potentially disastrous hack-attack. Sony should be taking notes here.

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At the time thisarticle was published Fool contributorAnders Bylundowns shares in Google but holds no other position in any of the companies mentioned. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+.The Motley Fool owns shares of Google, Activision Blizzard, and Walt Disney, has sold shares of Sony short, and has written calls on Activision Blizzard.Motley Fool newsletter serviceshave recommended buying shares of Activision Blizzard, Walt Disney, and Google and creating a synthetic long position in Activision Blizzard. The Motley Fool has adisclosure policy. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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