Bobby Kotick, Activision’s chief executive, said that while the videogame maker started the fiscal year on a good note, “we now believe that the risks and uncertainties in the back half of 2013 are more challenging than our earlier view, especially in the holiday quarter.”

Read the rest of this post on the original site »

In recent years, game sales have declined dramatically, with software and hardware making up only half of industry spending, according to NPD Group. The other half now goes toward downloadable content and microtransactions — in other words, digital content for consoles, smartphones and Facebook.

Because of this seismic shift in gamer behavior, many industry veterans are banking on the release of the new PlayStation, and a new Xbox coming later this year from Microsoft, to provide a jolt in traditional game sales.

On Wednesday, Sony is hosting an event in New York, where it is expected to unveil the PlayStation 4, as it has been nicknamed. Sony’s machine is expected to come in time for the holidays, along with the Xbox, although Microsoft declines to comment on its plans.

The good news is, that in the past, new hardware has always led to more software sales; as consumers bought one, they bought more of the other. But after a lackluster launch of the Wii U by Nintendo this holiday season, some wonder if a living-room-driven gaming experience has as much firepower as it once did.

“I feel like consumers are happy, and I’m not sure if there will ever be the right time to release a console again,” said Jerry Holkins, co-founder of Penny Arcade, a company that produces provides commentary on the industry through Web comics. “I think the spend is elsewhere. I don’t think they are waiting for the next generation; they are happy with where they are playing today.”

Electronic Arts’ John Riccitiello is more optimistic about the prospects of the next-generation devices. But then, as one of the industry’s biggest publishers, he has to be. During the company’s last conference call, he said that the December quarter was disappointing, but “that often happens when the consumer carries the expectation of a console transition.”

In January, Nintendo slashed its sales outlook after holiday sales of the Wii U failed to hit expectations. The poor turnout does not provide a lot of support for the theory that consumers were just holding back spending for the release of the new hardware.

The Japanese game company was hoping to rekindle consumer excitement by launching the Wii U with a controller that had a six-inch touchscreen display and acted much like Apple’s iPad. It also enabled consumers to interact with their TVs, by allowing owners to comment on programming within a closed social network. But the console was mostly trying to extend the life of the traditional videogame business, which relies on selling packaged software at $60 apiece.

Again, Riccitiello is hopeful that Nintendo’s performance is not an indication of the other two launches.

“I wouldn’t say that we see much correlation between the results that Nintendo has shown with their console debut of the Wii U, and what we see coming,” he said. “We see a pretty sharp distinction and, unfortunately, I am unable to go any further than that.”

But there’s no way to discount what has happened in the games industry since the last generation of devices launched. Social and mobile platforms have led to the rise of the 99-cent game and the free-to-play business model. Gamers have grown to enjoy playing a game without having to pay a dime. Then, if they want to, they can invest as much as they want.

If Sony or Microsoft are to be successful, adopting new business models may be the key.

There are already some signs of Sony’s willingness to change. According to The Wall Street Journal, Sony will provide a new streaming game service that will allow users to play games delivered over the Internet. The service is designed to use current PlayStation 3 titles on the new console. While cloud gaming hasn’t really taken off on other platforms, the technology does enable other pricing models, like subscriptions.

Another development since the last generation of consoles hit store shelves is how much the definition of a gamer has changed. With the massive popularity of Rovio’s Angry Birds and Zynga’s FarmVille, gamers aren’t just “hard-core” players but also housewives and touchscreen-savvy children.

To be sure, Microsoft has been aggressive in reaching out to a broader audience. Last week, it said that 38 percent of Xbox users are women, and more than 51 percent of owners are people who have kids. Overall, it said non-gaming usage has soared by 57 percent year over year.

Despite interest in other platforms, many also believe that there’s still a time and a place for the highest-fidelity experience possible. The console, with its high computing power, is often the perfect delivery mechanism for a gunshot to the face, or a perfectly depicted battle scenes — a fact that Activision proves year after year with its title Call of Duty, which defies industry trends. This year, for instance, the title under the name of Black Ops 2 crossed $1 billion in sales in just 15 days.

Anil Dharni, an SVP of Gree, has focused on publishing hard-core titles like Crime City for tablets, but still believes that consoles “serve an audience, who wants a high-fidelity experience that mobile devices can’t deliver today.” He thinks the traditional gaming market will decline, “but it’s not going anywhere anytime soon.”

Penny Arcade’s Holkins says he will continue buying consoles even if that makes him look old. “I liked having a console,” he said. “I enjoyed that, and I’ll still do that.”

As most know, the San Francisco gaming company has struggled to find the right balance as consumer behavior has shifted from playing social games on Facebook to playing games on their phones.

In the third quarter, 60 million people played Zynga’s games on a daily basis, up 11 percent from the year-ago period. But those gains were only possible due to mobile offsetting declines on Facebook. The worry of Wall Street investors over the situation is apparent in the price of its stock, now at $2.66, which remains 72 percent below its initial public offering price at the end of 2011.

But Zynga management believes it knows how to turn things around, including expanding beyond its classic Ville-style titles, like FarmVille, to more genres that appeal to a wider audience, including casino and more hardcore titles.

In a story earlier today, I wrote about the three executives that CEO Mark Pincus has appointed to help turn things around. One of them is Steve Chiang, the company’s new president of games.

Here are some highlights from an interview I recently did with Chiang:

Tell me a little bit about your background.

Chiang: I got into computers early, when I was six or seven, and I was really into videogames and playing games on my computer. And then I got into programming. First, I got into the industry when I graduated from school as a programmer, by creating games for Super Nintendo. That’s when making a game included one programmer and two artists, or two programmers and five artists, so they were really small teams, so you really had to know all aspects of game development.

And then, in 1994, myself and some guys I went to high school with, and John Schappert, started Tiburon. We started making Super Nintendo games, and then we started working on Madden when the contract came up after the other company didn’t ship the game on time. It was the best-selling game on PlayStation that year, which led to the acquisition by [Electronic Arts].

I stopped programming in 1998 or 1999. When I left EA, I was overseeing all sports development for Peter Moore, who was heading up the sports label, and I headed up development across Vancouver and Orlando.

What was the attraction to Zynga?

Chiang: In 2009, when I was thinking of joining Zynga, we had FIFA Ultimate Team, which was a card-based microtransaction mode. It was a $10 mode you paid for, and then you had $1.50 card packs. We quickly saw the microtransaction part of it surpass the $10 for the mode. So you reduce the $10 to free to reduce the friction.

Microtransactions and free-to-play seemed like the future, for sure. The second aspect was time. Having an hour to sit down and play a game is not easy to come by when you have a family, so, as a person who loves games, the idea of playing games for five to 10 minutes with friends was really appealing. I saw myself reconnecting with people from high school, and I saw my parents playing with my kids. The only game my ex-wife will play is Words With Friends, except for SingStar, a karaoke game on PlayStation.

When you are creating a place where women, children and older parents are all playing, it’s an incredible feeling and experience. It’s like the first time I saw “Star Wars” in the movie theatre — that’s what we are creating for people. That’s what we are trying to create on a day-in and day-out basis.

I’ve spoken to people before about the initial draw of Zynga being that so many people end up playing your game, unlike a console title that has a limited audience.

Chiang: Absolutely, in entertainment, you want to make hits. When you are working on sports games year after year, it’s not super appealing. But the idea you get to work on a game played by millions of people? That’s great.

I mean, I always tell people, you spend the same amount of time on a game that gets canceled as one that is seen by millions of people.

Do you believe the definition of a social game is changing?

I do. It’s a moniker, like casual gaming. We label stuff, but essentially the business model is free-to-play, and gaming has always been social. I look at us as doing free-to-play games on multiplatform.

For a while, social equaled Facebook.

Yeah, that’s how I interpreted it, as well. But when you look at Words With Friends, that’s what a social game looks like, where you are interacting with a friend on a daily basis.

Zynga and Facebook just changed their contract language, which is less restrictive and will free you up to do more things, right?

Chiang: I think Facebook is a really valuable partner. We struck a new agreement, which enhances our partnership in some ways, and allows you to invest more in our platform and mobile.

Everyone talks about gaming as a hits-driven business. Is it possible to sustain that over the long term?

Chiang: I think we’ve seen companies like EA and Activision be able to sustain [that]. There’s aways peaks and valleys.

With social, it’s more about gaming as a service — it’s a TV model, if you will. We continue to put out new content every week, and on Facebook every single day. That keeps our players engaged. There’s games like Poker that have been around forever. There are certainly franchises. It’s not that different from a Call of Duty or a Madden Football, which has been going on for 15 years now. We have some of the same characteristics in Poker and Words With Friends.

Tell me about the story arc for Zynga’s Villes. How come some are not as successful as the ones in the past?

What we’ve seen is a few different things. We are seeing consumer tastes changing, and there’s a player movement toward mobile gaming. If you look at just a single platform, you’ll see a peak or a leveling-off of gaming on Facebook. But we are seeing growth on mobile. As we go multiplatform, we may have peaks and valleys on a single platform, but we’ll see overall growth.

That seems to be a platform issue, but is there something about Villes in particular that is no longer popular?

Chiang: When I look at FarmVille 2, it’s reengaging a lot of players, and is off to a great start. There’s an aspect of something new, and so players are saying, “Let’s try that.”

A game like Pokemon peaked at a $1 billion business, but over time, it’s still a big business and it has sustained. Traditionally, you’ll see a massive pop and then it will sustain. It’s a great business, and when we put out great content like FarmVille 2, our players respond and they engage.

Let’s go back to the cross-platform approach. Zynga is going after both Facebook and mobile, and has restructured its leadership team around that. How has your job changed?

Chiang: I took over all of the games business, so I have every game on mobile and Web, and just recently I reorganized around our players and genres.

We have some great leaders, and some of the most experienced in social gaming in the western world. We are going to run our “Invest and Express,” which are our Ville games. We have a new group in PVP (player versus player), which is focused on men 18 to 34.

Then we have our casino group, which is poker and male-skewing, and we have slots and bingo, which is focused on women. And then we have our mobile casual group, which is focused around some of our big franchises, like Draw Something and Words With Friends.

Some critics say that Zynga’s games are not fun. What do you say to that?

Chiang: I think when you look at a game like FarmVille 2 or Elite Slots, we are driving new innovation, and we are continuing to push innovation. At the same time, if we change too much, players complain. We saw it in sports games, and you see it in social gaming, you want a consistent feel and familiarity. You don’t want to redo everything.

Zynga is such a data-driven company, I’m curious what metrics do you look at every day, and which ones are most important?

Chiang: We look at the net promoter score, where we ask players to rate the game from one to 10. A nine to 10 is a promoter, and below a six is a detractor. We certainly look at overall how many people are playing and what our retention is, especially after launch, to check out retention after seven days to see which way it’s headed.

Why didn’t The Ville do well? Zynga announced it was cutting back on it as soon as it went live.

Chiang: I think with The Ville, the team made a great effort. But we did not deliver.

Our players didn’t respond to it as we would have expected. We hit a high DAU (daily active user), but they did not retain as well as some of our other games. We looked at all of that, and applied that to our future games. When you are going for hits, we’ll also have some failures.

Do you have a mantra, or a way to rally the troops right now that makes everyone believe you can create another hit? Something to inspire them? How do you manage the turnaround process?

For us, it’s about focus and getting back to basics. Our team across the board has delivered hits. We’ve had a number of great game makers who have been tied up with games, and now they are focused on new projects. We are reducing the number of games we are making, and focusing on a fewer with the highest potential in Invest and Express, player versus player and casino.

With many departures over the past few months, does Zynga still have the talent to make good games?

Chiang: Absolutely. We had a lot of people joining before the IPO, and some of those folks have opted out, but the bench is still really deep. We are also still attracting a lot of folks. Social is not for everyone, so some people came here to try something, but the future is really bright. We have a strong network of players on Facebook and mobile, and a number of great games in the pipeline that should be — and we’ll see how they do — but are going to be really fun and social.

Is there a message that you’d like to get out to people on Zynga’s game creation? Do you think there is an impression people have that you’d like to correct?

Chiang: I never thought about that. I firmly believe that we have a huge bright future and have the best position for talent, and in terms of our network and in terms of mobile and Facebook players to drive the biggest and best entertainment in the world. We are well-positioned that way, and hopefully you’ll see things in the future that will surprise and delight a lot of people.

Here’s its latest attempt to break through: Disney Infinity, a series of games aimed at console game players.

That is: People who play games on Microsoft’s Xbox 360, Sony’s PS3 and the Nintendo Wii.

Short version: Infinity is a series of games linked together via a virtual “toy box,” so players can swap and modify characters from one game and bring them into another. Which means Sully from “Monsters University” can jump into a “Pirates of the Caribbean” game, etc.

The games also incorporate real-world collectible toys, which players use to unlock characters, games, etc. And you can also buy “power up” packs and other modules to boost/alter your games.

Or, for those of you who know kids of a certain age: This is a lot like Skylanders, except with Disney/Pixar characters that you can mash up. For the rest of you: Skylanders is a super-successful franchise from Activision that has generated $500 million in retail sales in a couple years.

That last sentence helps clarify what Disney is trying to do here. But if you’re wondering why Disney is focused on big, expensive (a “starter pack” for Infinity, which includes three games, will go for $75) console games, when the big trend in gaming is toward cheap/free casual/mobile games like Angry Birds, then Disney gaming chief John Pleasants wants to reassure you: They’re not.

“We’ve been fairly clear in our communications with folks that we have made a fairly big shift into online, mobile and social,” he says. And Infinity won’t change that.

But since people are still spending an awful lot of time on console games — and Sony et al are prepping the next generation of those machines — there’s no reason to abandon the market.

The research firm, which tracks spending at physical retail stores on a monthly basis, said last month was a particularly strong period for both hardware and software sales. In November, videogame sales totaled $2.6 billion, down 11 percent from the year-ago period, when sales totaled $2.9 billion — the smallest year-over-year decline so far in 2012.

There are two trends that are contributing to the drop off: One has to do with consumers shifting to other platforms, such as tablets and mobile phones, but the other has to do with how NPD tracks its data. It records sales that occur at retail, whereas a lot of consumers have started to purchase games digitally over the Internet. Still, looking at NPD’s data provides a broad picture of trends in the game industry.

Most telling last month was that sales have continued to be strong despite the fact that most of the hardware is six to seven years old, with the exception of Nintendo’s Wii U.

For comparison’s sake, NPD looked at how sales did last month compared to November 2005, which was the last time the industry began to transition between console generations. NPD Group Analyst Liam Callahan said retail game sales are nearly double what they were in November 2005. “This really demonstrates the long-term health of retail sales even as many platforms are quite late in their life cycles,” he said.

In addition, he said last month’s figures provide a very good sign of momentum going into the December holiday period.

Here are some of the findings from NPD’s November report, which tracked spending between Oct. 28 and Nov. 24:

• Nintendo sold more than 1.75 million total hardware units, including nearly 910,000 portable game units and more than 845,000 original Wii and Wii U units. In particular, it sold 425,000 Wii U units during the seven days captured in the data.
• Microsoft sold a jaw-dropping 1.26 million Xbox 360 units during the month, making it the No. 1 console maker for the 23rd consecutive month.
• November was the second-highest month of sales on a unit basis for the PS Vita since it launched, fueled by bundling third-party content with the hardware.
• Videogame software sales, including console and portable, totaled $1.43 billion, down 8 percent from the year ago period, when it totaled $1.6 billion. That represented the smallest unit decline this year, tied with August.
• Half of the software sales in November were for the Xbox 360, which gained 8 percentage points in market share since last November.
• Not surprising, Activision’s Call of Duty: Modern Warfare 3 Black Ops 2 was the top selling game during the month. It reported yesterday that it hit $1 billion in sales in just 15 days.

On the game’s first day, it achieved $500 million in sales, setting a new record for the Santa Monica, Calif.-based game publisher.

Last year, it took 16 days for Call of Duty: Modern Warfare 3 to hit $1 billion. Both games achieved those stratospheric numbers faster than the movie “Avatar,” which took 17 days to hit $1 billion at the box office.

The other big shooter released this season, Halo 4, which is only available on the Xbox, sold $220 million in its first day on sale.

The sales figures are according to internal company estimates and Chart-Track, which keeps tabs on retail customer sell-through information. The game, while rated “M” for “mature” because of the intense violence and strong language, reaches an enormously broad audience for a first-person videogame that takes hours to master.

In a release, Activision Blizzard’s CEO Bobby Kotick said, “Since Call of Duty was launched, cumulative franchise revenues from players around the world are greater than current worldwide box office receipts to date for the top-10 grossing films of 2012 combined. Life-to-date sales for the Call of Duty franchise have exceeded worldwide theatrical box office receipts for ‘Harry Potter’ and ‘Star Wars,’ the two most successful movie franchises of all time.”

Many say the comparisons to movies are not fair, since a trip to the theater costs roughly $10 apiece, while Call of Duty costs $60 to own. However, a movie takes about two hours to watch, whereas the game can be enjoyed for weeks. For example, since the game’s launch, more than 150 million hours have been logged online playing Call of Duty: Black Ops 2 through Xbox Live and the PlayStation Network.

Activision just confirmed that its big first-person shooter of the year has racked up $500 million in sales on opening day, setting a new record for the Santa Monica, Calif.-based game publisher.

That easily outguns first-day sales of Halo 4, which Microsoft said on Monday totaled $220 million. Activision’s war-themed title also easily beats last year’s blockbuster release, Call of Duty: Modern Warfare 3, which achieved $400 million in sales within 24 hours, and about $1 billion after 16 days.

These big videogame titles are often compared to more general entertainment releases, like first-day sales at the box office, given their size and scope. The criticism of using that metric is that one game costs $60 versus the $11-or-so that it costs to go see the new “Twilight” flick. However, the counterargument is that a $60 game is much more of a commitment, and will take even the most savvy players weeks to finish, whereas a movie is snack-sized at only two hours.

Here’s Activision Blizzard’s CEO Bobby Kotick drawing the obvious Hollywood comparison:

“With first day sales of over half a billion dollars worldwide, we believe Call of Duty is the biggest entertainment launch of the year for the fourth year in a row,” Kotick said. “Life-to-date sales for the Call of Duty franchise have exceeded worldwide theatrical box office receipts for “Harry Potter” and “Star Wars,” the two most successful movie franchises of all time.”

On Monday, Microsoft claimed that Halo 4 beat box office releases like “Harry Potter and the Deathly Hallows: Part 2” and the “The Avengers” — based on day-one sales in the U.S. Halo 4 is sold exclusively on Microsoft’s Xbox, whereas Activision’s Call of Duty sells across the Xbox, PlayStation 3 and, two days from now, Nintendo’s Wii U.

Metacritic, which aggregates videogame reviews from various game publications, gave Microsoft’s Halo 4 an impressively high score of 91, based on 37 reviews, compared to Call of Duty: Black Ops II, which received an 84, based on 48 scores.

That beats box office releases this year like “Harry Potter and the Deathly Hallows: Part 2” and the “The Avengers” — based on day-one sales in the U.S.

It has been five years since the release of the wildly popular Halo 3 and 11 since the first Halo game exploded on the scene. Microsoft says that, in all, the franchise has now generated more than $3.38 billion, making it “one of the most popular entertainment franchises in the world.” Halo 4, which is sold exclusively on Microsoft’s Xbox, went on sale last week for $60.

Another videogame that can claim blockbuster status is Activision’s Call of Duty franchise. Its latest release, Black Ops II, comes out tomorrow and is shaping up to be “the biggest Call of Duty game ever.” Its last release, Modern Warfare 3, surpassed $1 billion in sales faster than the blockbuster movie “Avatar.” The game, of course, runs across all three of the major consoles, giving it substantially greater reach.

Metacritic, which aggregates videogame reviews from various game publications, gave Microsoft’s Halo an impressively high score of 91 based on 37 reviews. Metacritic has not yet rated the new Call of Duty.

Based on the first 24 hours of sales, Microsoft says Halo 4 is on track to reach $300 million in global sales during week one, making it the biggest Halo launch in history. It also said the game shattered the record for the largest number of players in history, with more than four million players in the first five days. Users spent a total of 31.4 million hours playing Halo 4, pushing the total number of gameplay hours across the franchise past the five billion mark.

On tap for this month: Live footage of dudes playing videogames.

Google’s video giant will let Call of Duty players stream their exploits directly to the site, in real time, when Activision launches the newest version of the franchise next week.

You can read about the details here, but the gist is that if you’re so inclined, you’ll be able to watch gamers in multiplayer Call of Duty: Black Ops II matches blow each other up live, for free.

And if you’re not inclined, rest assured that there are a bunch of people who probably are.

Replays of “in-game” footage are a YouTube mainstay, and make up a big chunk of the views on Machinima, one of YouTube’s most popular channel/networks. And live gaming is a biggish deal, too: Earlier this year, YouTube garnered thousands of eyeballs for a live World of Warcraft launch event, which featured footage of players around the globe slashing and hacking.

So this is a pretty straightforward win/win for Google and Activision: One side gets free content, the other side gets free promotion. Free labor, too, courtesy of you and all your pals who paid $60 apiece for the new game.

And it’s a good reminder that while YouTube may occasionally draw huge audiences to watch a single live event, real-time video on the site is usually going to look like this instead: Something most of us have zero interest in watching, but something that’s intensely interesting to a particular niche. Which could make for a very interesting business.

Don’t care about videogames? You may still enjoy this ad for the game, directed by Guy Ritchie, with a cameo from Sherlock Holmes/Tony Stark himself:

The results easily beat the Santa Monica company’s outlook, which was hoping to achieve six cents a share on revenue of $740 million. The results also beat analyst expectations, which are better to compare against the company’s non-GAAP earnings. Based on those calculations, which exclude some results, Activision reported 15 cents per share in profit on revenue of $751 million. That literally blows away analyst expectations, which were projecting eight cents per share in profit on revenue of $708 million.

The company’s forecasts are typically conservative, but in the release, CEO Bobby Kotick attributed the strong results to subscription sales of Blizzard’s World of Warcraft: Mists of Pandaria, Diablo II; Skylanders Spryro’s Adventure; and sales for its Call of Duty franchise.

Thanks to today’s strong performance, the company is raising its full-year guidance for the third time in 2012. The new revision calls for GAAP earnings of 88 cents a share on revenue of $4.57 billion. Previously, it was expecting a profit of 69 cents a share on revenue of $4.3 billion.

Kotick still cautioned investors about next year, warning that it continues to be a challenging global economy and that it will be extremely hard to beat this year’s performance given record-shattering sales of Diablo III. “We expect that over the long-term, we will maintain our leadership position as the world’s leading interactive entertainment company and continue to provide strong returns to our shareholders by delivering great games to audiences around the world,” he said.

That would be Activision Blizzard, which is expected to blow away expectations for the third quarter when its results come out later this afternoon.

That also happens to be Robert Downey Jr.’s line in Activision’s new commercial for Call of Duty: Black Ops II, which will likely play a large role in contributing to the company’s bottom line.

Activision is forecasting to report a third-quarter profit of seven cents a share on revenue of $690 million. Analysts are even more bullish, projecting that the company will report a profit of eight cents a share on revenue of $708 million, representing a 13 percent increase compared to the same quarter a year earlier.

Wedbush analyst Michael Pachter says the company is also likely to raise full-year expectations — the second time this year. Pachter says the performance will be driven by strong subscriptions of Blizzard’s World of Warcraft: Mists of Pandaria, and healthy sales of Call of Duty, which he calls “the King of first-person shooters.” Activision is also expected to talk about strong digital sales that it generates through downloadable content, while it has also largely missed the downturn in social games by not exposing itself to the Facebook platform.

Arvind Bhatia, an analyst at Sterne Agee, also expects the company to beat third-quarter expectations and to affirm its full-year guidance. In a note to investors, he wrote: “We believe Activision is a defensive stock play within the interactive entertainment industry as at least half of its profits (i.e., Blizzard) are PC-based and not dependent on the ongoing console transition. That said, Activision’s console presence is very strong with titles such as Call of Duty and Skylanders.”

Bhatia noted that GameStop has said that Call of Duty: Black Ops II is shaping up to be “the biggest Call of Duty game ever.” That’s impressive, given that its last release, Modern Warfare 3, surpassed $1 billion in sales faster than the blockbuster movie “Avatar.” The new game, which is currently being presold for $60, will hit store shelves in six days.

The only reason to hesitate in naming the winner of the first-person shooter battle is that, after a five-year hiatus, Microsoft is releasing Halo 4, the latest installment in the Xbox blockbuster. Over its life, the franchise has generated $3 billion in revenue, and Microsoft is pulling out all the stops to ensure a big launch. The game went on sale yesterday for $60.

And generally it does this without the help of celebrities. But here’s one exception: The videogame’s trailer, which started appearing tonight during Monday Night Football, features cameo appearances from Robert Downey Jr. and French comedian Omar Sy. In the 60-second clip, titled “Surprise,” the actors appear as though they are playing in the game. Of course, the emphasis of Call of Duty is on blowing people to smithereens, but the lines are pretty funny. Downey, for instance, says with Iron-Man-like delivery: “Guess who brought a jet to a gunfight?”

The grenade-packing, bomb-dropping action was directed by Guy Ritchie (a.k.a. Madonna’s ex-husband). Can’t get more mainstream than that, right? That’s exactly what Activision is hoping for, since it wants to deliver another megahit for investors. Call of Duty: Black Ops II costs $60, and will come out Nov. 13. You can watch the entertaining trailer now, for free:

Nintendo’s President of North America, Reggie Fils-Aime, made the announcement this morning onstage in New York City.

There will be two configurations available. The regular set, in white, will cost $299.99, and will include the Wii console and the Wii U GamePad. It will have 8 GB of memory. The deluxe package, in black, costs $349.99 and will ship with 32 GB of capacity, a GamePad charging cradle and the game NintendoLand.

Nintendo also announced it will be offering a new video feature called Nintendo TVii at no additional cost. TVii will allow consumers to search for content across multiple subscription services, including Hulu, Netflix and Amazon Video, and stream content to the TV.

Fils-Aime confirmed that Nintendo will release the games NintendoLand and Super Mario U at the Nov. 18 launch, along with 50 other titles from partners including Electronic Arts, THQ, Disney, Warner Bros., Ubisoft, Activision and many others.

The Wii U was first unveiled more than a year ago at E3, where Nintendo surprised the industry with the first tablet-size controller for a videogame console. The hardware also represents a nice upgrade from the current generation, because it supports HD graphics and hardcore game play. It will be connected online to offer new social experiences, including video chat.

Nintendo’s new system will be the only new console launching this holiday season. Microsoft and Sony have not announced plans for launching new Xbox or PlayStation hardware.

The Wii U will launch nearly a month later in Japan on Dec. 8.

Many game makers are preparing for an opportunity to create edgier games as players begin to move upstream after cutting their teeth on simple mechanics, like slingshots.

To that end, a new crop of companies are forming to bring some of the classic first-person or role-playing elements found in console games to the phone and tablet market. The trend is not just happening on mobile, but Facebook, too, where new players were first introduced to gaming with farm-like mechanics, but now want something more.

SkyVu, which is announcing today that it has raised a first round of funding, is just one of those companies going after the so-called mid-core market.

The company’s games tend to attract a smaller user base, so they don’t reach the top of the charts and are not as well known, and being based in Omaha, Neb., has kept it off the radar of Silicon Valley. But SkyVu has been true to its target.

“We were one of the first to make mid-core action games on iOS. We stuck to our guns — no pun intended — and it has gone well for us,” said Ben Vu, the company’s co-founder, who was an animator for the movie ”Coraline.”

“We do not compete with Angry Birds,” Vu added.

For instance, one of its games, Battle Bears Royale, is a cross between Activision’s Call of Duty and the Teenage Mutant Ninja Turtles. In the game, bears slice off heads and shoot guns, but there’s never any blood. Instead, the funny action shooter — targeting boys age 9-15 — relies on rainbows and other wacky elements to entertain. To add to the Ninja Turtle vibe, the bears talk a bit like California surfers. In the words of Michelangelo, “Cowabunga, dude!”

Terms of the round were not disclosed, but investors include Lightbank, which is known for its investment in Groupon; Nextview Ventures; Great Oaks Venture Capital; Michael Chang, former CEO of Greystripe; and the Nebraska Angels. Vu noted that the company was profitable before it received today’s investment.

Battle Bears is a free-to-play game that is monetized through in-app purchases. So far, the company’s games have been downloaded 18 million times. That’s far fewer than Angry Birds, but because they draw in a more dedicated audience, Lightbank’s Paul Lee said, they still monetize well because the average user spends about three times more money than in other games.

According to AppData, which tracks the performance of apps across both Facebook and iOS, Battle Bear Royale’s top three in-app purchases were a small gas can ($2.99), a medium gas can ($9.99) and a gas tanker ($19.99). The game, which has more than 4,000 reviews and a rating of 4.5 stars, is currently the 329th top grossing iPad app in the U.S.

Higher engagement and better monetization are just two traits of a mid-core game, which may not attract as many players but can end up doing just as well or better as tamer titles.

The round of funding will be used to help launch the company’s two upcoming games and to open an office in the San Francisco area. The company, which has 22 employees, also has plans to extend the brand beyond games to merchandise, such as plush toys and T-shirts, and film and television deals. Updates will be announced soon on both of those fronts.

“These guys have done a good job of creating a cult brand,” said Lee, who reviewed 80 to 100 games before deciding to make SkyVu Lightbank’s first game investment. “This is like Rockstar Games (the maker of Grand Theft Auto) crossed with Angry Birds. We really like that.”

The company  recorded a profit of 20 cents a share on revenues of $1.05 billion, easily beating analyst expectations of a profit of 12 cents a share on revenues of $834.8 million, according to First Call.

But when you factor in official accounting methods, Activision’s results are down compared to the year-ago period.

In the second quarter, the company recorded a GAAP profit of 16 cents a share, down from 29 cents a share, and revenue of $1.08 billion, down from $1.15 billion.

That may be why the company’s stock is trading down 5.2 percent in after-hours trading, to $11.16 a share.

Still, Activision Blizzard remains one of the brighter spots in the videogame industry.

This week, Take-Two Interactive disappointed analysts with a wider than expected loss, and last week, Zynga shocked investors after wildly missing expectations. On Tuesday, Electronic Arts’ results were in line with expectations, although some areas showed signs of weakness.

Some of Activision’s highlights from the quarter include digital revenues of $343 million, representing 32 percent of the company’s GAAP revenues.

The company also had three of the top best-selling games in North America and Europe. They are Skylanders Spyro’s Adventures, Call of Duty: Modern Warfare 3 and Blizzard Entertainment’s Diablo III.

Because Activision was able to report such strong results in the second quarter, it is revising its full-year guidance for the second time. The company said it is now expecting non-GAAP revenues of $4.53 billion and non-GAAP earnings per share of 99 cents. In the second quarter, the company is forecasting earnings of 7 cents a share on revenues of $690 million.

Now the videogame maker is gunning for much smaller screens, including smartphones and tablets.

In an interview with All Things D, Activision Blizzard’s VP of Mobile Greg Canessa said to expect several mobile announcements as it invests more heavily in the space.

For starters, the Santa Monica, Calif., company is announcing today that it is creating a publishing arm that will bring third-party mobile games to market. Through the program, it will assist independent game makers with funding, development, distribution and promotion of their titles across both iPhone and iOS.

As part of the deal, developers will get the benefit of publishing their game under the Activision brand, while continuing to own the game’s intellectual property.

The shift to digital has been hard for many game companies to swallow, as it typically means shifting away from selling $60 games at retail to giving away free games that are monetized through advertising and virtual goods.

As part of today’s announcement, Activision said it is partnering with Flurry, a mobile analytics and advertising platform that works closely with thousands of mobile developers to help with this transition. Flurry will provide tools to Activision’s developers to help understand mobile development and distribution, while Activision will lend its expertise in making great videogames.

“Flurry can scout and find those indie developers that we should partner with,” Canessa said.

Flurry President and CEO Simon Khalaf said his company also will be able to help promote Activision’s first- or third-party titles, by cross-promoting the apps in its advertising platform, which reaches more than 250 million consumers a day.

To date, Activision has developed some of its own game titles for mobile, including Crash Bandicoot Nitro Cart 2; Call of Duty: Black Ops Zombies, which is a rendition of the console version of the game; and Skylanders Cloud Patrol. The games cost, respectively, $6.99, $2.99 and 99 cents on the iPhone.

In the future, Canessa said Activision will experiment with releasing games for free, to be monetized through advertising and virtual goods.

There are a number of reasons why Activision decided that now was the right time to invest in mobile, Canessa said, including increased smartphone and tablet penetration and the capability of the devices.

“It made a company like us, that’s focused on mid-core and hardcore gaming, take a second look at the platform,” he said. “Two or three years ago, you couldn’t envision a world where you could put mid- or hardcore games on mobile.”

To date, Activision hasn’t talked about the importance of mobile very much, but it may not really be late to the game, after all.

Last week, Activision’s close competitor Electronic Arts said that a majority of its mobile game titles will become free by the end of the year, representing a shift away from the premium games market. Unlike Activision, Electronic Arts has been one of the largest mobile games developers on both Android and iOS, but it also represents one of the biggest holdouts when it comes to shifting to free.

Perhaps you’ve never heard of Gree, but if you were at E3 this week, you probably saw that it made a huge splash.

Rumors started circulating early at the annual videogame conference that the Japanese company had the second-largest booth on the show floor — after Microsoft, that is.

The booth size is particularly ironic, given that Gree was showing off mobile games, likely the smallest games on the show floor.

The monstrosity, which included both a public booth and executive meeting space, spanned about one and a half times the typical company’s showroom footprint. In the map above, you can see that the size of the booth rivals even those of gaming giants like Electronic Arts.

But it also turned out that the rumor wasn’t true. Officially, all I could find out was that Gree had the show’s largest mobile-only booth, and I was never able to track down how it ranked among all of the show’s exhibitors. Under those circumstances, I grant it the biggest-smallest booth award at E3.

But clearly the space was purchased to make a point, because Gree did not need that much territory.

While Gree was showing off games on 3.5-inch iPhones, which were zip-tied to various podiums over lush (i.e., expensive) carpeting, EA and Activision’s booths contained billboard-sized displays to promote upcoming HD titles like Madden and Call of Duty. Large booths like those typically have theaters, where attendees can stand in line for a chance to either get hands-on time with the games or watch more game footage.

That didn’t apply here, where there were no lines to play the games.

On Tuesday night, a Gree-hosted party was one of the most coveted tickets at the event. At a venue near the Los Angeles Convention Center, a packed crowd turned out to hear the DJ known as Girl Talk spin records.

So, what was all the fuss about?

As many other companies are attempting to do, Gree’s goal is to become the social network for mobile games, similar to the way Facebook has become the social platform for games on the PC.

Gree was at E3 to stake its claim in the space, while also wooing developers.

Gree, which was founded in 2004, has a head start as one of the largest mobile social networks in Japan, generating $260 million in revenue in the fourth quarter alone. In 2011, it purchased OpenFeint in San Francisco, which marked its expansion into the U.S.; last month, it acquired San Francisco game developer Funzio. Together, the two acquisitions cost $310 million.

At the booth, Gree was showing off 13 games, five of which are first-party titles, with the remainder coming from outside developers. Some of the games are already available for individual download on iPhone and Android, including Zombie Jombie and Alien Family. This summer, the company plans to finally launch the mobile social network that will allow players from around the globe to compete against each other and discover games. Other companies that will be competing in this space include Facebook, Electronic Arts, DeNA, Apple and Google, to name a few.

We here at AllThingsD aren’t the most hardcore of gamers, but my colleague Tricia Duryee and I were there in full force to hear about Microsoft Xbox’s SmartGlass app, Sony’s new game titles, and Nintendo’s nod toward the “holiday season” for the release of its upcoming Wii U console. We also roamed the floors of the Los Angeles Convention Center to capture the best images from the event.

So, it may be game over for now, but for your viewing pleasure:

RELATED POSTS:

• Nintendo Holds Back the Goods on Wii U Launch Date
• Nintendo Reveals a Wii Bit More About the Wii U
• From Sony, More Games and More Cross-Platform Play
• Ubisoft Prepping Eight Wii U Titles, Including Exclusives Like Zombi U
• EA Building Up Its Facebook Empire — This Time With SimCity Social
• Ear-Splitting, Eyeball-Peeling Demos From EA
• Microsoft Calls Dibs on New Call of Duty: Black Ops 2 for Xbox
• Microsoft Doubling Down on Video and Music for the Xbox
• Microsoft Unloads the Latest for Xbox: Shooters, Sports and Songs
• Nintendo’s Wii U Embraces Social Networking (Video)
• E3 Interview: EA’s Riccitiello Promises to Make “Eyeballs Peel”

At the Microsoft Xbox press event at E3 today, the software maker said all new, downloadable expansion content from Activision’s Call of Duty: Black Ops 2 will launch exclusively on Microsoft’s Xbox 360 to start.

Xbox 360 is already listed as a console partner on the game’s official Web site, alongside Sony’s PlayStation 3, and the game will be playable on the PC, as well. But Xbox owners will get an early jump on the extra game content.

Call of Duty: Black Ops 2 is the next and highly-anticipated installment in the record-breaking franchise. It was first announced on May 1 of this year; the game’s official Web site says the game will be released on November 13, 2012.

One thing that sets this version of the popular first-person shooter game apart from its earlier software counterparts: This one is set in the future, around a 21st Century Cold War, while the others have focused on historical battles and wars.

The franchise has been a bright spot in the softening hardcore game industry. Late last year, Call of Duty: Modern Warfare, surpassed $1 billion in sales in just two weeks and two days.

Call of Duty: Black Ops 2 will cost $60, and is available for preorder now.

Over the past 12 months, the gaming giant’s stock has been cut in half, falling to $13.12 a share, down from a high of $26.13. At those levels, its market cap has shrunk to $4.2 billion, making the company potentially tasty acquisition bait for larger fish.

That valuation puts it slightly below its key digital competitor, Zynga, which continues to dominate the Facebook platform in spite of several failed attempts by EA to topple it.

EA has also lost a number of high-level executives to Zynga. And its big releases of Battlefield 3 and Star Wars: The Old Republic have struggled against rival Activision’s comparable titles, Call of Duty and Diablo 3.

Still, in an interview with Riccitiello this week ahead of gaming’s biggest annual gathering — E3, kicking off tomorrow in Los Angeles — he was sounding like it’s all high scores for EA.

“We are in a spectacular position. The stock is oversold, but they [investors] are waiting for a catalyst,” he said. “They don’t know what it is yet; maybe it’s the next mobile hit or social hit? But it will probably be E3. We will make their eyeballs peel.”

What that unusual image means exactly is unclear, but one assumes he hopes to impress at least some of the 45,000 attendees converging on Los Angeles Convention Center like zombies staggering toward fresh brains.

Once there, they will be overstimulated by ear-splitting music booming from a space — dotted with massive booths — about the size of eight football fields.

But for EA and the other companies showing off their wares, it’s an ever dicier situation. That’s because the show continues to celebrate blockbuster console hits over clear consumer trends focused on an increasing number of devices and platforms, as one-time purchases of $60 games are giving way to free-to-play models that make a few pennies per user every month.

In fact, about 90 percent of EA’s business used to come from the console arena, and now it’s closer to 60 percent. In the fiscal year 2012, EA generated $1.2 billion in digital revenues, representing a 47 percent increase year over year.

But in the build-up to E3, Riccitiello contended that, like so many other cycles in the past, the industry will get out of this lull too, and he’s pinning his hopes on new console hardware coming out from Sony, Nintendo and Microsoft this holiday season.

“I’m not saying Moses will part the water for us, but it will damn near be close when the consoles come out,” he said. “For the past few years, we’ve had a challenging console environment, but we are about to enter an era of double tailwinds.”

We’ll see about that, but here are highlights from my interview with Riccitiello:

On the next generation of consoles:

Each generation has built a software business that is 50 percent bigger than the one before, and that was entirely made up of a packaged goods business.

I don’t think console and packaged goods are synonymous, like how music and CDs aren’t synonymous. The delivery system has changed from a disc to a more digital model. It’s shifted to a service, like iTunes and Spotify.

Consoles are super-powered PCs that are connected to the biggest screen in the house. There’s no doubt in the mind that the TV set is going to remain as the principle display device for entertainment going forward.

On EA pulling off the transition from packaged goods to digital:

At some point they [investors] are going to have to wake up. When you are on the podium at the end of the Olympics, you obviously know how to swim. But they are still saying that we need water wings. I get it, I understand the cynicism that prevails.

On the worth of EA’s $400 million acquisition of Playfish, the social games developer, in late 2009:

If you read our fillings, you would see that they earned a significant portion of their earnout, so they must have done something right. If you go to E3, you will see a major introduction that will usher in a long train of products, which was only made possible by Playfish investment.

We are three years out from [realizing the full value of the deal], but the vision we have — and the direction we are going — has been made possible by a platform and culture and technology shift. And a gigantic part of that had to do with an infusion of Playfish’s DNA.

On shifting to an always-on model versus shipping software:

We used to peak on usage a week after we shipped. But all of our games have an ongoing business now, and Playfish was the model for all of that.

On the Sims Social on Facebook not knocking Zynga off the top of the charts as had been expected:

Maybe I wish the Sims Social had sustained longer, but relative to the impact it [Playfish] has made on our company, I can’t say enough about it.

On executive departures — such as Barry Cottle, the EVP of EA’s interactive division, and its COO John Schappert — to Zynga:

It says that people pay are willing to pay a lot of money for EA talent, but we had lower attrition than Google last year. … There were a notable number of high-profile executives who left for 300-600 percent more money. … Even at depressed stock prices, they got $12-$13 million to show up on day one. I take it as a compliment that someone is willing to spend $20 to $40 million dollars on my employees. Those are staggering sums.

On getting that talent back:

I just guided 30 percent income growth, which is better than any of my competition, and delivered a great fiscal 2012 with 40 percent growth on digital. I don’t think my team is missing a beat. Would I want them back? Not now, but I do understand it from a money perspective. I get it.

RELATED POSTS:

• Nintendo Holds Back the Goods on Wii U Launch Date
• Nintendo Reveals a Wii Bit More About the Wii U
• From Sony, More Games and More Cross-Platform Play
• Ubisoft Prepping Eight Wii U Titles, Including Exclusives Like Zombi U
• EA Building Up Its Facebook Empire — This Time With SimCity Social
• Ear-Splitting, Eyeball-Peeling Demos From EA
• Microsoft Calls Dibs on New Call of Duty: Black Ops 2 for Xbox
• Microsoft Doubling Down on Video and Music for the Xbox
• Microsoft Unloads the Latest for Xbox: Shooters, Sports and Songs
• Nintendo’s Wii U Embraces Social Networking (Video)
• E3 Interview: EA’s Riccitiello Promises to Make “Eyeballs Peel”

Now there’s some additional information on timing, thanks to a lawsuit between Activision and some former employees.

According to confidential agreements unsealed in the court case, Microsoft’s next game console, which is referred to as the “Xbox 720,” could be released in time for the 2013 holiday season.

The Los Angeles Times originally posted the documents on Monday, but it was Brier Dudley of the Seattle Times who came up with the theory on the timing.

The lawsuit is a complicated tale, involving Activision’s insanely successful first-person shooter Call of Duty. Former Activision developers are claiming they are owed hundreds of millions of dollars in royalties and bonus payments. Activision is claiming breach of contract.

The documents, revealed last week, detail a high-profile deal between Bungie and Activision in 2010.

The 27-page agreement calls for Bungie to develop four “sci-fantasy, action shooter games,” code-named “Destiny,” released every other year, beginning in the fall of 2013, according to the Los Angeles Times. Additionally, Bungie agreed to put out four downloadable expansion packs code-named “Comet.”

Bungie is the developer behind the successful Halo franchise, but is not the developer behind Halo 4, which Microsoft is developing and releasing in November.

Here’s what Dudley is suggesting based on the contract language:

Microsoft hasn’t said when the next version of the Xbox will go on sale, but the Bungie contract suggests that it could happen in the 2013 holiday season, with “Destiny” as a key launch title. That would be similar to the way Halo was a cornerstone of the first Xbox launch in November 2001.

An Xbox spokesman declined to comment on this theory, and referred questions to Activision and Bungie.

The document also says the game is expected to be released for the PlayStation 3 successor in the fall of 2014.

The big caveat to all of this guesswork is that the document is now two years old, so timing could easily change. Additionally, the name “Xbox 720″ could just be a code name or placeholder. Of course, console makers keep the timing of their upcoming hardware close to their vests, so that consumers don’t hold off on making purchases.

In March, Microsoft’s Corporate Communications boss Frank Shaw told AllThingsD that consumers probably shouldn’t expect new hardware at the E3 game conference, or “anytime soon.”

“For us, 2012 is all about Xbox 360,” he added.

After Activision’s Blizzard studios launched the highly anticipated PC game on May 15, players had problems logging on and said their accounts were being hacked.

“Despite very aggressive projections, our preparations for the launch of the game did not go far enough,” the company said in an apology issued last week. Yesterday, the company issued another statement, confirming that some accounts “may have been compromised.”

In addition to selling 3.5 million copies on day one, Activision said more than 1.2 million players received Diablo III as part of signing up for the World of Warcraft Annual Pass promotion. Based on that total, internal calculations and reports from distribution partners, Activision believes this makes Diablo III the biggest PC game launch in history.

By the end of the first week, Diablo sales reached 6.3 million. The game costs $60 for either the physical copy or the digital version.

“We’re definitely thrilled that so many people around the world were excited to pick up their copy of Diablo III and jump in the moment it went live,” said Blizzard’s CEO and co-founder Mike Morhaime. “We also regret that our preparations were not enough to ensure everyone had a seamless experience when they did so. I want to reaffirm our commitment to make sure the millions of Diablo III players out there have a great experience with the game moving forward, and I also want to thank them for their ongoing support.”

In the game, players take on one of five heroic characters — barbarian, witch doctor, wizard, monk or demon hunter. As that character, they must save the world of Sanctuary from the forces of the Burning Hells. As they engage in the virtual world, players gain new abilities and acquire artifacts.

For the first time ever, those artifacts can be traded for real-world currency through an auction house.

During the company’s first-quarter conference call two weeks ago, it confirmed that consumer feedback from the beta test had gone well, especially when it came to the new trading method.

Blizzard does not intend to sell any items in the auction house, in contrast to other game models where companies profit from selling in-game virtual goods. But interestingly, Blizzard will charge players a transaction fee on sales, or roughly 15 percent on most items.

The company said both revenues and earnings exceeded its expectations for the quarter, even though they were down from the year-ago period.

In the first quarter, Activision recorded a profit of 33 cents a share on revenues of $1.17 billion. Those results beat its internal forecast of 22 cents a share on revenues of $965 million, but is down compared to the first quarter 2011 when it reported a profit of 42 cents a share on revenues of $1.45 billion.

Due to a better-than-expected quarterly performance, the Santa Monica-based game maker said it was raising its guidance for the year to a profit of 65 cents a share on revenues of $4.2 billion, an increase of two cents and $50 million respectively.

In a release, Activision’s CEO Bobby Kotick pointed to strong demand for Call of Duty: Modern Warfare 3, Skylanders Spyro’s Adventures as well as Blizzard Entertainment’s World of Warcraft for the better-than-expected results.

In particular, analysts were eager to see how World of Warcraft performed with the introduction of Electronic Arts’ Star Wars: The Old Republic. Activision said the number of subscribers for WoW, the online massively multiplayer game, held steady at 10.2 million subscribers at the end of the first quarter compared to the end of the year.

On a non-GAAP basis, which excludes some items, Activision said it earned a profit of 6 cents a share on revenues of $587 million.

Analysts were expecting the company to earn four cents on revenues of $555.9 million, according to First Call.

In after hours trading, the company’s shares were up 10 cents, or nearly 1 percent, to $12.40 a share on the report.

Startup Grind, which first reported the layoffs, said between 500 and 1,000 employees will be affected, representing between 5 percent and 10 percent of the game-publisher’s workforce.

In an emailed statement to All Things D, the company said: “EA is growing and looking to hire hundreds of people for our digital, console, mobile and social games. Like all game companies, we make occasional adjustments to resize teams as projects are completed and new priorities are established. Overall, we expect that headcount will be up at the end of this year.”

Our sources indicate that the layoffs will be closer to 500 and are tied to the company’s game schedule. Last year, the company shipped two epic projects: Battlefield 3 and Star Wars: The Old Republic, which were challenging Activision’s respective dominance in first-person shooters and massively multiplayer online categories.

Once a title shifts, some employees stay on to work on other projects or remain on teams that build new content for the existing games to keep them fresh.

In this case, it appears the cuts show just how many resources the company was investing in these titles before launch. We expect to hear about these titles’ performance in a couple weeks when EA reports fourth-quarter earnings.

Three years ago, the company conducted a larger restructuring, totaling 1,500 employees.

Still, the Redwood City, Calif., company has aggressive hiring plans. Previously, it disclosed it wants to hire 5,000 engineers by the end of the decade to help build a platform, crossing all of its labels, including mobile, social and console. In particular, CTO Rajat Taneja has been bulking up his team since joining EA in October and now has 600 people on staff.

In afternoon trading, EA’s stock was down more than 5 percent, or 89 cents, to trade at $15.29 a share. Over the past year, it has traded as high as $26 a share.

The Redmond, Wash.-based company said today that for the first time, Xbox Live users are now watching more movies and TV and listening to music than gamers are using it to play online games.

The recent shift is worth noting given the mind-boggling number of hours gamers are willing to spend online destroying opponents on the battlefield or football field.

Microsoft declined to break down the number of hours spent, but as an example, 3.3 million players logged seven million hours on Xbox Live on the first day alone that Activision’s Call of Duty was available back in November.

What’s more, the growth of entertainment is not at the expense of gaming. Online gaming on the Xbox is up over the past year, too. In fact, Xbox Live usage — spanning gaming and entertainment — is up 30 percent year-over-year.

The shift toward entertainment is not completely unexpected, since Microsoft has been investing heavily in turning the console into a more general entertainment device for the living room. Sony’s PlayStation has a similar emphasis and Nintendo’s upcoming console, the Wii U, is expected to support entertainment applications.

In December, Microsoft rolled out a massive software update to the Xbox that allowed users to control the console using the Kinect. As part of the update, it also began to add more than 40 content providers to the console to increase the catalog of live and streamed TV, movies and music.

As previously announced, Xbox today launched voice-controlled TV apps from Comcast and HBO Go in the U.S., and MLB.TV throughout North America. To access these apps, you must be a subscriber, meaning it is not meant as a cable subscription substitute.