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Blizzard’s Q3 2015 Report

Rather than risking burying the lede, it feels more like there’s a risk of being buried by them.

First, WoW “only” dropped by 100k subscriptions in Q3:

Pump the brakes, kid.

Pump the brakes, kid.

I did not specifically offer a prediction for this quarter last time, and I’m glad I didn’t. Is it weird to say, though, that I’m both surprised and not surprised at only a 100k loss? It is one thing to expect the WoW house of cards to continue collapsing after seeing 1.5 million subs evaporate in the three months prior. But it is also entirely true that there are people still playing the first EverQuest and Ultima Online like it’s 1999. Is there any doubt in anyone’s mind that there would still be people out there playing Star Wars Galaxies or City of Heroes if they could? In that sense, we kinda know already that there will be some kind of baseline level of WoW subscriptions that will always remain. The question is just where that floor is.

Of course, we may never end up knowing where the floor is because Blizzard has decided to stop reporting WoW sub numbers. I pretty much agree with the rest of the internet that this is a rather embarrassing PR maneuver meant to obfuscate the declining success of the game. It’s a shameful, shameful display, Blizzard… how could you sink to the level of EVE Online and FF14’s “lifetime total subscriber” tactics?!

That said, I do find this brave new world of faux news amusing. For example, from the last link:

Instead of subscriber numbers, Activision Blizzard intends to use unspecified engagement metrics.

As the company has pushed toward a “year-round engagement model” with its franchises, it has similarly de-emphasized traditional performance metrics like sales figures. It has never reported sales figures for Destiny, instead relying on “registered users” numbers, sometimes even pairing that with the number of registered users for the free-to-play Hearthstone and reporting a combined number. In its quarterly earnings, Activision Blizzard pointed to “key engagement metrics” for Hearthstone being up 77 percent, but neglected to detail what those metrics were.

I wonder how the job interview went for the person who writes these press releases. “Why should we hire you?” “I’m 77% better than the other applicants.” “In what way?” “Key ways.” I did end up listening to the entire Investor Call for more Hearthstone tidbits, but the only non-zero piece of news was it achieved its highest quarterly revenue in Q3. So… X+1 > X, at a minimum. I suppose we could extrapolate that Hearthstone is still growing, but without a baseline, we’re back in the weeds.

The lede of ledes though, is Activision Blizzard buying King (aka Candy Crush) for $5.9 billion. Pretty much everyone, everywhere has questioned the sanity of this move, and I’m a bit inclined to agree. King is on the decline, even Activision Blizzard agrees there are no synergies between the franchises, and this move has drained the company’s cash reserves of $4.5 billion down to… next to nothing. We can even envision a scenario is which the WoW movie flops – and that’s a real chance – and suddenly things could start looking unexpectedly grim.

At the same time… you kinda have to look at this from a business perspective. Throughout the Investor Call, Kotick and crew repeatedly stressed how they more or less bought ~340 million mobile customers. The sum total of Activision Blizzard’s exposure to to the mobile space up to this point has been Hearthstone and some Call of Duty apps. Could they build some amazing mobile games with $5.9 billion? Maybe. King is on the decline from its heights, but at least they demonstrated that they were successful at some point. If they can release/steal another hit, or start leveraging the mobile eyeballs to cross-pollinate franchises, this could suddenly seem like amazing foresight.

The other thing to look at? King is based in Ireland, which is famous for its double…. sandwiches. Or was that the Dutch? On top of that, of Blizzard’s $4.5 billion in cash they had prior to this deal, $3.6 billion of it was held overseas. As in, evading US taxes. Spending it this way gets the maximum value purchasing power which they may not have been able to realize any other way. And, of course, it moves Activision Blizzard from having little mobile presence to being a dominate player in the field. Even if King turns into Zynga.

So maybe this deal is a bit better than people think.

Changing Hearts (of Thorns) and Minds

Remember when I said MMOs are like relationships? ArenaNet just put on the Barry White:

Veteran Player Appreciation

For our long-standing fans and loyal players, we would like to say thank you and show our appreciation. For all players who registered the core Guild Wars 2® game prior to January 23, 2015 and who upgrade their account by prepurchasing and registering any Guild Wars 2: Heart of Thorns edition before Guild Wars 2: Heart of Thorns‘ launch, we will add one additional character slot to your Guild Wars 2 account.

But wait, that’s not all!

For all players who purchased the Guild Wars 2 core game from our website and registered it between January 23, 2015 and June 16, 2015 in anticipation of Guild Wars 2: Heart of Thorns, we will automatically refund what you paid for the core game should you decide to pre-purchaseGuild Wars 2: Heart of Thorns from our website or in-game store any time through July 31, 2015. If you take advantage of this refund and pre-purchase Guild Wars 2: Heart of Thorns, all of your current account progress will be kept intact. We’ll provide further details on when refunds will be processed in the next couple weeks as we set up this process.

ArenaNet then went even further by explaining the business model moving forward: each new expansion will include all prior content. So we got the character slot for veterans, refunds¹ for the people who bought the base game during the miscommunication period, and concrete details on how things will work in the future. You literally could not get a more reasonable response from a company. I am completely impressed.

Not impressed enough to reinstalled GW2 and pay $50 for an expansion, of course. But impressed nonetheless.

¹ I believe this is limited to those who bought direct from ArenaNet, and not those who bought from Amazon, etc.

“Salad Dressing Weekly”

The following excerpt (it’s actually almost the entire article) is from a Wired interview with Ken Levine regarding why Bioshock Infinite has such generic box art:

When I got to sit down with Infinite‘s creative director Ken Levine on Thursday after playing the game and asked for his thoughts, I got an extensive, thoughtful answer that in a perfect world would put an end to all of the bellyaching.

“I understand that some of the fans are disappointed. We expected it. I know that may be hard to hear, but let me explain the thinking.”

“We went and did a tour… around to a bunch of, like, frathouses and places like that. People who were gamers. Not people who read IGN. And [we] said, so, have you guys heard of BioShock? not a single one of them had heard of it.”

“And we live in this very special… you know, BioShock is a reasonably successful franchise, right? Our gaming world, we sometimes forget, is so important to us, but… there are plenty of products that I buy that I don’t spend a lot of time thinking about. My salad dressing. If there’s a new salad dressing coming out, I would have no idea. I use salad dressing; I don’t read Salad Dressing Weekly. I don’t care who makes it, I don’t know any of the personalities in the salad dressing business.”

“For some people, [games are] like salad dressing. Or movies, or TV shows. It was definitely a reality check for us. Games are big, and they’re expensive, I think that’s very clear. And to be successful, and to continue to make these kinds of games which frankly, of the people who make these types of games, there’s not a lot of them, and they haven’t exactly been the most successful with these types of games that have come out in the last few years. I was thrilled because I love them, and I hope that we had some small role in getting those games greenlit… But they have to be financially successful to keep getting made.”

“I looked at the cover art for BioShock 1, which I was heavily involved with and love, I adored. And I tried to step back and say, if I’m just some guy, some frat guy, I love games but don’t pay attention to them… if I saw the cover of that box, what would I think? And I would think, this is a game about a robot and a little girl. That’s what I would think. I was trying to be honest with myself. Trust me, I was heavily involved with the creation of those characters and I love them.”

“Would I buy that game if I had 60 bucks and I bought three games a year… would I even pick up the box? I went back to the box for System Shock 1, which was obviously incredibly imporatnt — that game was incredibly influential on me, System Shock 2 was the first game I ever made. I remember I picked it up… looked at it and I said, I have no idea what this game is. And I didn’t have a lot of money back then. So, back on the shelf. And I was a gamer.”

“I wanted the uninformed, the person who doesn’t read IGN… to pick up the box and say, okay, this looks kind of cool, let me turn it over. Oh, a flying city. Look at this girl, Elizabeth on the back. Look at that creature. And start to read about it, start to think about it.”

“I understand that our fan says, that’s great Ken, what’s in it for me? One, we need to be successful to make these types of games, and I think it’s important, and I think the cover is a small price for the hardcore gamer to pay. I think also when we do something for the hardcore gamer, there’s something we’re talking about and something we’re sure about. The thing we’re sure about is that we’re going to be releasing a whole set of alternate covers that you can download and print. We’re going to be working with the community to see what they’re interested in.”

“We had to make that tradeoff in terms of where we were spending our marketing dollars. By the time you get to the store, or see an ad, the BioShock fan knows about the game. The money we’re spending on PR, the conversations with games journalists — that’s for the fans. For the people who aren’t informed, that’s who the box art is for.”

I like this excerpt for a lot of reasons, but mainly because I think its useful to occasionally be reminded that the majority of the games we like playing couldn’t have been made without a bunch of other people paying for them too; people who “don’t get it,” or otherwise are incapable of appreciating the game for what it is or what it represents. There are some outliers as always, high-profile titles exclusively geared to its niche, and thankfully the positive PR around the indie movement has made it possible to break the AAA budget straightjacket.

But sometimes the “dumbing down” is, in fact, necessary. Or at least useful in ensuring that you see more development from that studio/those designers.


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