Closer Look: Blizzard’s Q4 2011

When we last left our intrepid heroes in Q3 2011, WoW had lost 800,000 subscriptions and the following four salient points were made in the earnings call:

  • Majority of the sub loss is occurring in the East.
  • Implicitly, the difficulty of Cataclysm content was the cause of sub losses.
  • Expect some (more) “aggressive” World of Warcraft marketing.
  • Patches are more about recapturing the recently churned.

I suppose the holiday box sale and Annual Pass count as aggressive marketing, but let me not get ahead of myself. If you want to read along from home, Seeking Alpha will hook you up.

1. Is Bungie not working on Titan?

Eric Hirshberg from Activision Publishing buried this gem 25 paragraphs into vapid gushing of COD and Skylanders:

Looking further out, we continue to lay the foundation for our new universe from Bungie, one of the world’s best developers. Bungie continues to make incredible progress on what we expect to be a genre-defining new IP that will provide us with tremendous new opportunities and which remains one of our key strategic growth pillars for the future.

This may or may not seem a non sequitur, but I have always entertained the notion that the Bungie acquisition might have had something to do with Blizzard’s Titan development. Why?

Let’s look at the entrails. First, both Joe Staten and Rob Pardo have been playing it coy as recently as 2 years ago about Bungie working with Blizzard. But we also know that Bungie’s secret project “Destiny,” is slated as a sci-fi MMOFPS that is, quote, “WoW in space.” If you have a tinfoil hat handy, things can get even more bizarre when you consider that Ensemble Studios was working on a Halo MMO to directly compete with Blizzard… that was code-named Titan. And when Ensemble Studios was disbanded, several ex-members joined Blizzard. And now Bungie is here with a 10-year contract, making a brand new MMOFPS IP to be a “strategic growth pillar” for Activision Blizzard at the same time Blizzard is making a “casual” new-IP MMO that isn’t supposed to compete with WoW… that is code-named Titan.

Technically a lot of this is old news, and the earnings call did not reveal anything new either way. But in reading that paragraph under the Activision Publisher heading, it occurs to me that it is entirely possible that we could see two new, separate MMO properties out of Activision Blizzard even with WoW still sucking most of the oxygen out of the MMO room. In some respects, that outcome is crazier than Titan turning out to be a Blizzard-Bungie joint MMO.

2. Around 1 million Annual Passes sold… in the West.

Another initiative that has been very successful is the World of Warcraft Annual Pass. This program was announced at BlizzCon this past year. Under its terms, players who commit to being a World of Warcraft subscriber for 1 year will get a free copy of Diablo III, unique digital items in World of Warcraft, and other benefits. To date, we have signed up more than 1 million players in the West for the World of Warcraft Annual Pass.

The more I think about that number, the crazier it ends up being. While the Annual Pass appears to be non-binding (your access to D3 will simply go away), can you otherwise imagine another MMO who can count on 1,000,000 Western subscription accounts being locked in for 12 months? That would make SWTOR automatically profitable for an entire year.

3. Mists of Pandaria information out on March 19.

Some of you may have seen recent news about the upcoming World of Warcraft expansion, Mists of Pandaria. Last week, we began inviting global press to visit our office to get a hands-on look at the game. The press visit will take place next month, and our players will be able to read the latest news on the game on March 19. We’re looking forward to showcasing the game to our community and collecting more feedback as we prepare for the upcoming beta for Mists of Pandaria.

By the way, that means there is an automatic 1 million beta-testers for Mists, yeah?

4. Chuck Norris was super effective!

Neil A. Doshi – Citigroup Inc, Research Division

Mike, I was wondering if you could provide us a little more detail around the subs for World of Warcraft. What was the impact from some of your marketing efforts? And then how many subs did you add from Brazil? And if you have any comments on trend that you could share with us, that would be great.

Michael Morhaime

Okay. So we were very pleased with the results of the marketing initiatives in Q4. The Chuck Norris spot was very effective. We’ve got over 29 million views of the spot on YouTube. And I think, just looking at how well the subscribership held up during our most competitive quarter ever, we’re very happy with that. Engagement of the player base is very strong. We do not break down regional. We do not provide regional breakdown of subs, but we’re off to a good start in Brazil. And I don’t have any detail on churn.

Nothing to add to that.

As reported everywhere, WoW did implicitly lose another 100,000 subs in the quarter. There have been a lot of “See? Not dying!” posts over in the MMO-Champ and WoW Insider comments, but it’s worth pointing out that A) if someone unsubbed for SWTOR, then they won’t count as “missing” until January, e.g. Q1, and B) WoW launched in Brazil this quarter, as noted above. There are several more high-profile MMO launches coming this year, and let’s not forget that everyone is stuck with Dragon Soul until Mists actually launches… which could be six months from now, or more.

In any event, sub numbers really only matter to me in the context of having objective data by which we can interpret future design philosophy, and MMO player desires by extension. If Blizzard’s reaction to losing 1.8 million subs is to make the game easier, then we can assume that they believe a hard game is why people left.

It’s crude, it’s imperfect, but it is all we really have as armchair game designers.

Posted on February 10, 2012, in Commentary, WoW and tagged , , , , , , , . Bookmark the permalink. 9 Comments.

  1. While WOW only lost 100k subs it seems that the west (US/EU) lost a lot of subs while subs were gained in places like China. This is based on the revenue section and comparring that to previous quarters.

    For example last quarter there were 10.3 million subs and they had $336 million in revenue. This quarter subs went down to just 10.2 million but revenue tanked to $268 million deferred and just $250 million non-deferred.

    The best possible explanation for this is the west lost a lot of subs and the east gained just 100k less than the west lost.


    • Douglas Creutz – Cowen and Company, LLC, Research Division

      Another question on Warcraft. It looks like your subscription revenues, your revenues for the game, not just subscriptions, were down about 10% sequentially. And given that the subs were relatively flat, I was wondering if you can give some color around why, I guess, the ARPU was down so much.

      Thomas Tippl

      Yes. One of the factors that impact that is our Annual Pass promotion where we effectively, for the combination of products, gave a certain discount through the free delivery of Diablo and a mount. So we’re applying that discount on a pro rata basis across all of those products. So we’ve been recognizing on both Annual Pass subscribers lower market subscription run rates…


      The above probably doesn’t account for all of that, but yeah, it is definitely tricky anymore to gauge Western subscription losses. Not only do West subs bring higher profit margins, they are the only real subs that matter to, well, the people probably reading these kind of blogs.


  2. First off thanks for an outstanding blog post. I know how much effort it is to do a really properly researched and well-thought out one.

    Next, I wonder if we’re seeing some more statistical sleight of hand. You cite a Blizzard earnings call that states that most of the sub loss is in the East. That means the West is more or less constant.

    However WoW just launched in Brazil, presumably sold well and presumably costs less that the product does in North America and Europe. Brazil is West.

    Could it be the case that WoW has actually lost a large number of subs in North America and Europe but has replaced them with Brazilian subscribers thus giving a superficially stable number of total subs for “the West” as a whole?


    • You just reminded me of a blue post I read recently but failed to commit to a post.

      It is an open question as to whether Blizzard counts Brazil (etc) as “West.” We know they use West/East, but have they ever used Latin America or simply South America? Does Russia count as East or West?

      As for the question at hand, yes, I imagine they are losing NA/EU subs; it is hard to reverse downward trends because each friend/guildie lost weakens the whole social fabric. I was more than fine continuing my subscription, for example, but it stopped making sense after the 3rd day of logging in, playing for an hour, and not seeing any other the 3-4 people I actually cared about playing with online.


      • To reconstitute those social ties, I think they will be wanting to get many of the “lost” players back at the same time, probably when MoP releases. I think this may explain the suspension of the Recruit a Friend program. I expect RaF will return as part of a big push when MoP comes out, or shortly before.


      • It’s possible. Then again, another theory I read about is that with the LFR system in place, people coming back via Scroll of Resurrection (I assume that’s what you meant) are actually capable of getting geared up and actually see all the content that was released in patch within the 7-10 free days. Since patches are only released every ~6 months, you could effectively play all the fun bits of WoW for free.


  3. A point about the annual pass – it inflates WoW sub numbers at the cost of giving away Diablo 3 for free. So even if WoW numbers stayed constant it would still represent a loss for the company. It’s essentially just shifting performance metrics from one game to another game.


    • That’s debatable. I mean, if the people who signed up were going to subscribe for 12 months anyway, then yes, it’s a loss. But how many people did the math and said “close enough” when they otherwise weren’t going to bother with a 12-month sub?


  4. “Chuck Norris was super effective!”

    I’m experimenting with Social data mining (not sure of a better term, link below) and I’m not seeing any change in growth at the time the ad was released. It definitely was successful (in term of views) but it probably touched current and veterans. I’m seeing other trends though:


%d bloggers like this: