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:
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.