Activision Blizzard Q2 Earnings Call What we learned!

[Azrile]

i didnt like that the shareholders were questioning about the activition/blizzard merge and what benefit it had.

Those weren´t shareholders per se, they were representatives from investment houses. It was actually a very important question and answer. You can compare the merger of Blizz-Activision with the merger of Bioware-EA. With ATVI, Bobby pointed out that the overall business plan of Blizzard is it´s own. Activision does not dictiate game design decisions or IP decisions onto Blizzard... contrast that to what happened with Bioware ( previously the only developer I would rate as highly as Blizzard).. EA totally controlled Bioware, they installed their own management into Bioware, and thusly, Both of Bioware´s post-merger games have been pretty terrible and ´reeked´ of EA. Bioware is no longer Bioware, but because of how ATVI did the merger with Blizzard, Blizzard is still very much Blizzard.

[Ronduwil]

You are wrong. In past quarters when they lost 1.3M subs, he said it was mostly from the East. This quarter, there was a much smaller overall drop in subs, and it was evenly split.

And we all know that "mostly" is code for "just about all," right?

[Azrile]

I'm sorry. I was honestly attempting to be sarcastic. Over the last 3 months I've seen post after post exclaiming that the losses were 90% Asian because at the previous meeting they said they were "mostly" in the East. The tone of such posts has been that, "We're losing a bunch of Chinamen to F2P MMOs, and good riddance to those pay-to-winners!" The statements this quarter basically refute that line of thought and establish that losses are occurring on both sides of the world and that there's far more to them than "F2P > subs." I'm sorry that my attempt at sarcasm was so confusing. It didn't help that I unintentionally riddled it with typos and initially said "West" when I meant to say "East." Apparently sarcasm is not my forte.

I understood your sarcasm, but you are wrong. You are talking about 3 different financial quarters. In the first two quarters, the losses were much bigger and Bobby said they were mostly from the east. This quarter, the sub losses are much smaller, and split evenly.

1.3M losses - mostly from the east
1.0M losses - mostly from the east
.7M losses - split evenly

Three different financial quarters. In the first two quarters, the losses WERE mostly cheap, low-paying china accounts. When WOW dropped from 10.5M to 8.3M is when Bobby was saying it was ´mostly from the east´. He has been talking about one quarter at a time, not cumulative-to-date.

[Noctifer616]

I find it interesting that in Q2 2012 the WoW revenue (Online Subscriptions in the financial report) is actually lower than in 2013. That's 1.4 million subscriptions difference.

[Azrile]

And we all know that "mostly" is code for "just about all," right?

Check out their revenues. if they had lost 1.3M people in one quarter who were paying $15 per month it would have affected their revenues. The fact that they lost 2.3M subscribers during those two quarters and their revenues barely nudged is a really good indication that they were not very high paying players. Also, just a little bit of research and you will learn about the huge F2P game that launched very successfully in china, and was highly marketed in cyber cafes exactly at the time the huge sub losses started.

But yeah.. put on your tin-foil hat and play symantics with the word ´mostly´... All the evidence, including revenues, and even the tone of the conference call tells you that there is no panic about the sub losses because they are still making the same amount of money.

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I find it interesting that in Q2 2012 the WoW revenue (Online Subscriptions in the financial report) is actually lower than in 2013. That's 1.4 million subscriptions difference.

Yep, pretty amazing that WOW lost 25% of its ´subscribers´ yet saw an increase in revenues. Unless of course the subscribers they lost were paying $1 per month to play.

[nekobaka]

Why not? (I stupidly missed the call so I have no clue what was going on >.< need to listen to a recording as soon as I can find one)

I missed the question myself. I do not see why one would get mad about it given that it is relevant towards the recent split from Vendi and how the two companies being separate are beneficial moving on forward and the answer was to how the companies since the original merger with Vendi have streamlined things and learned from each others strengths from the different markets that they do well in and sharing of ideas and experiences in these markets that allows each side to continue to grow and diversify with less risk. Examples given include Blizzards battle.net, servers, and Asian market experience and success provide a framework for Activision to learn from and use to allow them better success into breaching the Asian market, running an MMO or another heavy server reliant service.

[Azrile]

The info on Titan = more life for WoW is in the works.

Basically, there will not be a WoW 2. There can only be one WoW.

I was hugely surprised by this. I never thought Titan was going to be a WOW replacement, but I did think they were going to basically make ´COD with a subscription´..

[Manhands]

I guess Blizzard didn't attract the Asian market with this new expansion. I personally always thought the concept of this expansion was silly.

This was my thought, as well. Blizzard obviously wants the eastern markets, and the *idea* of ancient Chinese dynasties coming to life is a great, but the execution was just not quite as interesting in comparison to previous expansions.

Blizz, just do what you know. Do demons and dragons. Or demon dragons...riding giants...towing the chariot of the Titans.

[Azrile]

This was my thought, as well. Blizzard obviously wants the eastern markets, and the *idea* of ancient Chinese dynasties coming to life is a great, but the execution was just not quite as interesting in comparison to previous expansions.

Blizz, just do what you know. Do demons and dragons. Or demon dragons...riding giants...towing the chariot of the Titans.

So it is your opinion that the devs created WOTLK to lure in the Nordic players? It was an expansion theme.. they were introducing MONKS... of course it is going to have a china theme.. but it wasn´t some dark, sinister plan to pull in asian players any more than WOTLK was a huge trap to pull in nordic players. UO and AOC both had asian themed expansions and they don´t even exist in china. Did the wow developers create Uldum in order to pull in egyptian players? oh, those clever marketing guys from Blizzard.. putting in some of the egyptian gods in order to tempt egyptian players into subscribing. Developers use themes all the time, nothing to do with marketing to a specific place.

[Ferocity]

Yep, pretty amazing that WOW lost 25% of its ´subscribers´ yet saw an increase in revenues. Unless of course the subscribers they lost were paying $1 per month to play.

Don't forget -50% character service promotion. And now they are working on cash-shop features, to make up for more losses. I doubt it will be efficient way to increase profits from WoW, so we are yet to see some more quite unappealing changes/additions.

[Noctifer616]

Don't forget -50% character service promotion. And now they are working on cash-shop features, to make up for more losses. I doubt it will be efficient way to increase profits from WoW, so we are yet to see some more quite unappealing changes/additions.

We had the same thing in Q1, but there was no character services discount.

[Maconi]

What I took from it was that they're wanting to transition all their games to be more console/mobile friendly. Expect to see Titan on consoles IMO.

[Omega10]

"Basically, there will not be a WoW 2. There can only be one WoW."

Also, I am hoping that "There must always be a WOW".

It looks like, so far, that Blizzard is navigating some rough waters and surviving. I hope that they continue to survive, so that they are poised to really thrive when things turn around. I really like the explanation of the relationship that exists between Blizzard and Activision.

Ultimately, Blizzard being continually profitable is what will keep WOW around. So far... so good!

[Noctifer616]

Online subscription 233 million

Blizzard revenue 224 million

Distribution 37 million

So 9 million is the revenue they make from physical products?

[Ronduwil]

I understood your sarcasm, but you are wrong. You are talking about 3 different financial quarters. In the first two quarters, the losses were much bigger and Bobby said they were mostly from the east. This quarter, the sub losses are much smaller, and split evenly.

I understand that they were different financial quarters, and I was joking when I said that he was getting bad data. I actually looked up Blizzard's financial reports. Here is the quarter-to-quarter revenue difference corresponding to this quarter's data:

.7M losses - split evenly

The online subscriber revenue was 233 million for Q2 and 275 million for Q1. That's a difference of $42 million in revenue between quarters. Holy smokes. Suppose 25% of that net difference could be attributed to a decline in sales of expansion packs (I honestly think that's a little high). That still leaves $31.5 million in revenue loss due to actual subs. With .7M lost that averages to $45 per player for the quarter. That's pretty much the North American sub rate. Since the subscriber loss is evenly split I don't think the Chinese accounts are as "cheap" and "low-paying" as most people claim.

[Deleted]

When talking about blizz profitable, this vid is still relevant it seems =):



With Titan I understood they wouldnt make it subbased. However, wont it even be an mmo? That would be interesting as well. Blizzard could never make another success like wow, but I think most people at least was hoping for a new mmorpg where they delivered something outside the box.
Guess blizzcon will tell?

[Edge-]

With Titan I understood they wouldnt make it subbased. However, wont it even be an mmo? That would be interesting as well. Blizzard could never make another success like wow, but I think most people at least was hoping for a new mmorpg where they delivered something outside the box.
Guess blizzcon will tell?

I don't think Blizzard will be talking about Titan for at least another year+. They're doing some serious work in changing the direction of the game so anything they announce would have to be vague as all hell.

[Ronduwil]

I don't think Blizzard will be talking about Titan for at least another year+. They're doing some serious work in changing the direction of the game so anything they announce would have to be vague as all hell.

I learned my my lesson with Warcraft Adventures: Lord of the Clans. I couldn't wait to buy that game, but it got pushed back so many times that by the time it was almost ready for release it was obviously dated. I never assume any games, especially Blizzard games, are going to be released until the company puts out a full-blown press release with a concrete date. When Titan becomes definite we'll have more than rumors of its genre and pricing model. Until then I'll see it as something that may or may not happen.

[Collected]

Kinda strange that Blizzard would just drop into a call that Titan won't be subscription based and then in the same call suggest it's still years off. Perhaps they're 100% confident the sub model will be dead by then. I don't believe it will be on consoles. MMO's just don't suit consoles.

[Edge-]

Kinda strange that Blizzard would just drop into a call that Titan won't be subscription based and then in the same call suggest it's still years off. Perhaps they're 100% confident the sub model will be dead by then. I don't believe it will be on consoles. MMO's just don't suit consoles.

DCUO makes more money on consoles that it does on PC. Planetside 2 and Warframe (not a proper MMO though) are both moving to consoles. Elder Scrolls Online will be released on consoles. Everquest Next has been hinted to be release on consoles by Smedley.

MMO's can work well on consoles, even if it's not the ideal platform.