Activision Blizzard, Inc Earnings Report - WoW's Predictions

[Zenfoldor]

Can't wait for the Blizz to try and capitalize on the Battle Royale frenzy and release a game like FN / Apex 2 years from now when that craze is dying and the game does poorly. Blizzard games have only been successful by taking relatively small / niche genres (mmos, moba, arpg, etc.) and releasing games with mainstream appeal that puts them at the forefront of the industry.

Unfortunately, they're not in that position right now it seems, they're trying to either capitalize on genres that already have established games or trying to cash in on short term memes. The ultimate issue is that Blizz doesn't (and really has never) have a creative bone in their body and now these chickens are coming home to roost.

Seems like they had the right idea with a Dark Souls ripoff, but the problem is they tied it to Diablo. Why can't blizz create a new IP in 3rd person action-rpg genre? Perhaps that genre is harder to monetize or perhaps it would only appeal to gamers, and not a casual audience of non-gamers. It appears that game got scrapped(afaik we don't know for sure if it was even real), but that Dark Soul ripoff diablo game was the first exciting news I've heard about blizzard development in years.

When you make the same game over and over, you really have to be good at it(Nintendo, From Software). If it keeps getting worse, you don't have sustainability.

[bloodwulf]

A free to play game with no free story, one PvP game mode, and flooded with microtransactions devastated company after company.

Hilarious.

Out of curiosity, do they have to be honest in these reports? I know they do their best to spin everything positively, but is there actually any threat of repercussions if they just make up numbers?

There is an expected level of honesty, because your company will be devastated if it comes out you lied or misled investors, and groups like the SEC could be involved (see Elon Musk's tweets about going private). Yes, you will spin the truth in a favorable light, but you can't outright lie without repercussions. People like to underplay Fortnite, but it seriously has rocked the industry in ways that was largely unexpected.

[Guddocter]

For all these posters that concentrate on WoW results, and what can, will, or might be done in the future, look at the quarterly revenue $ in one of the follow up threads and accept the fact that Blizz is one of three divisions in the company, about 38% of revenue/profits. Top management has to act on what's best for the company as a whole, so who knows how much they think one of the other two divisions prospects are vis a vis Blizzard, and the amount of time and money spent on each division will be split out accordingly. Could mean increased spending and attention on WoW/Blizzard if they think that is
best revenue driver going forward, or cutting the budget and spending on the other two if they are expected to be better return on their time and capital,

[rrayy]

From the image i posted:

in 2018 compared to 2017 Acti-Blizzard

Spent MORE money on:
-Software royalties, amortization, and
intellectual property licenses (product Sales): More 71M
-Game operations and distribution costs : More 44M
-Product development: More 32M
-General and administrative: More 72M

Total Additional costs: 219

Spent LESS money on:
-Product Costs: less 14M
-Software royalties, amortization, and
intellectual property licenses (subscription, licensing, and other): Less 85M
-Sales and marketing: Less 316M

Total money saved: 415

------

Conclusion in 2018: Acti-Blizzard spent less 196M (they said "fuck it" to sales and marketing)

(why did i do this?)

Sales and marketing spending will always vary based on how many new games you release in a given year. Blizzard released Battle for Azeroth and Warcraft III from their Warcraft IP in 2018. Good bet they spent more on advertising in that area than in 2017 when they didn't release any new games from that IP. When you look at all IP's across the Activision-Blizzard spectrum, you will likely see that they released less games in total in 2018 than in 2017 meaning they would spend less on sales and marketing.

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There is an expected level of honesty, because your company will be devastated if it comes out you lied or misled investors, and groups like the SEC could be involved (see Elon Musk's tweets about going private). Yes, you will spin the truth in a favorable light, but you can't outright lie without repercussions. People like to underplay Fortnite, but it seriously has rocked the industry in ways that was largely unexpected.

These earning reports are filed with the SEC. So, there is no could be involved with the SEC. They are directly involved.

[korijenkins]

There is an expected level of honesty, because your company will be devastated if it comes out you lied or misled investors, and groups like the SEC could be involved (see Elon Musk's tweets about going private). Yes, you will spin the truth in a favorable light, but you can't outright lie without repercussions. People like to underplay Fortnite, but it seriously has rocked the industry in ways that was largely unexpected.

That was my assumption. They can't outright lie and say WoW has 10 million subs, but they can pretend a drop of 1 million subs is normal.

[rrayy]

And I'm pretty sure if they were to just make up numbers they would be in trouble with several governmental agencies that have a 3 letter acronym name.

Yes they would. Go look up Enron if you want to see what happens when a company makes up numbers.

[rrayy]

And guess what happened after Enron? Look up Sarbanes–Oxley Act, which is what companies have to comply to now.
Public companies and their operations are much more regulated now, thanks to Enron and WorldCom

Exactly. You don't make up numbers unless you really want the SEC, IRS, and the FTC to crawl up your butt with a microscope.

[Big Thanks]

Need help on this part @Greyscale
Plz help me.

I found this exact same numbers on the charts below (blue-revenue and red- operating income)





And the numbers are correct.
Its a 15% increase in revenue
Its a 51% increase in operating income
Compared to the numbers of last year (at Yellow)

BUT
How did the 15% increase in revenue ended up with 51% increase in operating income????
("operating income" is the revenue LESS the costs)

Blizzard made EXTRA 87 million dollars in revenue AND were able to keep 81 million dollars out of those 87.
That means they were able to keep 93% of the extra money they made.
Only lost 6,9% of the extra revenue they made.

How is this possible? Dont they have any costs?

(ive been looking at this for hours without understanding the costs and "operating income")

[kamuimac]

the most important data is that net revenue is beating records once again and that stocks prices are skyrocketing

anything else is meaningless

[Demithio]

We're hitting hard with popularity amongst fans. MAU's are down from this time last year. Big plans ahead for the mobile markets. Cost cuts and job elimination generated added income.

Games unperformed, but added value services generated Billions. No big titles on the horizon so we'll keep milking existing customers for more money than ever before ... Zzzzz...

People simply adore us .. Zzzz...

..

Realistically nothing very exciting. Activision-Blizzard lost their identity already to many of the fans who built them up in the first place. It would happen eventually, and pretty good for the small developer markets, who put out quality above everything else, something Activision-Blizzard has long forgotten.

Eventually thier horsesh*t was going to catch up with them. They couldn't ride that wave forever.

[Big Thanks]

the most important data is that net revenue is beating records once again and that stocks prices are skyrocketing

anything else is meaningless

No, you can have a trillion billion quadrillion in revenue and still lose money....as i understand.

[rrayy]

Eventually thier horsesh*t was going to catch up with them. They couldn't ride that wave forever.

They are still making record profts. How exactly is it catching up with them again?

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No, you can have a trillion billion quadrillion in revenue and still lose money....as i understand.

Well, yeah if you are spending more than that.

[Big Thanks]

It's because their costs didn't increase at the same rate as they did last year.
Their costs probably decreased in relation to revenue growth.

Enough to keep 93% of all the extra revenue compared to last year? 81M out of 87M? Just like that?

That means Blizzard is doing NOTHING (but cutting costs)
They are wasting no money at all this quarter.

Someone prove me wrong!

[MoanaLisa]

That was my assumption. They can't outright lie and say WoW has 10 million subs, but they can pretend a drop of 1 million subs is normal.

1. They didn't talk about subs at all except to say they dropped. We know there's a big bubble of players who show up at expansion release and then leave after 1 or 2 months. We know that. There's no real pretending about it. It's been going on for years.

2. No, they cannot deliberately lie on their earnings calls. The SEC will get after them and the data they produce is auditable. In that it's quite different from say game forums where people lie all the time about facts and other people.

[Big Thanks]

I think you've confused yourself.

This quarter Blizzard made $686M in revenues. They had $445M in costs. They were left with $241M in operating income.
Same quarter last year they made $599M in revenues. They had $439M in costs. They were left with $160M in operating income.

So they've increased their operating income by $81M (50.6%) compared to the same quarter last year, by keeping their costs more or less flat, while at the same time producing considerably more revenue

Thats the part i dont understand.

How in the F did they have MORE costs in 2018 than in 2017...and were able to get a 51% increase in operating income in 2018?
Makes no sense in my head.

All i know is that they made 87 more million dollars than last year...and were able to keep 81 million...

The green underline part in my image.

[MoanaLisa]

Releasing an expansion can do wonders for your revenue in a year or quarter. They've been hiring in 2018 for projects, many unannounced.

[Obelisk Kai]

Releasing an expansion can do wonders for your revenue in a year or quarter. They've been hiring in 2018 for projects, many unannounced.

I suspect Blizzcon this year will be announcement heavy. In fact, I wonder if the Warcraft expansion will have the usual end of the Opening Ceremony pride of place as it usually does or will they really want to push out on Diablo 4 and make it the centerpiece?

[rrayy]

"World of Warcraft saw expected declines post the expansion release "

How to try and sugar coat a massive failure. OMEGALUL. Thats what expansion releases are there for, to expect declines from them. Thank you Actilizzard for the comedy.
I wish theres one out of that 8% fired who was in charge of looking at sub numbers and they leak those grand 500k active subs left.

Since you seem to know how many subs are left, you should leak it as you already have the proof. Tells us where you got that number?

[rayjr76]

I'm just waiting for news like
Ex Acti blizz employee brings hes favourite semi auto to work and goes postal in HR and upper floor department.

Would put smile on my face.

Wow, are you for real?

[Big Thanks]

That's just a comparison number to last year... so you can benchmark and compare their performance year to year. You can ignore the Increase/(Decrease) column if you want, it doesn't really have relevance other than being a benchmark.

They're making $241M operating income this quarter.
They made $160M operating income this yearter last year.

Those are the numbers to think about.

Oh, you already gave up i think i will too

But how in the hell did they increase the operating income 51% with only a 15% increase in revenue?

cut costs
cut costs
cut costs
cut costs
cut costs

Is the only explanation.
And when you try and do the math you get that they had more costs in 2018.
Nothing makes sense anymore...i give up...we will never know