Q3 developments

As I write this, the Q3 Earnings Report Conference Call is underway, with all the high Activision Blizzard executives discussing the state of the corporation and their piece of it. That call is usually interesting, because it can give us a hint of where the company is headed, although you really have to parse it to squeeze any information out of it. So I will take a look at it when the transcript is posted and possibly have a few comments by tomorrow.

Last quarter, I noted a strong emphasis on average active play time as a measure of a franchise’s success. Every franchise CEO reported this statistic for their games. It was almost as if, when the memo went out about what to cover in your conference call comments, one of the bullets was to make sure you included this info. And sure enough, many of the changes in WoW over the last few months have been directly targeted at getting people to spend more time in the game — weekly bonus events, adding valor back in 6.2.3, etc.

Meanwhile, the actual earnings report has already been put out, with not many surprises, except that at least one financial analysis firm (maybe others, I don’t read them all) indicates that the adjusted earnings for the company are down 18% from a year ago. This does not mean ATVI is in trouble, far from it, as most of the other measurements of economic health are rosy, and many analysts consider it a good buy if you are the kind of person who likes to gamble on the stock market. One comment in the analysis I just cited, however, caught my attention. In summarizing the company’s Q3 earnings and adding in the impending buy of King Digital Entertainment (Candy Crush and Candy Crush  Soda Saga), the analyst had this to say in the way of caution (emphasis is mine):

However, higher adoption of free-to-play games and significant competition remain the near-term headwinds. Also, the company’s dependence on a handful of mega franchises (Call of Duty, World of Warcraft and Skylanders) for the lion’s share of its revenues makes it highly susceptible to the success of these games.

One last item I noted. Most of you probably saw the Q3 WoW subs were down a bit, about 100,000, which I don’t think is a big deal given we are at the end of a very unpopular expansion. If anything, I was surprised the number of subs had not dropped more. What interested me, though, is an item reported today by Gamespot.

Blizzard Entertainment typically announces World of Warcraft subscriber numbers every three months in its quarterly earnings report, but that’s coming to an end. The company has confirmed that this week’s announcement of 5.5 million subscribers is the last time the company plans to divulge those numbers.

Well.

Cynically, I could attribute this announcement to Blizz’s current strategy of full communication shutdown except for highly scripted events at which only happly news is reported about puppies and unicorns. But I think something more complex is at work here.

If, in fact, as the Zack’s analyst postulated, ATVI still relies on the success of its baseline franchises for a positive economic bottom line, then it stands to reason that a steady stream of reports about declining WoW subscriptions is not good for that dynamic. In fairness, the overall success of WoW — given its highly cyclical nature — cannot be measured solely by the number of subscriptions. Still, it is a good barometer of the health of the game, especially when the numbers change dramatically in a short period. And if potential and current customers think the game is failing, that can become a self-fulfilling prophesy. Blizz, in a typical response, “fixes” this annoying problem by shutting down all reporting on subscription numbers. It is sad that they are so frightened of transparency.

Somewhat more ominously, they are shutting down subscription reporting just as they are preparing to move into a new expansion. It strikes me that if they were confident that Legion will  be a blockbuster of an expansion, they would be eager to publicize what they believe will be a huge surge in subscriptions. I am not drawing any conclusions here about Legion, but it is certainly one of those developments that makes you go “Hmmmmmm.”

The thing is, subscription numbers speak to the widespread appeal and accessibility of the game. Average time spent playing, on the other hand, speaks to the loyalty of what may be a very narrow player base. If you had only 1000 total players, and those players were all elite raiders, your average time playing would be through the roof. If you use that to measure game success, your game is a hands-down winner. By shutting down reporting on subscription numbers,  and by concurrently emphasizing average player time as a measure of game success, Blizz is pretty much admitting that they want the game to become more and more about elite and/or loyal players, and not about accessibility.

Just my 2 cents on the Q3 reports.

About Fiannor
I have a day job but escape by playing WoW. I love playing a hunter, and my Lake Wobegonian goal is to become "above average" at it.

2 Responses to Q3 developments

  1. Grumsta says:

    >>with all the high Activision Blizzard executives discussing the state of the corporation <<

    Well, that explains a lot I guess 😉

    The figures we will see published are how many people buy Legion: that in itself will be a fascinating number. If subscribers peak back to 10m+ I have a feeling Blizz might just let that little snippet of info slip out too. The bit they'll want to suppress is if the numbers drop again 2-3 months later like with WoD.

    I don't know about your server(s), but ours has definitely got quieter recently. Not sure if people are off playing other games, or waiting for 6.2.3, or both. Will 6.2.3 be enough to bring people back into the game? I hope so, but I'm still hearing of previously successful raiding teams losing previously die-hard key players such as both tanks. We're gathering up some of the survivors and integrating them into our team. Last week a 714 Retadin joined us because his previous raid guild had imploded.

    On a positive note: I was genuinely surprised and pleased the drop was only 100,000. If it had been 1-2m down like some were predicting then I'd have been really worried. Recent decisions and announcements by Blizzard have helped. The hype for Legion and the film can't hurt either. (People are getting hyped about a trailer, analysing spoilers of trailers ……. I'm getting old).

    The WoW Token has been a great move. I'm enjoying funding my sub through in-game activity, and Blizz are making money from people buying gold through legitimate means. Win-win. I think that's helped a lot to stop people un-subbing.

    • Fiannor says:

      I do think Blizz has succeeded in stopping the flood of unsubs we saw in the first half of the year. As you say, it is a combination of new game mechanisms and policies, hype for Legion, hope for 6.2.3, expectations for the movie, and probably just being down to the most loyal players being the ones left. I can only hope that Legion lives up to the hype, and that Blizz has finally learned a few lessons about what keeps players playing. Fingers crossed.

      I agree that the token has been good for the game — I just hope that Blizz does not do one of its famous “If a little is good, too much will be way better” things with it. It is great for subscription time, but I would not want to see it expanded to things like store items, gear upgrades, etc.