Activision Blizzard conducted its public Q1 2017 Earnings Call yesterday. For those of you unfamiliar with this quarterly ritual, it is a conference call conducted to inform ATVI stockholders of the company’s financial status. The company being traded publicly, the transcript of the call is published for anyone when cares to read it, and in fact if you really are into masochism, you can register with ATVI in advance and sign up to be on the call (in theory, that is — I have never tried this, can’t imagine why I would actually). This conference call accompanies the public release of the financial report for the quarter. I am not even going to give links to these things — you can easily find them if you search, and honestly they are very dry and dull. There is, however, a quick and dirty summary on MMO-C if you care to read it.
There was not much in the latest report/call that had to do with WoW. In fact, there hasn’t been much for a few quarters now, usually only a brief mention of a new expansion or some comment about Monthly Active Users or Daily Active Users. That in itself is sometimes eye-opening to WoW players, because it underscores the undeniable fact that WoW is no longer the flagship it once was, it really is a minor part of the growing ATVI empire. In the big corporate picture, you definitely get the impression that WoW is a bit of a dinosaur — it is still a revenue producer, but it is does not seem to be part of ATVI’s vision for the future of gaming.
There were one or two points that I picked up on in the report, though. The first was the opening statement by Bobby Kotick, CEO of ATVI. You can sum it up in one word: esports. A partial quote:
One of our big priorities is to unlock the full potential of professional esports by opening the sale of teams and media rights of our leagues. Over the years, we’ve become a leader in creating world class competitive experiences, sustainable franchises that engage hundreds of millions of people around the world, through gameplay competition and connecting players and communities. This success is driven by our ability to tap into the timeless power of communities, anchored through organized competition.
The esports audience includes some of the hardest to reach and most sought-after demographics for marketers and advertisers, with the share of millennials two to three times higher than any of the big four U.S. sports.
We’re also going to combine delivery of our spectator content with unique advertising opportunities that includes the ability for advertisers to have better targeting and analytics, much more so than what you would see in traditional forms of broadcast advertising today. And with over 400 million MAUs and extremely high levels of engagement, our potential to generate meaningful advertising revenue is substantial.
Of course, it is not news that ATVI is betting heavily on esports. And no one should be surprised that the WoW franchise plays only a tiny part in that expansion — it is really focused on ATVI’s other, newer, games. What did strike me, though, is the very strong implication that ATVI is more than willing to use its entire stable of games — along with the very considerable and detailed data it collects on player activities and preferences — to “generate meaningful advertising revenue.” I confess I do not really know what that means, but it does tend to give me an itchy feeling between my shoulder blades now if I decide to click on the in-game Blizzard shop, or if I routinely check the Mac technical forum on the Blizz web site. Nothing illegal or even necessarily immoral about this, and it certainly is a widespread practice any time you use the Internet, it’s just that I had previously not considered it as part of WoW. Yeah, I know that is naive, but still Kotick’s comment got my attention. Are we on the path to becoming less valuable as customers and more valuable as ATVI mass data products?
The other major point I took from the report were a couple of related comments.
This, from ATVI COO Thomas Tippi:
Blizzard continues to see strong engagement from its players with time spent increasing by a double digit percentage year-over-year to a new Q1 record.
Blizzard’s strategy to release content and feature updates more regularly in World of Warcraft has been paying off with time spent up year-over-year, and with overall performance ahead of the prior expansion.
And this, from Blizzard CEO Michael Morhaime:
So, yeah, this year for Blizzard represents a new type of pipeline, one that’s not necessarily based on full game launches, but instead on delivering new content updates for our games. This quarter, we have meaningful new content for every franchise in our portfolio. In fact, a few weeks ago we set a new DAU record on the back of these new content updates. This reflects the evolution of our business from focusing primarily on full game releases to also providing a consistent stream of content for our players. Even without any full game launches this year, we’re continuing to add to the depths of our games to serve a very highly engaged community with more content across our portfolio than we ever have before.
Anyone who thinks the grindy aspects of Legion is just an expansion peculiarity needs to think again. It is, in fact the plan for the foreseeable future. We can expect the next expansion to stretch out professions, leveling, gearing up, achievements — every activity in the game — even more than Legion does. Why? Because time spent in the game is the metric for game success in ATVI.
Is this tactic really “content”? Who knows? The fact is that whatever it is, it has succeeded — at least so far — in evening out WoW player engagement. Whether you like or hate Legion or are somewhere in between, it seems to have kept more players logging in further into the expansion than previously. Legion’s strategy seems to be a financial success, as measured by MAU/DAU. It is hard to argue with that. And while it can seem grindy — hell, it is grindy — it is also fun, certainly to those of us actively playing.
Still, there is this stubborn, contrary part of me that feels manipulated and used. It’s the same feeling you get when you suddenly realize someone is taking advantage of you. I feel like Blizz is pushing my loyalty to the game so as to get better quarterly numbers. Yeah, I know that is why they are in business, but this feels different somehow.
It’s like this: What if movie theaters suddenly changed their business plan to measure success by how long movie patron cars remained in the parking lot? So once you got to the theater, there were deliberate setups that ensured long lines for tickets, for popcorn, for the bathrooms, to get to your seat. They added a gift shop you had to pass through in order to get to the seating area. They tripled or quadrupled all the pre-movie ads and trailers and trivia games. They added several intermissions to every movie. They gave you a coupon of some sort if you stayed after the movie was over to complete a customer feedback survey. And so forth. How would you feel about your movie experience? Chances are, if you really wanted to see the movie in a theater, you would still go, but you would not consider most of the experience to be happy. Some would undoubtedly love all the new “content”, but many others would remember when they used to be able to do the movie experience in 3 hours, but now it took 5 or 6, and they would not be pleased about it.
I don’t have any grand conclusions about all this. It was, after all, just a financial report. Still, it did give us a couple of insights into what the future may hold.
Speaking of which, my future includes a weekend. Weather weenies tell us it will be cool and rainy in my part of Virginia — perfect for staying warm and dry inside and playing WoW or watching a movie.