Activision Blizzard earnings and what it means for WoW

Activision-Blizzard (ATVI) published its Q2 2017 earnings report a couple of weeks ago. I usually write about these reports, but decided not to write about this one when it came out. However, MMO-C — I guess because it is a slow news season for WoW — wrote up a little summary about it today, so I will make a couple of comments. The quotes below are from the transcript of the conference call among ATVI executives published on August 3rd.

Esports. I do not follow esports, so I am rather constantly amazed at the worldwide interest in them, and more specifically in ATVI’s gigantic investment in them. They really believe — possibly with total justification — that the company is poised to become the NFL of esports. The thing that caught my eye over this in the Q2 report is this comment from Bobby Kotick, CEO of ATVI (emphasis mine):

We also announced the first team sales for the Overwatch League, the first major global city-based professional esports league. We have the very best teams with the very best resources dedicated to celebrating and rewarding the world’s best professional Overwatch players.

Overwatch, with more than 30 million players has captured imaginations and driven strong global engagement. We organized our league around major cities, taking a proven model from competition in traditional sports. Our announced team owners and their locations, New England, New York, Los Angeles, Miami, Orlando, San Francisco, Shanghai and Seoul and the many more we expect to announce, represent the very best in esports and traditional sports.

Actually, possibly my comparison to the NFL was a tad too limiting. ATVI believes they are poised to become as big as, or bigger, than the biggest traditional sports franchises worldwide, whatever the local big money sport may be.

I point this out not to make any judgement on the viability of esports now or in the future, but rather as seed material for a little thought exercise. Imagine for a moment that ATVI’s vision comes true. Imagine a system of colleges and universities fielding Overwatch teams not only as money-makers for the institution but as a pipeline of promising players to the professional franchises in the major cities. Imagine an annual player draft with teams competing for college stars, offering big money and professional perks. Imagine an established Overwatch pro season, with TV stations vying for broadcast rights. Imagine the endorsements and the advertising and the spinoff merchandise. Imagine a playoff season and the hype around a final championship game.

Far-fetched? Yeah, probably, at least for the immediate future. But now think about World of Warcraft, and maybe you can see how very tiny is when fit into the strategic thinking of ATVI. I am not saying its demise is imminent, but it clearly is becoming more and more a niche market for ATVI and indeed even for Blizzard. It was the game that launched Blizzard into years-long dominance of the MMO genre, and it still makes significant money for them and for ATVI, but it is puny when compared to the esports dreams of the company.

ATVI also clearly sees the continuing move away from desktop computing, towards tablets and notebooks/game platforms and mobile mini-games, and they are poised to take advantage of it for all their franchises. Hearthstone proved to them the viability of WoW mobile spinoffs. The acquisition of King a few years ago has not yet had a noticeable impact on ATVI, but the Q2 report is enthusiastic about the “advertising potential” King brings to all ATVI business lines.

Bottom line here: WoW is not dead, but we should be prepared for a lot of wrenching changes in the not-too distant future.

What can the Q2 report tell us about the nature of WoW going forward?

  • Blizzard’s Monthly Active User (MAU) and D(aily)AU metrics were at an all-time high. The fact that ATVI continues to crow about MAUs can mean only one thing for WoW players going forward into the next expansion: the business model henceforth will be feature endless grinds on the same pattern as AP for artifacts in Legion. The vehicle for such grinds may change from expansion to expansion, but make no mistake there will be such a mechanism.
  • The Blizzard app is popular among players, and it dovetails nicely with ATVI’s focus on mobile apps as a significant part of their future plans. I think what this means for WoW going forward is that we can expect not only a continuation but possibly an increase in WoW’s mini-games (like garrisons and order halls), because these lend themselves to use of a mobile app.
  • In order to be a part of the burgeoning esports venture, WoW will continue to feature short competitive spectator-friendly pieces of the game, such as Legion’s Mythic+ dungeons. What effect this will have on the ordinary player’s game experience is anyone’s guess. We have already seen Blizz make general policy and adjust mechanics based on World First raiding guilds, though, so there is precedent for tailoring parts of the game for elite rather than ordinary players.
  • WoW’s tentative steps into integrating social media into the game (Twitter and Facebook) have not been roaring successes, but ATVI’s investment in King and their continuing development of it suggests they will keep trying. I do not expect Blizz to be so crass as to inject advertising into WoW directly, but I do expect them to try and integrate some social media aspect that will in turn generate advertising revenues. They just have not found the right vehicle yet.
  • Blizzard has had wild success with Hearthstone and Overwatch, so we can expect them to devote significant R&D resources to coming up with more such hits. I fully expect that to mean WoW will suffer in allocation of development resources. What that means for the game, I think, is that we will see more and more recycled content — perhaps more “classic” dungeons revisited, more reuse of artwork and graphics like Broken Shore/Argus, more recolored mounts and armor, more “piling on” of existing boss mechanics rather than coming up with new ones, etc. It may also mean Blizz will seek to save money by outsourcing seasonal-type piecework, such as music for a new expansion. (As we saw with the recent departure of Russell Brower.)

It’s good news that ATVI is making more money. We all want them to be successful. However, the nature of their success as well as their strategic vision has some definite impact on World of Warcraft.

Housecleaning

Lately it has been challenging for me to come up with decent topics to write about in this blog. (Read the one from Wednesday and you will say something like “That’s for sure!”) We are pretty deep into summer game mode, I suppose — Patch 7.2.5 is old news, and 7.3 is months away. People are spending more of their leisure time in pursuits other than WoW, and I suspect a lot of Blizz devs are off on vacation or at least in a vacation mindset. This is a good thing, and I love summer, but it does make it tough to remain creative and thoughtful on a steady basis.

Thus, today I’ll do some housekeeping and clear out a few unrelated — and mostly undeveloped — topics that have been rattling around in my drafts folder.

Group finder for world quests/bosses. This is one of the best quality of life improvements Blizz has made in Legion, in my opinion. Except for the weekly world boss, I don’t often use it on my hunter because I can solo nearly everything, but I use it a lot on my alts, especially my squishier ones. I love that it is so easy, just hit a button on the quest tracker and you are good to go. The groups form quickly, do their thing, then disband immediately. Easy peasy lemon squeezy. The only improvement I might suggest is that there be a clearer labeling of PvP and PvE realms, but that is minor. Good job, Blizz.

Argus innovations. As a disclaimer, I have not yet logged on to the PTR, so honestly I am writing in complete ignorance, but when has that ever stopped me? I am hoping to log on sometime this weekend, but meanwhile, based entirely on 7.3 notes, I have a couple of questions.

  • Does the concept of portals put players into even more restrictive cattle-chute type play? Will it compartmentalize new areas in such a way as to preclude meaningful exploration and — Blizz’s favorite word — “immersion”? Are the Argus portals a precursor to the main mode of transportation in the next expansion?
  • Does the lack of flying on Argus portend anything more sinister for the future of flying, or is Argus just a Timeless Isle kind of zone?
  • Will the requirement to complete quest lines in order to unlock new portalled mini-zones become yet another endless grind, all in the name of “content”? Will those quest lines themselves become as onerous as the profession ones are now, especially for alts?

Will we ever be free of garrisons? In WoD, a significant number of players (at least the active ones) expressed hatred of garrisons, almost from the start. The backlash was strong, yet Blizz responded by doubling down on them as WoD progressed. They repeatedly lied to us about the role of garrisons, at first saying they would be completely optional, then saying everyone had to have one but only the basic level, then requiring an advanced level garrison in order to experience the new Tanaan Jungle content.

And then, given this very strongly expressed player dislike of garrisons, Blizz slightly repackaged them as class halls for Legion — pretty much removing the WoD perks and leaving the crap parts. Each patch has introduced extensions to them, and apparently there will be more such extensions in 7.3.

I would love to see an absolute end to this concept in the next expansion, but I am not hopeful. Someone at Blizz loves them, and I predict they will continue to be crammed down our throats. And, even though they appear to be the perfect technical mechanism for something like player housing or guild halls, Blizz will never bow to these popular requests. We will continue to have the worst of all worlds.

Monetization of WoW PvE. A few days ago Blizz announced a Mythic Dungeon Invitational. This is an open competition for teams to go through a series of gates to be able to compete publicly for prize money by achieving top speeds on a Mythic+ dungeon. Ultimately the winning team will receive $50,000, and other finalists will share lesser amounts of prize money. Oh, and of course the races will be covered on Twitch for esports fans to follow.

We’ve all known this kind of competition was coming, it was only a matter of time before Blizz tried to capitalize on more than the PvP aspects of WoW as a spectator sport. And honestly, the handwriting was on the wall when they introduced the whole Mythic+ idea in Legion.

I am not sure I have any strong feelings one way or another about this. I am not fundamentally opposed to the whole esports phenomenon — it’s not really so different from any other spectator sport when you come down to it. It holds zero interest for me, but I can see where others might enjoy it.

The part that gives me pause is how it might affect the game I love to play. I say this because of a conversation we had last night in raid. Someone picked up a really awesome piece of gear using a bonus roll, but they could not use it. Of course, since it had been a bonus roll, they could not offer it up to the others on the team who could absolutely have used it, and they expressed frustration about this seemingly arbitrary rule. The reason Blizz has given for this rule is that “some” teams might abuse it and require everyone to use up bonus rolls in order to gear up others.

The thing is, the only teams likely to engage in this kind of behavior are elite teams who gear up their rosters through the (somewhat gray area) method of split runs. No normal guild team engages in this kind of activity. So basically Blizz has implemented a rule that prevents abuse by less than 1% of the player base, and the other 99% are disadvantaged because of it.

This is the kind of thing I worry about happening more often as a result of expanding professional competition in the form of the game I play. People competing for real money will inevitably push the envelope as much as possible in that pursuit. Blizz’s response to such pushing has often been to apply a bandaid rule designed to prevent the specific perceived infraction, regardless of the consequences to the vast majority of players who would never even consider such action.

And with that, my drafts folder is clean, and it is time for the weekend to begin. See you on the other side of it.

Oh, and Happy Bastille Day.

 

Time and the bottom line

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.

Cheats and chiselers and lines not to be crossed

Blizzard just announced that they had “taken action” against some players who were accepting real world currency for in-game assistance, such as carrying players for raid clears. You can read the Blue Post here, courtesy of MMO-C.

This is absolutely reasonable action from Blizz. The activities were clear violations of the Terms of Service agreement, and some forum posters claimed it was getting out of hand — blatant advertisements abounded. I wouldn’t know about that, I tend to be quite naive about these matters. Still, there is a line between the in-game economy and the real world one, at least as far as players are concerned. Blizz went to some pains to point out that raid carries for gold, for example, are perfectly legitimate. It is just when actual rent-spendable money enters in that it becomes illegitimate.

In-game gold versus real-world money is a line most of us can understand, but I wonder if Blizz itself has not blurred that distinction a bit with their introduction of the token. By becoming their own gold seller, they have legitimized a direct connection between real world money and in-game gold. If you have the money, you can pretty much amass as much gold as you want in the game. Yes, you have limits placed on you in terms of how many tokens you can buy over a period of time, but if someone is patient and well-off, they can easily max out gold on every character on every account.

Not that having millions and millions of gold gets you much in the game nowadays, beyond a certain Scrooge McDuck feeling of wallowing in wealth. The reason Blizz’s gold selling has not become pay-for-play is that they have severely curtailed the number of game-enhancing buyable items available. In WoD, for example, you could buy competitive high-level crafted gear, but you were limited to equipping just three such items, thereby ensuring players with a lot of gold could not immediately outfit themselves with raid-level gear. In Legion, Blizz allows unlimited pieces of crafted gear to be equipped, but they prohibit selling (thus, buying) such gear above level 815. It can only be upgraded if it is soulbound — again, prohibiting wealthy players from easily (if expensively) outfitting themselves with high level gear.

Another thing the token has done is give everyone a quantitative way to value in-game items and activities. In the U.S., one token currently buys you approximately 90k gold, and it costs $20. Thus, if for example a guild is selling Nighthold clears for 200k gold (I have no clue if this is the going rate or not), a player contemplating buying the service can know that this means the true cost to them is $30-$40. (If the player is an in-game buyer of tokens as a way to pay for their subscription, then the cost is approximately $30, or two months’ play time. If the player is an in-game seller of tokens for gold, then the cost is $40, or about two game store token purchases.)

Similarly, if a piece of BoE gear is priced at 100k gold, a player can evaluate whether or not it is worth one month’s play time ($15), or $20 of their hard-earned cash from the other perspective.

Still, even if the real world versus game world line has become a bit blurrier, it is still there, and it certainly does not justify crossing it.

Which leads me to the other aspect of Blizz’s announcement that gave me pause. Of note, they indicated some of the presumably-banned players were members of world-first guilds. This is troubling, for basically the same reason I discussed in a previous post: that is, it indicates a lack of high standards of integrity in these guilds. Let’s be honest — there is no way guild management could have been unaware of the money-grubbing actions of the members engaging in this illicit business. But for whatever reason, the guilds these players belong to chose to do nothing about it — the best you can say is they gave tacit approval, and the worst is that they may have shared in the profits.

I know I will get hate mail for this, but given the apparent high profile of some of the guilty ones, I think in this case a bit of naming and shaming might have been in order. If not the actual players involved, then maybe the guilds they belonged to. “Don’t do the crime, if you can’t do the time.” Maybe a little guild embarrassment would be good incentive to police their own members in future.

How much better it would have been if, when the guilds suspected some of their members were doing it, they issued explicit instructions to knock that shit off or face expulsion. At the very least, they might have taken a page from professional sports and benched the offending players for some amount of time or levied a fine of some sort. Any guild sanction would have demonstrated these professional guilds are serious about policing their own, serious about upholding high standards of behavior. Sadly, insofar as any of us knows, they did not.

I am certain I could play this game forever and not give a flying fig about world first achievements or the inner workings of the professional guilds. I do not care about the pseudo-celebrity players in them. But I do care that some of the players and guilds I encounter in the game seek to emulate those semi-pro players and their guilds. If their role models are cheats and chiselers, then that attitude may well spread down through the game, and it will take away from my enjoyment of it.

In a perfect world — or even an above-average one — guilds would be incensed if their members cheated, and they would take drastic and public action to ensure everyone knew such behavior was unacceptable, to uphold the rules of the game they play, indeed the game they are leaders in. But sadly this is not the case, and we are left with some guilds that get while the getting is good, knowing they need take no responsibility because Blizz will step in and police their players for them. Well, good for you, Blizz. And shame on you, all you who know who you are.

Of sledge hammers and responsibilities

Yesterday there was a long blue post in one of the forums, about Blizz’s decision to axe the use of all nameplate addons for friendly characters in raids. Basically, insofar as I can surmise, Blizz did this because they were annoyed that one of the world-first Mythic guilds used such an addon to gain an advantage defeating one of the Nighthold bosses, and Blizz thought this was No fair, no fair! (Stomp feet, pout, get angry red face.)

Up front, let me say that I really don’t give a flying fig about the specifics of this action — I don’t use friendly nameplates at all, much less in the chaotic visual salad that is raid bosses. So I doubt that this will have much if any direct effect on my game play, and I suspect it will have very little effect on 90% or more of regular players.

Still, I found Blizz’s action interesting. It struck me as a real overreaction, like using a sledge hammer to swat a fly. One top-level guild uses one specialized addon to help them defeat one boss in a Mythic instance of one raid tier, and Blizz considers the best solution is to ban the use of all similar addons for all raid teams for all bosses in all raids?

Why not tell the guild, “Sorry, we have determined that you used an exploit, and we warned everyone that use of exploits would nullify any achievements they were used for, so go back and try again.” Would this have angered the guild? Sure, and they might have rightfully claimed Blizz was being arbitrary and capricious, but hey welcome to the world the rest of us Great Unwashed live in. Blizz, of course, is loathe to annoy the top guilds because they are money-makers, so they tend to tiptoe around them asking if maybe they could get them another cup of tea or a crumpet or something. A world-first guild has to do something pretty heinous for Blizz to sanction them in any way. In this case, like the medieval use of whipping boys as stand-ins for misbehaving royalty, Blizz is punishing others for one incident of one guild’s naughtiness.

In any human endeavor, some will inevitably rise to the top, some will become leaders. As leaders they are treated differently than those they lead, they have certain privileges and are able to exercise certain powers either directly or indirectly. There are good reasons for this, and at any rate it is just the way of the world. Most people accept it.

But here’s the thing: With leadership comes responsibility. The more power you have, the more loathe you must be to exercise it. The more privileges you have, the less you must be willing to use them. The more adulation you receive, the more you must shun it. In all things, you must keep in mind the greater good of those you lead, not your own personal advancement. This is true whether you are the leader of a nation or an army general or the treasurer of your middle school student council. Or a top level guild in a computer game.

Which brings me — finally — to my point. Many players look to the achievements of top guilds, as well as to the game play of members of those guilds, as models worthy of emulation. And Blizz encourages this through their promotion of world first competitions and esports events. This makes these guilds and their members leaders in the gaming community. No, they don’t have the nuclear codes, and the world order will not collapse as a result of their decisions, but they are leaders nonetheless, whether or not they realize it.

Gaming “leaders” are a relatively new group on the world stage. The closest similar group are sports stars, both individuals and teams. As we all know, not all sports stars exercise their leadership in positive ways (well, to be honest, many world leaders do not, either), but maybe now is the time for gaming leaders to establish a pattern of high standards and excellent leadership in their games. Not just in achievements, but in the methods they use to get there.

I don’t honestly know if the nameplate addon usage was a shady exploit or not, for all I know it was perfectly legitimate to assume it was okay to use. But what I do wonder is if the guild that used it even thought about the precedent they were setting, or the possible ramifications to other players if their technique was determined to be unfair. Are these guilds setting a good example when they skirt the boundaries of normal play by using split runs and gear funneling in their pursuit of a world first achievement? Do they even consider the possibility that their actions may have an adverse effect on normal players? Again, I am not saying any of these procedures are wrong, I just think it is time for the top guilds to acknowledge their leadership position and to make decisions responsibly and in accordance with a consideration for the greater good of the game. If that means they reject certain actions as not setting a good example — even if it means they might lose an edge for the title of world first — then that is a positive sign for the future of world class gaming.

And now, let the weekend begin.

Happy Pi Day and other numbers

Woohoo! It’s Pi Day, which of course is celebrated with pie. What could be better for a dreary Monday in March? And this year the day is somewhat special. Well, it was special last year, too, but we do like to drag out our specialness when possible, don’t we? As ABC News explains:

Last year’s Pi Day was one to celebrate since it was 3/14/15, perfectly matching the first numbers past the decimal point of pi. Last year, hardcore math fans even started celebrating the day at exactly 9:26 a.m. and 53 seconds. There’s a big reason to celebrate this year too — math enthusiasts are calling today “Rounded Pi Day.”

When rounding pi to the ten-thousandth (that’s four places beyond the decimal point), it comes out to 3.1416, matching today’s date — March 14, 2016.

In our house, Pi Day takes on slightly more significance since it is also the day before the Ides of March, which happens to be my spousal unit’s birthday. Poor fellow, he has never had an actual birthday cake from me, he always gets birthday pie. It is, of course, always a rounded pie, but this year the shape clearly assumes greater importance!

Anyway, Pi Day being about numbers, I decided to go back and look at the Q4 2016 report from Activision Blizzard, which was issued early last month. I had scanned it when it came out, decided it made my head hurt, and quickly moved on. But something made me look at it again. My usual disclaimer: I am not an economist or stock expert, and my comments are purely a lay person’s observations. Take them for what they are worth, which honestly is not much.

Of course, all the comments by the ATVI execs were rosy and optimistic. In general, they have a right to be — the gaming industry is flighty and fickle, and to maintain a multi-billion dollar gaming company for years is a pretty impressive accomplishment. So this is not a “WoW is doomed” post, just a couple of observations — an attempt to read between the lines — about the Blizzard and WoW corners of the massive ATVI entity.

The first thing that really stood out for me is something one of my regular readers alluded to in a comment on my last post — that Legion artifact weapons are a huge gating mechanism. I agreed with him and it made me think, oh silly me of course this is done on purpose, especially the part about having to level an artifact weapon for every spec, not just for every class. And the reason is that the success metric now applied by ATVI is “monthly active user engagement”, which just means amount of time played each month by players who log on. (I think — I really do not know exactly how ATVI defines “active users”.)

ATVI  COO Thomas Tippl (emphasis mine):

First, we broadened our audience reach with successful new content launches and expanded onto new platforms and geographies. In the fourth quarter, our monthly active users grew to our highest level ever at over 80 million users. For the full year, MAUs grew 25% over 2014.

Second, we drove deeper engagement by providing outstanding game play and frequent content updates. Players spent 3.5 billion hours playing our games in the fourth quarter alone. For the full year, engagement was up 16% to a record 14 billion hours, and this doesn’t include rapidly growing hours spent spectating which we estimate for Activision Blizzard alone is now 1.5 billion hours. Third, we progressed in something that is very hard to do, but is critical for our business. We shifted to a year-round player investment model, while growing engagement at the same time. And as a result, we grew our revenues from in-game content and services to over $1.6 billion. That’s up 57% year-over-year at constant FX.

When executed well, increased player investment and deeper engagement are not a tradeoff but instead can reinforce each other, and we are pleased that our results are proving out this important element of our business strategy.

That is the big ATVI picture. Here are related comments from Blizzard CEO Mike Morhaime (again, emphasis mine):

Moving onto World of Warcraft, we saw quarter-over-quarter growth in Q4 as we kicked off presales at BlizzCon for our new expansion, Legion, which is coming out in the summer, and we released a new content patch. With Legion we’re taking care to build off the best aspects of Warlords of Draenor to create an experience that appeals to an even wider audience and which offers more opportunities for sustained engagement.

(I’m not sure I remember the release of a new content patch in 4th quarter of 2015, but never mind.)

It seems clear that one of the main goals for Legion, as part of the larger ATVI corporate goal, is to extend the time each player must spend in order to attain desired goals. Thus, we will have spec-specific artifact weapons, each of which entails a relatively long process to open up the entire range of what amounts to a new talent tree based on a unique weapon. Further, I think we can expect to see other goals — especially the most sought after — to be fairly long and involved (think flying as an example).

I am not necessarily passing judgement here — forcing “engagement” is not inherently good or evil. I am just saying that the prime motivator for many of WoW’s mechanisms probably has very little to do with player fun or some bogus “spec fantasy”, and a great deal to do with the bottom line in the next quarterly report. Remember that when you are collecting your 30th widget of 300 for quest number 6 in a string of 21 required for Legion flying.

My last point is that, despite rosy pronouncements from ATVI execs, all is not unicorns and puppies and rainbows as far as the company’s future goes. They certainly are not in imminent danger of going under, but they face some very significant challenges, some of which are described by this analyst. Essentially, acquisition of King remains a large gamble for the company, and the realization of huge eSports revenue, while still promising, is in its very early and formative stages. A lot could still stop it in its tracks.

What this means for WoW is anyone’s guess (although it appears less and less  likely that it will be revived as an eSport, it just is not a good genre for that), but — not to be a harbinger of doom — it seems pretty safe to say that this MMO is playing out its own end game. Sure, it may remain viable for a couple of more years, but I think we are seeing Legion as a possible last-ditch attempt to revive it, or maybe just to allow it to exit gracefully. The analyst I cited above had this comment to make:

World of Warcraft – increasingly becoming an afterthought, which shows just broad and deep ATVI’s portfolio is – appears to have declined sharply from the billion-dollar levels estimated as recently as last year. Durkin said that for the first time since Activision and Blizzard merged in 2008, WoW drove less than half of that company’s revenue. Given that Blizzard generated $1.565 billion in revenue for the year, that caps WoW’s contribution at ~$780 million.

And last, this thought from yet another analyst (my emphasis):

Whatever the reasons for the decline in Activision’s main products are, there is no question that there is a decline.

First, World of Warcraft. The game hit its peak of just shy of 12.5 million subscribers in the fourth quarter of 2010. Since then, it has steadily declined, with a short recovery in Q4 2014. By end of the third quarter 2015, the game had slightly over 5 million subscribers and is expected to have ended up slightly below 5 million by the end of 2015. Worse, it looks probable that this decline is very likely to continue and will not be reversed by the forthcoming release of World of Warcraft: Legion on September 21, 2016.

No, it may not be time yet to head for the WoW exits, but it wouldn’t hurt to know where they are. Enjoy the game as much as you can as long as you can, but know that it will not last forever. The world of gaming is changing, and some genres will not be part of the next game generation.

Meanwhile, I recommend pie.

Well, that answers that question

A couple of days ago, I posed the question, “Who is this game for?” I am pretty sure I now have my answer.

Official Blizz announcement:

This Tuesday, February 9, at 3:00 p.m. PST, tune in live at Twitch.tv/Warcraft to watch several top World of Warcraft streamers, YouTubers, and personalities from Europe and North America race against the clock—and each other—in some of the new max-level dungeons coming in World of Warcraft: Legion.

Our two teams will be racing through two dungeons: The Maw of Souls, a brand-new dungeon not yet available in the Legion Alpha, and the Heroic difficulty version of Halls of Valor, home of the greatest warriors of the vrykul. While these teams have had some practice with Halls of Valor on lower difficulty, this will be the first time any adventurer has set foot in The Maw of Souls—all these two teams know is to expect the unexpected!

For this challenge, we’ve assembled a colossal collection of some of the biggest names in the World of Warcraft community. Representing Europe: Treckie, Bellular, Qelric, and Alex and Loz of FatbossTV. To face off against them, representing North America: Towelliee, Killars, Monkioh, and Tattva and Tovo of Line of Sight Gaming. Both of these teams have a ton of experience, knowledge, and history with World of Warcraft—but will it be enough to triumph?

Assistant Game Director Ion “Watcher” Hazzikostas will join Community Manager Josh “Lore” Allen to provide commentary and insight as each team fights through the dungeons in a race to earn the fastest time possible. The winning team will claim victory not only for themselves, but for the region they represent!

Who is this game for? It is clear from this announcement that Legion, at least, is for the elite players, for the “stars” and the wannabes. It is for the new Activision Blizzard eSports Division. It is for dev-execs like Watcher to indulge their Howard Cosell fantasies. It is for the advertisers currently losing revenue because no one is watching the WoW streamers whose channels they place their ads on.

Why else would Blizz make An Event out of an expansion draft that is not even in beta yet, with classes and specs far out of balance and buggy?

And not for nothin’, but apparently Blizz has reverted to what I can only assume is its core attitude of flippant and snarky answers to legitimate questions. As quoted on MMO-C’s Blue Posts today, in response to a serious question about when we might expect Legion beta with — presumably — a wider group of testers, there was this:
Aerythlea
Community Manager
2016/02/04 11:44:00 AM

Soon™

Nice. Such a great, respectful, satisfying response to a perfectly reasonable question. Now, I grant you that this CM may not know when the beta will be available, or indeed if it ever will be. But what a missed opportunity to show the community that a serious concern, if well presented, will elicit a serious response. The CM could have responded, for example, that she does not know, but here are some of the factors we consider in order to decide when to launch a beta.

But no, much better to give a snide one-word non-answer that has the dual benefit of demonstrating how very witty she is while at the same dismissing this player’s concerns as trivial.

Anyway, back to my main point: Legion is being developed for the less than 1%, not for the majority of current players, who have transitioned in Blizz’s view from customer-players to “audience”.

Going slightly tinfoil-hat here, but of note, this transition might even explain some of the extreme ability pruning we see. I am guessing that most people watch eSports for games with which they already have some familiarity. So it is to Blizz’s benefit to increase their audience by promoting it as accessible to new players. Accessible for the basics, mind you, not for the full end game experience. If you can draw in new players with the movie and possibly with a port to game consoles, if these new players only have to learn a few button fundamentals, that may be enough to profitably increase the eSports audience size for the game. (Better, it may lure them into other Blizz franchises.)

So maybe Legion is being written for two groups — brand new players who are never really expected to get to the end game, and the afore-mentioned “personalities” and “elite” players.

Another quick detour. This announced “event” makes it clear why Blizz went with the highly-restricted alpha test instead of a larger beta as they usually do. By inviting the “personalities” and streamers, they ensured these players would have a huge advantage in mastering the new stuff, thereby helping them to maintain their profit margins while at the same time allowing the eSports Division to create continuing events even between expansions.

(And forgive me for a bit of schadenfreude here, but wouldn’t it be awesome if the new Maw of Souls turned out to be a complete tech, mechanics, and class balance disaster during the live stream?  It won’t, of course, because even Blizz is not that incompetent, except when they are launching a live expansion (Mists, WoD). But still…)

So far, of course, these streaming events are “free” — i.e., revenue-generating through placed ads. But mark my words, soon you will have to pay actual money to view them, either as single events or through some sort of “premium” subscription. You heard it here first.

So we know who this game is for. Who is it not for? It is not for players like me, who love the game but who do not care to make it a profession.

It is not for the “serious casuals”, who play it for relaxation and sometimes escape, but who also like to challenge themselves to become more skilled — because when the class and profession mechanics totally change every expansion, you can’t really progress in your skills, you can only start new, become semi-proficient, start again, etc.

It is not for the social player, who loves being in a social guild or a leveling guild or a casual raiding guild.

It is not for the player who loves to level and quest, because that process has become chaotic and disjointed, a mere means to an end rather than the end in and of itself.

So I asked the question, “Who is this game for?” Now I know, and I regret asking. As my grandmother used to warn me, “Don’t ask the question if you don’t want to hear the answer.”