The quarterly earning reports are out, and so are the pitchforks!
The Activision arm (they should just rebrand to Call of Duty, since every shop works on this) made mint. Not anywhere close to Fortnite’s billion $$$ pumping machine, but certainly some good numbers. A 43% operating margin is impressive, given their size. Not to mention some big year-over-year (YoY) growth. All of this makes sense given that we’re in a pandemic… more people are playing games and devs are really milking that micro-transaction cow for all its worth. Battle Passes + extra bits = major cash and extremely low dev effort. Course it helps when you lay off 10% of your staff when pulling in the money. Capitalism at it’s finest, after all. Stock value is the ultimate measure.
The Blizzard portion is where stuff gets really weird. If you recall, Shadowlands was touted as ‘making it the fastest-selling PC game of all time industry-wide’, which was obviously derided as hyperbole, but still sold a ton of copies. You would think that with that extra push, overall player numbers (I know there’s more than WoW) would have increased, as they had with other Activision properties. Not so much.
That is not a good trend to have, and explains a fair chunk of the restructure within Blizzard over recent years. This is all of Blizzard, yet the only big items that would be considered ‘delivered’ in this time frame are the 3 items above.
- Heroes of the Storm is on life support, most of the team cut
- Overwatch hasn’t had anything, resources are allocated to Overwatch 2
- Starcraft 2 is done
- Diablo 3 has had nothing (Necromancer was in 2017). Immortal still isn’t out.
- Warcraft 3 reforged was Jan 2020, which may explain the horizontal line rather than down trend
- Hearthstone has gone all over the map, and now has a battle pass.
That Blizzard somehow lost 5m people during the pandemic has got to be worrying for them. And yet…their revenue increased 7%. That money could theoretically come from the various microtransactions, but more than likely it comes from their 3.7m copies of Shadowland sales offsetting the other lost revenue.
Spurious Conjecture Time!
Think of the glut of quality games available to take our time today, games that allow multiplayer options. The need for an ‘all the time’ game is all but gone because there’s always something else. And Blizzard’s penchant for taking ages to launch anything (pre-pandemic as well) is not aligned to today’s industry. That they deliver late, and with massive balance issues (Hearthstone is 10x worse than WoW on this) is not helping. They make attract an audience with a drop, but they are clearly unable to sustain that paying audience.
I’ve written more than enough on WoW’s woes, plenty of bloggers have. It has a massive bot problem, you need to filter through levels of garbage gold boosted runs to find most social groups, and the last refuge is guilds. Sure, multiboxing is now banable, but is that not like 10 years too late? Mechanically the game is too focused on directing people to a single way of playing, to the detriment of other parts. While that’s not my cup of tea, and clearly not that of others, it still brings in some dough.
The other franchises… Immortal won’t work in the West and there are dozens of similar games in the East. Seriously, look at any app store and search for “action rpg” and you’ll find dozens. Diablo 4 is at least 2 years out. Overwatch 2 lost Jeff and was already 2+ years out. Diablo2 will be an interesting bit…seems higher prospects that the Warfraft3 re-release. There’s nothing else in the pipe, at least nothing announced. Any WoW expansion is at least 18 months out, likely more due to COVID.
Should we mention that Overwatch reported an increase in user base by 10m in 2020, and that they were averaging 10m monthly players in Nov 2020. Overwatch has had numerous ‘free weekends’ and then in September actually gave the game away for free for a short while. I don’t know too many stores that celebrate having a high number of window watchers, but here we are.
That leaves very few places of potential income, aside from selling access rights in China for streaming Overwatch.
Do the Math
Bobby Kotick is an amazing CEO, on the measures by which industry measures CEOs. He consistently delivers increased revenue, decrease operational costs, and thereby increase overall profits. He’s not the worst person on the planet either. He’s not subject to any sexual harassment claims, keeps on message all the time, and agreed for a 50% pay cut. He does his job and is really good at it.
That society has issues with his approach to cost cutting while also recording record profits… well hey, maybe stop buying his products.
And that gets us to the math problem on the table, the one that EA has certainly taken a stab at. (EA is a separate topic, yet you have to admit that they do at least invest in new IP, to varying degrees of success). EA buys out other studios, sees if it can make them profitable, and if not, absorbs the assets and shuts down the studio. The math and trends – which reminder, is all that matters to stakeholders – show that the Blizzard arm has some serious issues at hand.
They’ve dropped piles of players during the pandemic, while nearly everyone else has had an uptick. They launched a full price game and still only had 7% increase in revenue (not profits) compared to launching nothing the year prior. They have an anemic pipeline for income for the foreseeable future.
Blizzard may be profitable, but that trend is certainly not increasing. It’s a bad time to be a Blizzard employee right now.