Blizzard – Down Nearly 2 Million Subscribers, But Still Insanely Profitable

The big news for MMO watchers in Activision Blizzard’s quarterly report was the mention that World of Warcraft was down to 10.3 million subscribers, a loss of nearly 2 million from its 2010 peak.

Wait, where did I get that 2 million number?

Last year’s end of year report from Activision Blizzard stated that, as of Dec. 31, 2010, there were more than 12 million World of Warcraft subscribers.

As of October 7th, 2010 Blizzard claimed 12 million subscribers world wide.

Cataclysm came out between those two, which must have bumped up the subscriber base some, though we cannot tell exactly how big of a bump that was.  Still, selling 4.7 million units in in the first month probably a reasonable indication that some players came back for the expansion, especially since China did not get Cataclysm until this past summer.

So I think we can safely assume that, at some point in December there was a subscription peak at least close to 12.3 million.  And with the statement that WoW is down to 10.3 million, 2 million missing subscribers seems to be a reasonable estimate to throw around.

So that is my number.

What does it mean?

While I feel some of it is repudiation of the direction Cataclysm went, with its very solo-centric feel, my gut say that having just five levels of content, and pretty easy content, just wasn’t enough to keep the non-raiders hanging around.

The raid-or-die crew will blast through the content to get to work on raiding, but will hang out doing that for a long time.  People like me are more invested in a slower climb through the new zones, and those five zones were pretty fast.  That and I think the value people put on the new 1-60 content was pretty low.

Anyway, mistakes were made and at some point next year Pandas will either fix them or make them worse, we shall see.

But does being down 2 million subscribers, a 17% dip from peak (my estimate), mean doom for Blizzard?

Probably not.

The Activision Blizzard third quarter results bear that out pretty strongly.

Way down near the bottom, the results are broken out by “segment,” which means three different sections of the company:

  • Activision Publishing (“Activision”) — publishes interactive software products and content.
  • Blizzard — Blizzard Entertainment, Inc. and its subsidiaries (“Blizzard”) publishes games and online subscription-based games in the MMORPG category.
  • Activision Blizzard Distribution (“Distribution”) — distributes interactive entertainment software and hardware products.

Revenue for Activision was $253 million for the last quarter and $898 million for the year so far.

Revenue for Blizzard was $297 million for the last quarter and $968 million for the year so far.

So the Activision and Blizzard sides of the houses are not far out of syn when it comes to how much money they bring in before expenses.  And the numbers for Distribution, just to round this out, were $77 million for the last quarter and $214 million so far in 2011.

Then there is income, which is the amount of money left after they paid all the bills but before they paid taxes.

Income for Activision was… well… they fell short $36 million dollars last quarter, and for the year it has made a grand total of $42 million.

Income for Blizzard was $120 million last quarter and it has made $425 million dollars in 2011 so far.

And Distribution is in for a million dollars of income this year.

So with revenues that are reasonably close, Blizzard has made TEN TIMES as much income this year as Activision.

Not only that, Blizzard makes more than 43 cents on every dollar it takes in.  So of your $14.99 subscription fee, $6.58 cents go into a bucket that might as well be labelled “Profits and/or Bail Out Money for Bobby.”

Okay, yes, it is a bit more complicated than that.  There are other costs and taxes that come in after that number.  And the numbers are down from last year, which is partially because Blizzard didn’t ship anything new in 2010 and partially because of the subscription slide I am sure.  But those are still really solid financials.

So when Bobby the Tick comes out and says “Profits tripled!” it does not mean, as has been reported in the media, that Call of Duty saved the day.

Call of Duty merely meant that Activision wasn’t nearly as big of a drain of Blizzard’s money making acumen as they might have otherwise been.

Blizzard has been saving the day since was joined up with Activision.

15 thoughts on “Blizzard – Down Nearly 2 Million Subscribers, But Still Insanely Profitable

  1. Warsyde

    Just to be the resident cynic/complaining bastard, is it any wonder Blizzard profits are so high when they spend very little on ongoing content development?

    Much of that monthly sub goes straight into the company coffers. The $15 sub being needed to meet costs and fund development is a lie.

    Like

  2. TheRemedy

    Activision basically makes one game at this point, Call of Duty. And it has been and will be the biggest selling game of the year. Last year’s Black Ops sold 25 million copies world wide. Those first 3 quarters don’t matter much at all compared to the last quarter when the newest CoD comes out.

    Like

  3. Carson

    Anecdotes are not data. But here’s mine. I thought Cataclysm was the best stuff Blizzard have ever developed for WoW, by quite a large margin. And yet, my account has been inactive since March,due to simply running out of things to do.

    My guild had beaten all the 4.0 raid content – which I thought was fantastic and perfectly tuned – but wasn’t really enthusiastic about doing it all again on hard mode. I’d done all the questing in all the new zones (which were great). I’d done all the heroics (which were great). I’d levelled an alt to 60 through the revamped old world (which was incredibly great). Now what?

    4.1 didn’t lure me back (two new heroics didn’t sound like a month’s subscription worth of fun). 4.2 didn’t lure me back (guild was completely inactive by then so a new raid was irrelevant to me). MAYBE I’ll take a look at 4.3 and see how the Looking For Raid tool works.

    It just feels like the ultimate fate of the themepark. You can’t produce content faster than we can consume it, you will never be able to.

    Like

  4. Dancingblade

    “Not only that, Blizzard makes more than 43 cents on every dollar it takes in. So of your $14.99 subscription fee, $6.58 cents go into a bucket that might as well be labelled “Profits and/or Bail Out Money for Bobby.””

    Boo-friggin’-hoo. Maybe Warsyde would be interested in joining you for OccupyBlizzardHQ. Remember, while every other form of entertainment has gone up in price (movies, bowling, sporting events, cable, satellite – shall I go on?), $14.99 has remained CONSTANT.

    Like

  5. Wilhelm Arcturus Post author

    @Warsyde – Well, that should be a self-correcting problem. A game that depends on recurring subscriptions and which does not provide enough new content will see a decrease in customers.

    And, hey viola, subscriptions are declining! But those numbers have only really been declining this year, and I am going to guess that you think Blizzard has been failing on that front for somewhat longer.

    @TheRemedy – Well, they had better hope that the dispute with Infinity Ward doesn’t screw up their meal ticket.

    But you’re right, the 2010 company report generally reads, “Activision screwed up a lot, but Call of Duty pulled their ashes out of the fire… again. Oh, and Blizzard has a 50% profit margin.”

    @Dancingblade – You misunderstand me. I think profits are a good thing, a sign of strength. That line is mocking the Activision side of the house for not keeping up.

    Like

  6. Genda

    @warsyde – So you are saying that the way to profitability in the MMO business is to short-change development?

    I haven’t seen them but I bet if you delved into the financials you would find that they spend a great deal. Probably almost as much as they spend on customer support.

    The other thing you don’t take into account is that most of that development money being spent is going into products that haven’t launched yet; Diablo III ($0 revenue), Heart of the Swarm ($0 revenue), Titan ($0 revenue) and Mists (how much revenue depends on how you want to call this, but they haven’t made a cent off of MoP yet.) Titan isn’t shipping any time soon, based on Blizzard’s unwillingness to even talk about it at Blizzcon. That’s a LOT of developers and a LOT of development going on.

    I think your assertions are a little fact-short.

    Like

  7. SynCaine

    @Genda: Why would the $15 a month WoW players are paying have anything to do with D3/SC2/Titan?

    Fact is, with that much cash coming in, WoW should be dwarfing everyone else in content, tech, design, etc. Forget one expansion a year, WoW should have one a month if far smaller games like EQ2 and LotRO can put one out a year.

    Instead, they release stuff like Cata and pocket the rest. I think it’s pretty fair of WoW players to be pissed.

    Like

  8. Wilhelm Arcturus Post author

    I have to admit that, after more than 20 years in software, there is generally a maximum size for any team after which you start… well… shipping Microsoft products. Really spectacular management along with a clear vision and a strong corporate culture can mitigate that.

    But the idea that you can “double the staff and double the output” is a delusion.

    Blizzard has a strong corporate culture in their dev group… and one of the attributes of it is moving carefully and shipping only when they think they are really ready. That shouldn’t be a news flash for anybody reading this thread.

    As for players not getting enough content, as I said above, that ought to be a self correcting problem. People get bored, they leave. If people complain about not enough new content, but keep playing… I don’t know what to tell you. You’re either getting your $15 a month out of it or you are not, and how much Blizzard profits shouldn’t even enter into that. See Dancingblade’s mis-directed comment above.

    Like

  9. Paul

    Cata’s problem is not JUST that it doesn’t have enough content. A lot of people left really early, without experiencing all the content. Heck, I think a lot left without entering a single raid instance.

    This was, I think, a consequence of the devs ramping up difficulty in order to spread the content peanut butter as thinly as they could. It was not a good idea.

    Like

  10. Pingback: The Unknown Warcraft Subscriber | Mana Obscura

  11. SynCaine

    Who said doubling staff = double content? That’s putting words in my mouth. I said spending more = more content.

    Obviously as you scale up you don’t get as much production per dollar spent, but that does not mean you hit a total wall at some point and get NOTHING for your spending. And we all know Blizzard is slow by MMO standards with content, and now not only are they slow, but also fail to deliver something worthwhile, as the stagnation with WotLK and the decline of Cata show.

    That Blizzard apologists are bringing up D3/SC2 as the reason WoW is falling off is pretty sad too. Paying customers should have higher standards.

    Like

  12. Wilhelm Arcturus Post author

    @SynCaine – Again, if Blizz is not putting out enough new content, they will suffer for it. It is as easy as that. The game is either worth $15 a month to you or it is not, and how much Blizzard makes in profit is not relevant.

    By measure of subscriptions, they did manage to provide content well enough through at least October of last year. But I would guess that you, personally, would not agree that the shortage of content started with Cata.

    @Paul – I am not sure I even made it to anything that was difficult in any objective sense. The 1-60 stuff was all face-roll easy, and the 81-85 open world content was all pretty much solo.

    Like

  13. SynCaine

    My initial post was directed at Genda, who suggested that Blizzard is doing a LOT of development with that $15 a month. I disagreed. Nothing to do with my personal opinion of WoW content, that is well known. That they were able to produce content at the pace they produced it post-2006 is not something to be celebrated IMO, but we have people like Genda pointing at D3/SC2 and saying “$15 well spent!”

    Hard to expect standards to rise when people happily accept so little.

    Like

  14. Pingback: Bloggers up in Blizzard’s bidnizz — MMO Melting Pot

Voice your opinion... but be nice about it...

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s