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Quote of the Day – In Which 25 Million Equals Nothing September 9, 2014

Posted by Wilhelm Arcturus in entertainment, Nintendo.
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3 comments

25 million people play Call of Duty monthly, but that pales in comparison to 2.5 billion people on the Internet. That’s 1 percent of the Internet, that’s nothing.

Michael Pachter, at Cloud Gaming USA

That is one of those quotes that boggles the mind as it lets so much slip by, to the point of being meaningless.  What percentage of that 2.5 billion plays video games, has hardware capable of playing something like Call of Duty, has an internet connection capable of playing the game, can afford the game, and can actually buy the game in their local market?  What should Activision have done differently?  What should their target audience have been?

And the irony here is that just a few paragraphs down the line he takes gaming companies to task for embracing the free to play model, which is all about increasing market penetration. Free-to-play should go away he says (and I have some bad news for him about his ad revenue idea) and the game companies are stupid for taking less than they should get.  And then further along he projecting 4 billion people playing games in the very near future.  Will they be on the internet?  How does it relate to that 2.5 billion number?  It is a mishmash, though that could be as much the reporting as the presentation itself.

Of course, Michael Pachter is an analyst, and the analyst’s bread and butter is in making outlandish, unsupported, attention getting statements like that.  All the better to get you to pay them for their deep insight.  You don’t get speaking gigs by being dull.  As Apple’s iPhone announcement today was nothing but an ad for Apple, this presentation was mostly an ad for Michael Pachter, and nobody should have expected otherwise.

Not that he is completely off base on things.  He frets about the future of consoles in the face of dropping physical game sales and the expanding smart phone market as well as where Nintendo will end up.

He really focuses on Nintendo.

But even I can see that Nintendo is especially vulnerable as its corporate culture is still tied up with the idea of them being a hardware company, while their real assets are in their software.  I like my Nintendo 3DS XL very much.  It is a fine piece of hardware.  But I bought it solely to play Pokemon.

Without Pokemon the 3DS XL is just like the Wii U, an interesting piece of hardware I don’t really need in a world where the iPhone and other such devices loom.  Nintendo’s goals may be in line with Corless, the Team Plasma Boss from Pokemon Black 2 & White 2.

Can't stay proprietary with that goal...

Can’t stay proprietary with that goal…

But they are not going to get there with the mindset of the 90s, where the software was there to sell hardware.

Anyway, the article that the quote came from at the top of the post has enough fodder for a dozen blog posts.  I can’t even get started on how much it irks when somebody stands up and speaks of “the cloud” that will solve all problems.  Put something in the mythical “cloud” and be prepared to do without it unless you control it.  Or, put another way:

But like Oscar the Grouch, I am often happiest railing against something like this.  Pachter is many things, but he isn’t boring.  I look forward to many more pronouncements.

Blizzard – Down Nearly 2 Million Subscribers, But Still Insanely Profitable November 9, 2011

Posted by Wilhelm Arcturus in Blizzard, entertainment, World of Warcraft.
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15 comments

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.