MAU! MAU! DIDI MAU!
-Bobby Kotick, leaked internal communication
Last week Activision Blizzard had their quarterly earnings announcement.
At one point this sort of announcement used to be a headline generating event in the MMO world, because among the numbers announced would be the total World of Warcraft subscribers.
It was kind of a big deal. In a world where other MMO companies had pretty much given up on the idea, choosing to play up other, often dubious metrics, like registered users of beta applications, Blizzard actually coming out and straight up giving us a subscriber number was pretty cool.
That number wasn’t perfect. There was always the question about how many of those subscribers were in China, plus the usual conspiracy theories about how Blizzard was padding those numbers by including something that should actually count… despite the fact that the statement regarding numbers was pretty clear about what constituted a subscriber. But it was a number, a solid metric that carried over quarter after quarter and charted the financial fate of Azeroth.
And then those subscription reports dropped down to numbers not seen since late 2005 and suddenly the joke wasn’t funny any more. Blizzard gave us one more set of numbers then declared that they would no longer be publishing subscription numbers.
The quarterly report done in February, which summed up the year 2015, lacked, as promised, any mention of subscription numbers for World of Warcraft. I speculated that even poor subscription numbers were better than none at all, but it was going to be the dubious metric, divorced as it was from any revenue number when compared to subscribers, of “monthly average users” or MAUs. Nobody is going to write a headline about MAUs.
But still, aside from the lack of subscription numbers, things looked to be following the pattern it had for the last few years, with the team in Anaheim an independent unit with its own slide in the presentation that focused on just the Blizzard properties.
And then there was last weeks announcement… and the pattern of the presentation set over the last few years changed. Here are slides 4 through 8 of the presentation deck available at the investor relations site:
Blizzard got lumped into the mix this time around.
I don’t want to read too much into that. Part of it was no doubt because King is now part of the club, having been purchased for $5.9 billion back in 2015. There are now three distinct players in the mix and the company has to both make sure everybody knows King is on the team and justify spending that much money on a horrible company that stole every good idea it ever saw… um… by which I still mean King.
But to get there the emphasis is very much on how much time players spend with the company’s games, which gets us back to MAUs.
And when it comes to MAUs, King is… well… King, with 463 million. Activision comes in a distant second, with 55 million, while Blizzard can’t even get halfway to that number, bringing up the rear with 26 million.
Not that hours played is the worst metric, and the company seems very proud that, in the last year, people spent nearly as much time playing its games as they spent watching Netflix.
But it is a measure that only has a correlation with revenue, as opposed to subscriptions, which have direct relationship with revenue. To illustrate, there are the numbers from the financial statement:
Q1 2016 non-GAAP revenue – Total $908 million
- Activision – $360 million (40%)
- Blizzard – $294 million (32%)
- King – $207 million (23%)
- Other – $47 million (5%)
So the “King” of the MAUs at the company isn’t the actual king when it comes to bringing in cash.
King does a bit better when it comes to income.
Q1 2016 non-GAAP Operating Income – Total $252 million
- Activision – $99 million (39%)
- Blizzard – $86 million (34%)
- King – $67 million ( 27%)
Which means that when it comes to operating margin, King is actually out in front.
Q1 2016 non-GAAP Operating Margin
- Activision – 27.5%
- Blizzard – 29.3%
- King – 32.4%
But Blizzard is no slouch, bringing in more money than King and operates at a better margin than Activision despite being at the bottom of the MAU list.
Unfortunately, you can’t tell how much World of Warcraft is contributing to that mix. There used to be a “Subscriptions” line item in the financial statement that was pretty much just WoW. However, that has now been lumped into the “Digital online channels” line item, which includes subscriptions plus any other online purchases. So if you buy the latest Hearthstone expansion, or something to help you beat a hard level in Candy Crush Saga, it goes there as well.
So, while I do not doubt that WoW contributes a decent chunk of the revenue to that $797 million line item, we cannot know exactly how much because that category is 88% of the revenue for the quarter. WoW has been effectively disappeared.
Sure, there is a mention of it on one slide. The upcoming expansion is still a thing. But if you were gauging simply by the amount of attention a title got, you might easily assume that Hearthstone is the leading product out of Anaheim.
And such is the way of thing today.