Blizzard and the MAU Reality


-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.

11 thoughts on “Blizzard and the MAU Reality

  1. Fenjay

    Everytime I see MAU I think they should somehow wrangle it into being MAUSE and let the plural be MICE.

    Maybe Monthly Average User/Subscription Equivalent?


  2. Helistar

    If there’s a day to be added to the calendar, marked “death of WoW”, I’d say this is a good candidate.
    But probably the saddest part is that this switch is because people are idiot enough to be sucked in by the FF metric of subscribers. WoW announced the switch to MAU after the apple-to-orange comparison to FF numbers….


  3. Wilhelm Arcturus Post author

    @the clairvoyant – If you took that from the post, then you’ll have to point out where that came across.

    The tl;dr is more of, “Blizz, why are you hiding what is still likely your most valuable asset?” They have successfully hidden how much money WoW brings to the table in the name of all this MAU nonsense.

    You could also read an “Activision destroying Blizzard” conspiracy theory into it as well.


  4. Eph

    It’s in the report, not the slides:

    “Blizzard’s net revenues decreased for the three months ended March 31, 2016, as compared to 2015, primarily due to lower revenues from World of Warcraft due to a smaller subscriber base and lower revenues from Heroes of the Storm due to the prior year including revenues from the release of the Founders’ Pack.”


  5. bhagpuss

    Given just how successful and profitable WoW has been, and given that Blizzard is a business built around renewable franchises (Warcraft, Starcraft, Diablo), what are the chances of a WoW2 at some point? The argument against it used to be that it would either split an existing audience to no great benefit or that the new game would simply not do as well as the old game (EQ2 and Lineage2 being strong warnings there).

    With WoW in seemingly terminal decline, however, and the number of ex-WoW players outnumbering current players by orders of magnitude, those arguments will presumably seem increasingly less persuasive. There can be no doubt that a WoW2 would, at the very least, bring in an unconscionable amount of money in initial box sales. You’d think there’d be a point at which it would begin to look like an attractive option, even if it would take years and cost a fortune.

    I wouldn’t bet against it ever happening but I think it’s still too soon. Come back in ten or fifteen years though and the time could be propitious for a full-on WoW revival. Perhaps in the then-standard VR.


  6. mbp

    It strikes me that the division of the business activities into “Acivision”, “Blizzard” and “King” is a historical anomaly at this stage and not helpful to investors. All three divisions offer different types of games on multiple platforms. Customers don’t buy an “Activision” or a “Blizzard” they buy “Call of Duty”, “World of Warcraft” or “Candy Crush”. It would be much more useful to investors if the company broke down earnings by major brand. How much is the WoW franchise bringing in? How much is Call of Duty brining in?


  7. Wilhelm Arcturus Post author

    @Eph – Ah, I missed that! Now, of course, I wonder where the subscription number lies.

    @bhagpuss – I do not think there will ever be a new, stand alone product that will be recognizable as World of Warcraft 2. This will be, in large part, because of the view of the team that make WoW, which I am sure would tell you that they shipped WoW 2.0 already and are, in fact, getting ready to ship WoW 7.0 this August. And they are somewhat justified in their view that each expansion remakes the game in some way.

    I personally feel that if the team could get past their view that whatever is the latest version of WoW is clearly and obviously the best and actually do something with the alternate rule set server idea… giving the game more breadth as opposed to the ongoing narrowly focused depth… they could haul back a chunk of players.

    As for terminal decline, how long ago would you have said EQ, once king of the genre, was there? There is a long and profitable life to be had in decline. The company just has to be prepared to adapt. Unfortunately Blizzard, or more specifically Tom Chilton, still seems believe they can do the same things they have always done and everything will be fine.

    But no, I do not think they will make a separate and distinct new MMO based on WoW.


  8. sc

    Sorry, but it’s hard to ‘be nice’ about an animal called ‘Kotick’ (Activision CEO).

    ‘Terminal decline’ is an apt description for anything Kotick digs his fat, grubby hands into, leaving things tainted and miserable for bottom line players who are, after all, the ones who bring in the bacon.

    He’s also been reported as saying that it’s important to him to “take the fun out of game development” – no prizes for guessing that’s also his mantra for games as well (just look at the ‘vote of no confidence’ thread on the Warlock forums in Battlenet. A Blizz employee tried to take it down, but it was started again and once again has high support.

    Won’t be long before it spreads to all other classes.

    And if Kotick ever fell off the planet, no one would give him a second thought.


Comments are closed.