A Good Fourth Quarter for Blizzard… When Compared to the Rest of 2019

Activision Blizzard had their Q4 2019, and 2019 overall, financial results announcement and conference call yesterday.  You can find all the numbers, the slide deck, and the conference call recording over at the investor relations site.

The basic financials for the three groups were presented in the slide deck as usual.

Activision Blizzard Q4 2019 Financial Results Presentation – Slide 9

Revenue was down from last year’s Q4 results, when Blizzard pulled in $686 million, but operating income was up from $241 million.  They made more money from less income, so margins were also up from last year’s 35%.

Compared to the rest of the year, Blizzard’s revenue and income was heavily tilted towards the end of the year, giving it a distribution akin to its Activision stablemate, which tend to make most of its money when the latest Call of Duty launches every year in Q4.

  • Revenue / Income / Margin
  • Q1 $344M / $55M / 16%
  • Q2 $384M / $75M / 20%
  • Q3 $394M / $74M / 19%
  • Q4 $595M / $260M / 44%

For Blizzard the highlights were a bit of hand waving and repeated mentions and nods towards WoW Classic.

Activision Blizzard Q4 2019 Financial Results Presentation – Slide 7

A few things happened between the end of Q2 in June 2019 and the end of the year, but WoW Classic was the big one.  Bobby Kotick specifically said on the call that adding WoW Classic to the WoW subscription doubled subscribers over that period.  Yay WoW Classic.  But they didn’t mention a lot else, including what a rebuke to the current game the popularity of WoW Classic is, and were clearly avoiding bringing up some things.

I am reminded of the CEO of EA on the first earnings call after the launch of SWTOR where they declined to break it out or even mention it specifically.  He said that SWTOR was not their most interesting title or some such.  Battle for Azeroth is clearly not on the “interesting” list over at Blizz right now.

Nor is Warcraft III Reforged.

Over at Massively OP they reported on the question and answer segment of the call where Activision Blizzard was clearly ducking questions related to a few things they didn’t want to talk about.

The company also declined to break out total revenue and income numbers for the three divisions, something they have done in the past on their charts.  But we have the quarterly numbers.  I typed them in above.  I can also add them up to get totals.

In 2019 Blizzard made $1,717M in revenue for $464M in operating income, which gives a simple margin number of 27%.

In 2018 Blizzard made $2,291M in revenue for $685M in operating income, which put the simple margin number at 30%.

Basically, Blizz was down 25% in revenue and about 33% in income in 2019.  Not a good year for them in that regard, though all numbers are relative.  I am certain some smaller studios would think their dreams had come true if they pulled in a quarter of what Blizz did in 2019.

And will things get better?  The slide deck promises “follow-on” content for WoW Classic, but so far as I have seen that just means the remaining unlock phases.  Giving us Darkmoon Faire and the final raids will make people happy, but it isn’t going to grow the subscription numbers.  For what is in the plan, those numbers have peaked, dropped off some, then hit something of a steady state.  And we know that a steady state for an MMORPG is really a slow decline.

Other than that, there isn’t a lot on the horizon.  Yes, there is the Shadowlands expansion, but that won’t be until Q3 and, while it will likely cause a spike in revenues, it needs something special to hold people.

There will be more Hearthstone decks, because there are always more Hearthstone decks.  And Diablo: Immortal will go into regional testing at some point.  Didn’t NetEase claim that was done almost a year ago?  And Blizzard’s recent efforts like the 8.3 patch and Warcraft III Reforged have not been burnishing the company’s reputation for quality and polish.

Will 2020 revive Blizzard’s fortunes or just see them sink further?


11 thoughts on “A Good Fourth Quarter for Blizzard… When Compared to the Rest of 2019

  1. SynCaine

    Considering the past however long, at this point if New Blizzard was to announce new original Classic content, I’d know two thing:
    1: Classic would become a worst game because the new content will undoubtedly be bad.
    2: There would be a good amount of entertainment in seeing just how hard they screw the pooch, which even as a current Classic player, is at least worth something.


  2. Wilhelm Arcturus Post author

    Looking at that revenue/income list, it feels like the cost of keeping Blizzard going as it stands is about $300M a quarter, or $1,200M a year. There is some variation and I am sure costs change for this and that, but the numbers seem to say that profit comes somewhere around the $300M mark for revenue.

    Also, what a change over time. Back in the day when WoW was bringing in a billion a year, Activision used to be the big number in Q4 with a CoD title, but over the full year Blizz would win with a nice and steady subscription income stream. Now Blizz is needs a big release to get a decent quarter.


  3. Shintar

    The quotes about Classic really come across as trying to square the circle: trying to highlight how it’s making money while simultaneously trying to downplay its popularity because old products being more successful than newer ones isn’t a good look.

    Liked by 1 person

  4. Redbeard

    I’m trying to figure out why Activision is still holding onto Blizzard and King, when the numbers clearly show that –at least net profit-wise– Activision is better as a separate entity. Of course, gamers would approve of that as well, but everything I’ve seen out of Mr. Kotick implies that he thinks he can get blood out of a turnip by likely cutting personnel at Blizz further.


  5. Yeebo

    300 million a quarter just to break even! What I know about the finances of studios that large wouldn’t fill a post-it note, but that seems like a lot in proportion to the number of active projects they have (at least that I know about). If even one fifth of that is going in to WoW, it would indicate some serious inefficiencies. There are studios that put out way more new content with much smaller budgets.


  6. Wilhelm Arcturus Post author

    @Redbeard – I have a couple of thoughts on that. First is that Activision looks good in Q4 because it shipped a Call of Duty title. For the rest of the year it isn’t so hot. In Q2, for example, Blizz and King both brought in more revenue. So the Q4 numbers in this post are not representative of the overall picture. If anything, King has been keeping the overall margin number higher, which is a key Wall Street metric.

    Related to that, if Activision screws up a Call of Duty launch… and they will some day… then they at least have the other two divisions to smooth things out somewhat.

    And even if Activision’s margins were higher on its own, which would get it a better valuation ratio, that valuation would be based on a smaller revenue number, so they might be better off in the end with the other two along. In the end, I think Bobby Kotick would gut Blizz to boost revenues and margins while riding on the subscriber overhang before he would split them off.

    @Yeebo – They have data centers to run and all that, but that number is probably mostly payroll. If you buy a software company and lay off all the people, you aren’t left with much.

    So I think you are seeing one of the long standing problems with software development. As a rule, software teams have more to do than their staffing will allow. When you’re a small studio, you make the hard choices and prioritize. When you have a bunch of money though, there is always the temptation to add more staff so you don’t have to make hard choices. But n+1 has its limits and a project beyond a certain number of people starts becoming a beast to be tamed in addition to the work to be done. Things can get slower and less efficient. Oh, and with more people expectations and requirements will grow as well. So when Blizz says they are going to hire more people for the WoW team, that doesn’t necessarily mean we’re going to get expansions any sooner or quality to go up.


  7. Redbeard

    @Wilhelm– I’m afraid you’re right in that Bobby would gut Blizz first. In the end, he’s all about the money, not the company. And definitely not about the gamers, who have mocked him every chance they get.


  8. fatherofdaughters

    How significant will the Warcraft 3 reforged debacle be in the long run do you think? At one level is is a relatively minor title and the company’s finances don’t hinge on its success or failure but Blizzard’s whole ethos was about delivering high quality games. Blizzard fans are a bit like Apple fans in their dedication to the brand but most of the vitriol against reforged has come from long time Blizzard fans who are traumatised that the company they loved so well has come to this. Has the brand been permanently damaged or will they shrug this one off? The stock market seems to think they can because the share price is pretty much unaffected by the affair.


  9. Wilhelm Arcturus Post author

    @fatherofdaughters – I don’t think it will necessarily be a big financial hit, but it is another dent in their once vaunted reputation for polish and not shipping until things were ready.

    There may be an esports angle to all of this as well. We might see them trying to get WC3 into their tournament cycles, which will push a few more copies once they get the bugs worked out.


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