Tag Archives: Activision

The Blizzard Name Will Go

The California Department of Fair Employment and Housing lawsuit against Activision Blizzard has revealed a carbuncle of toxic culture within the company and exposed it to the world.

In fact, it hasn’t just exposed it.  The whole thing has encouraged many current and former employees to come forward and confirm the situation.  The headlines just keep rolling in and every day or two some employee of note is fired for their involvement.  The whole thing has been a disaster for the company, one of its own making.  The state only sued after a two year investigation because the company clearly wasn’t serious about making any changes.

And, when the lawsuit hit, they doubled down on the line, claiming that these were all old issues and that everything was fine now… right up until it became clear to everybody that everything was not fine.  Then it was suddenly expedient to reverse course and talk about change.

The fact that the company is now firing people who were implicated in the toxic behavior at least puts them moving in the right direction.  Key members of the Diablo IV team were in the latest round who got the chop, which at least indicates some level of seriousness.

It would have been a lot easier if they had cooperated with the state before the lawsuit, but Bobby Kotick, the subject of a sexual harassment lawsuit himself back in 2010, felt he could brazen it out.  Now the company pays the price.

And with the state now committed, things will have to change at the company.  I’ve worked for a few companies that have been sued for bad behavior.  The state will make sure every employee gets the word, usually through some sort of mandatory training at regular intervals.  Sometimes it takes.  Sometimes management buys in on doing the right thing.   And sometimes your CEO gets up and snarks about how they have to play nice now and respect everybody since they got sued when they fired somebody because they got a sex change operation. (A Texas company that no longer exists.)

Activision Blizzard might very well be a better place at some future point.  But that is not likely to be enough.  We didn’t think the company was this bad until the lawsuit hit, so how can we possibly tell if things change.  Meanwhile those tales from the lawsuit will continue to dog the company.  Something will need to visibly change, and when a reputation has been damage, a name change often seems the easiest plan.  It nearly worked for ValueJet.

The thing is, while the lawsuit names Activision Blizzard in general, and includes Activision in some sections, the vast majority of the dirt seems to be on Blizzard specifically.  They are getting all the headlines.  Maybe I am just reading the wrong news sites, but I have yet to see anything about, say, the Call of Duty team at Infinity Ward making booze-fueled work day tours through the cubes to harass female employees or the like.  The Activision name might be safe.

But the Blizzard name has to go.

The company name will be changed.  Maybe it will be Activision.  Maybe it will become Activision King.  Hell, if they’re worried, the whole thing might become King., though that might be a little too tied to the patriarchy I suppose.  But it is always easier to rebrand to a name you already own.

Blizzard will become just another studio under the new company.  Its special standing gone.  That special standing, which it has managed to hold onto since it was first acquired back in 1994, has been largely based on the success of WoW during the Activision era.  Mike Morhaime got the CEO of Blizzard title because the game was bringing in a billion dollars a year.  J. Allen Brack got to be President because, though WoW was no longer as big of a deal, it was still a consistent money maker.

Now though, WoW seems headed for a fall with the bad news while Activision has figured out how to make Call of Duty pay out big for more than one quarter a year.  Blizzard is not so special anymore.

The name will have to go.  There will be a studio re-org, at least on paper.  I suspect that they might do a Daybreak and give each respective group their own studio name, at least for WoW, Diablo, and Overwatch.  But maybe they will keep it all one group, just under a different name.

Anyway, that is my Friday prediction, that the Blizzard name will go away before all of this is over, and with it Blizzard’s special status within the company.  At a minimum it gets dropped from the main company name.

Meanwhile, if I were Activision I might emphasize that their upcoming title, Diablo II Resurrected, was done by Vicarious Visions, which is in Albany, New York, far from the current scandal.  Maybe get them on board for Diablo IV as well.

Activision Blizzard, the Lawsuit, and the Q2 2021 Financials

You don’t want to do that either. You think you do, but you don’t.

-J. Allen Brack, BlizzCon 2013

I am pretty sure that J. Allen Brack would be pretty happy just being known as the guy who arrogantly pissed all over, and probably helped delay, the huge money maker that WoW Classic turned out to be.

I am also pretty sure both he and the company wish that statement was worst thing to come out of BlizzCon 2013.

But yesterday saw him step down as President Blizzard… a polite way to say he was the first big sacrifice in the wake of the California Department of Fair Employment and Housing hostile workplace lawsuit.  He was joined by the SVP of HR, Jesse Meschuk

Not that he didn’t deserve it.  Sure, a lot of the most egregious behavior happened on Morhaime’s watch, but Brack was still in the thick of things, still a leader in the company during that time as well.

Brack was replaced by new Blizzard “co-leaders” Jen Oneal and Mike Ybarra, both of whom have roots outside of Blizzard.

For those of you who like the “Bobby Kotick is cementing his dominion over Blizzard” narrative, it has been noted that Morhaime was CEO of Blizzard, Brack was President of Blizzard when he replaced Morhaime, and Oneal and YBarra are co-leaders now, whatever that means.

And the Brack announcement went out in advance of the Activision Blizzard Q2 2021 financial results announcement, no doubt following the theory that you get bad news out of the way before and hope that you have good news during and after.  So was it a good thing that Kotaku pointed out that the company is losing T-Mobile as a sponsor of their Call of Duty and Overwatch esports league before the call as well?  And then there was the expected shareholder lawsuit.

Which brings us to the report.  You can find the detailed financials, the presentation, and the recording of the call over at the investor relations page.

The presentation opened right up with five actions the company is taking in light of the lawsuit and the protests both from outside and within the company.  They are:

  1. We have asked Jennifer Oneal and Mike Ybarra to assume responsibility for development and operational accountability for Blizzard.
  2. We will continue to investigate each and every claim and complaint that we receive. When we learn of shortcomings, we will take decisive action. To strengthen our capabilities in this area we will be adding additional staff and resources.
  3. We will terminate any manager or leader found to have impeded the integrity of our processes for evaluating claims and imposing appropriate consequences.
  4. We will be adding resources to ensure and enhance our consideration of diverse candidate slates for all open positions.
  5. We have heard the input from employee and player communities that some of our in-game content is inappropriate. We will be actively reviewing that content and removing it, as appropriate.

Again, this is a change from the stubborn defiance that was the hallmark of the initial response from the company, but is unlikely to be enough in itself to soothe anybody.  The employee organizers are still not buying the company’s new tack.

When it came to the numbers, all three pieces of the company saw a decline in revenue from Q1 2021, though that is not unexpected given the roll back in pandemic restrictions we saw midway through the quarter.  People went outside and did things, a trend that will no doubt continue into Q3 if the price of airline tickets and rental cars are any indication.

Activision Blizzard Q2 2021 Financial Results Presentation – Slide 11

Blizzard alone was down $50 million in revenue when compared to Q1, which was a direct hit to margins.

When it came to singing Blizzard’s praises, the song remained the same, a tale of Azeroth making the money while other franchises languish.

Activision Blizzard Q2 2021 Financial Results Presentation – Slide 7

WoW bookings doubled year over year, with much of the credit going to the launch of Burning Crusade Classic.  A lot of people bought that pack with the lizard mount.

Hearthstone kept on rolling as well, cranking out yet more expansions.

And while Diablo II Resurrected holds promise for the company, Diablo IV is still on the distant horizon and Diablo Immortal has been pushed back again, this time to the first half of 2022.  We could see a four year gap between when it was announced at BlizzCon 2018 with a playable demo and when it finally ships.

Meanwhile over at Massively OP, where they have been keeping score, the running tally of monthly active users for Blizzard continued its downward trend, with the company shedding another million users.  We don’t know where they came from or where they went, but they aren’t hanging out in Blizzard games anymore.

After being down in revenue and players in Q2, we have yet to reckon with Q3 and the iceberg that is the California lawsuit.  The only thing Blizz has in the near future is Diablo II Resurrected and some likely misguided hope about “stronger engagement” with the Shadowlands expansion.  But people were already leaving retail WoW for FFXIV before the shit hit the fan.

I appreciate that Activision Blizzard seems to have finally decided that they need to clean house, though the cut off for responsibility is clearly enforced before you get to the C-level suite, but the company clearly needs to step things up a couple notches or the Q3 results will be a bloodbath.

Blizzard Still Depends on WoW but is Pinning Some Hope on Diablo II

It was time for the Activision Blizzard Q1 2021 fiscal reports, so we can once again see what the company is hyping and what they are mysteriously failing to mentions.  You can find everything I reference on the Activision Blizzard investor relations site.

As usual, it is nice I guess that Activision is doing well with yet another spin of the Call of Duty wheel and that a bazillion people still play Candy Crush Saga, but my interest resides in Blizzard camp where they continue to talk up World of Warcraft and WoW Classic.

Overall revenue was down from Q4 2020, but that was also when Blizzard launched the Shadowlands expansion, which is usually a peak item in their financials.

Activision Blizzard Q1 2021 Financial Results Presentation – Slide 9

Margins are very good, but the only title they mention is WoW, while pointing towards “product timing” as a drag on the overall numbers.  Somebody else isn’t pulling their weight.

Details from the quarter again rely heavily on WoW.

Activision Blizzard Q1 2021 Financial Results Presentation – Slide 7

Shadowlands and the coming of Burning Crusade Classic are up top, followed by another Hearthstone expansion.  But there is always another Hearthstone expansion, isn’t there?  They’ve had so many they’ve got Hearthstone Classic option in the game now.

The only “hope for the future” item on the list that isn’t invested in Azeroth is Diablo II Resurrected, which I will admit I am a bit hyped for myself.  And then there is Diablo Immortal, which continues to take its sweet time getting to a point where it can launch.

After that we have Overwatch League and nothing else.  We heard last report that Overwatch 2 and Diablo IV are not slated for this year.

Meanwhile, the reported MAUs, monthly active users, for Q1 was 27 million which, according to Massively OP, which has been keeping track, down 29% from the Q1 2018 peak of 38 million.  If WoW is still booming… and carrying the company… that means 10 million fewer people are engaged with other Blizz properties.  For those interested, slide 13 defines MAUs as:

Monthly Active Users (“MAUs”) We monitor MAUs as a key measure of the overall size of our user base. MAUs are the number of individuals who accessed a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period.

An individual who accesses two of our games would be counted as two users. In addition, due to technical limitations, for Activision and King, an individual who accesses the same game on two platforms or devices in the relevant period would be counted as two users. For Blizzard, an individual who accesses the same game on two platforms or devices in the relevant period would generally be counted as a single user. In certain instances, we rely on third parties to publish our games. In these instances, MAU data is based on information provided to us by those third parties, or, if final data is not available, reasonable estimates of MAUs for these third-party published games

Since I played WoW and WoW Classic a bit each month over the last quarter I guess I count as two users, which seems to imply that Azeroth is possibly propping up the MAU count even more than I might have suspected.

Massively OP also has some notes from the investor calls including some inconsistencies from the company.

Anyway, that is what we have from Activision Blizzard for Q1 2021.

WoW Carrying Blizzard Again in Q4 2020 Results

On Thursday afternoon Activision Blizzard held their investor relations presentation for their Q4 2020 and 2020 overall financial results.  You can find the presentation, financial results, and the recording of the inventor call on their investor relations site.

There was considerable good news for the combined company.  The Activision side of the house did especially well with their Call of Duty releases in 2020.  While that is always their big title, 2020 saw revenues for the franchise doubled, giving the Activision team a very merry Christmas indeed.

Activision Blizzard Q4 2020 Financial Results Presentation – Slide 12

Kind was up a bit, though they seem pretty consistent from quarter to quarter.

And then there was Blizzard, which did very well with World of Warcraft and the Shadowlands launch, but which was down somewhat year over year, which they blame on there being no BlizzCon and a decline across other titles.

The BlizzCon aspect probably shouldn’t be a surprise.  While I doubt it adds much in the way of net profit… it costs a lot to setup, leaving aside the amount of lost productivity it no doubt causes within Blizzard… selling 40K tickets at $250 a pop, plus however many $50 virtual tickets is still a lot of cash flowing into the company.

Meanwhile, the other titles statement seems to confirm what I was going on about in Q3, which is that we seem to have come full circle and are now back to a Blizzard where there is World of Warcraft and then there is every thing else.  WoW has been on an uptick since WoW Classic launched and Blizz is saying Shadowlands hasn’t started tanking yet, so that is where the money is.  WoW pays the bills.

And it looks like it will be that way for a while as the presentation doesn’t have a much of anything else in the forecast for Blizzard.

Activision Blizzard Q4 2020 Financial Results Presentation – Slide 7

The promise of Diablo Immortal is still out there.  I’ve read a report from somebody in the regional testing that was pretty favorable about the title, it being basically Diablo on your phone.  But it really has to ship to make some money and we’ve been wondering when that is going to happen since BlizzCon 2018.

And then there is BlizzConline coming up.  Unlike BlizzCon, this is free to watch, so no direct revenue boost is expected, though they will no doubt hype up the gear store and such.  The big deal is the future plans.  Where are the non-WoW franchises going and are we going to see anything new?

Otherwise, there isn’t even a Hearthstone expansion on the list.  Maybe they are holding that for BlizzConline.  They said on the call that we wouldn’t be seeing Diablo IV or Overwatch 2 in 2021.  In summing up BlizzCon 2019 I thought I was being a bit caustic suggesting that Diablo IV wouldn’t arrive until 2022, but there it is.

And how is Overwatch 2 not out yet?

I don’t follow Overwatch that closely, but back at BlizzCon 2019 they were talking about it like it was almost ready.  It is mostly a PvE campaign, right?  But then I guess Diablo freakin’ Immortal isn’t out yet either and that looked ready to go at BlizzCon 2018, so clearly we need to allow a lot of lead time for announcements involving anything besides WoW and Hearthstone.

Other Coverage:

 

The Friday Bullet Point is GameStop

January is almost in the rear view mirror and it has already been a strange year.  I figured it was about time for me to grab some smaller items from the month and do a Friday bullet points post.  Obviously, GameStop was the top item for me.  But, after that, everything else sort of faded into insignificance.

  • The Revenge of GameStop

A year ago, in my predictions for 2020, I said that GameStop was headed for bankruptcy.  That seemed like a gimme prediction given the company’s situation.  But then came the pandemic and we all needed video games and the company revived.

Still, things were not looking great for storefront video game sales.  The company’s stock price (ticker: GME) was around $4.00 a share a year ago and had buoyed up close to $20 thanks to holiday sales.  And then, earlier this week it was past $450 a share.

Melvin Capital Management (MCM) decided to short the stock… basically a bet that the price would go down… when it was sitting in the high teens, which the Reddit group Wall Street Bets decided to go all in the other way, driving the price up to punish MCM, costing them a lot of money as they had to cover their position.

As if many were not convinced already that the stock market has simply become a casino for the wealthy, Robinhood, E*Trade, and TD Ameritrade, all of which cater to small investors, stopped allowing their users to trade GameStop (along with AMC, BlackBerry, Nokia, and a few others which was also seeing unexpected movement).  Robinhood denied it was a political move, claiming problems with margin exposure and reconciliation, and they are kind of a dicey edge case in the market, being already under investigation by the SEC and some states.

But TD Ameritrade E*Trade are not.  They’re really in the Wall Street club first, and no doubt this move was to defend the extremely wealthy… which includes themselves… as much as anything.  The casino gets upset if the suckers start costing them too much money and start changing the rules.  And there have already been calls for the SEC to control this sort of outsider behavior so that the peasants can’t rise up again.  Populist politicians on both sides of the divide are already looking to make hay out of this and there may be congressional hearings… because political donations from Wall Street are all important.

As a rule, small investors are only safe… or not at complete risk… investing in index funds, usually through their 401k retirement program, because Wall Street can charge a recurring maintenance fee and then use the money to prop up the stocks that benefit them the most.  The little guy is allowed to benefit, but only if Wall Street can make its money first.

And people may be cheering that MCM lost a bunch of money on this, but other big firms either sold off or got in with their shorts when the price was high and made money on the backs of the Redditors.  Meanwhile, individuals who saw GME prices taking off and jumped in later and who didn’t sell before the dive will lose out.  As always, Wall Street wins in the end and the small investors mostly lose.

In the end, none of this helps GameStop  the company even one iota. (Though I wouldn’t be surprised to find some senior execs and board members sold off part of their positions.)  The stock price only matters when the company offers new shares to the public.  This was all people trading shares the company had already sold, so the price… $4.00 or $400… doesn’t mean much to their daily operations.  The company is still in trouble.  This is all people trying to make money from nothing but perception… it is straight up gambling.

This sort of thing happens every so often.  The NPR podcast Planet Money did a story earlier in the year about Hertz Car Rentals when declared bankruptcy earlier this year… due to the fact that they had no cash reserves to speak of because they have spending all their money on stock buy backs which are what most benefit the CEO, board of directors, and Wall Street in the short term, so were completely unprepared for the pandemic downturn… and how their stock suddenly shot up because people were playing the market and wanted to make a quick buck.  The GameStop thing was only news because Wall Street lost control of the situation for a brief moment.

And yes, I am a bit cynical about Wall Street after watching them wreck the economy with sub-prime mortgages fifteen years back only to pay no price and get handed billions of dollars in quantitative easing so they could pay themselves bonuses while many suffered.

After the great depression of the 30s a lot of regulations were put in place to keep a titanic event like that from happening again.  For a brief time in history the stock market was what my finance professor described back in college, a way for company to raise money in order to expand or invest in the business.  That has long since been chipped away and we’re not so far from the days of Joseph Kennedy bilking small time investors.

Anyway, this seemed like something worth noting, even if it is only tangentially gaming related.  I’ll be interested to see where things stand in a year when I review this post.

For those interested in more details about GameStop:

 

Blizzard Hangs On During a Quiet Q3

We got the 2020 Q2 financial results for Activision Blizzard yesterday, and it confirmed that the video game market is still doing pretty well.

Overall the combined company had a very good Q3 2020, well up over last year, though much of the good news came from the Activision side of the house, where they were still riding the Q2 Call of Duty launch for all it was worth.  The company is even talking about hiring 2,000 more people to keep up with demand.  That is a long way from the 2018 results when they were cutting staff.

Activision Blizzard Q3 2020 Financial Results Presentation – Slide 9

The Activision team was up almost 3x over their Q3 2019 net revenue.

Blizzard, while up, was only up a small amount over Q3 2020.  However, Q3 2020 was the start of the Blizzard revival where, after two quarters in the doldrums, WoW Classic launched and revived their fortunes.

Meanwhile, Q3 2020 was in something of limbo state as the Shadowlands expansion was slated for a Q4 launch.  There was little new to entice people players back.  There wasn’t even the expansion pre-patch to raise some excitement.

But the slide deck rightly looks for Q4 2020 to be a big deal.

Activision Blizzard Q3 2020 Financial Results Presentation – Slide 7

Blizzard got the Shadowlands pre-patch out earlier this month, unveiling the big level squish for all to see and experience.  And now we have a date for the start of the expansion pre-launch events, November 10th, and the launch of the expansion itself, November 23rd.  Blizzard will be able to recognize revenue on all those pre-orders the day it launches.   The is usually a pretty big ka-ching moment.

However, outside of World of Warcraft there isn’t a lot of big news.  Hearthstone carries on, with a new expansion on the way.

Overwatch remains popular, though a year after the Overwatch 2 announcement it doesn’t feel like much has changed.  I flagged Overwatch 2 as one of the “big four” announcements at BlizzCon 2019, but I don’t pay enough attention to the game to know what has gone on since then, except for the fact I haven’t seen any headlines about it lately.

Diablo IV remains somewhere in the distant future.  I think I said 2022 last year when it was finally announced, and I might have been optimistic with that call.

And then there is Diablo Immortal, perpetually in some new stage of testing, but never quite ready to launch.  It can’t fail it they never release it I guess.

So Q4 is almost guaranteed to be big for Blizz, but unless Shadowlands gets more traction than Battle for Azeroth did, there isn’t a lot else to depend on after that.  For all the other franchises, it is still WoW that carries the load.

You can, as always, find all the numbers over at the Activision Blizzard investor relations page.

Blizzard Continues Its Pandemic Profit Roll in Q2

We got the 2020 Q2 financial results for Activision Blizzard earlier this week and it confirmed what many had probably already guessed; people staying home play (and pay for) more video games.

So, not really a surprise that they did well, though I am sure senior execs from Bobby Kotick on down will claim that their leadership was the magic ingredient.  It is always their work that causes anything good and unavoidable market conditions that cause anything bad.  So the execs get huge bonuses and the employees… well… and it isn’t just people on the Activision side of the house.

Anyway, as the presentation shows, revenue was up year over year.

Activision Blizzard Q2 2020 Financial Results Presentation – Slide 10

Of course, things were looking pretty meager a year ago, with the 2019 Q1 results showing people had fallen away from Battle for Azeroth with Q2 reviving slightly… margins up from 16% to 20%… on anticipation of WoW Classic and the Rise of Azshara update which unlocked flying in the expansion.

It wasn’t until the Q3 results that included the launch of WoW Classic that things began to look better.  And then, of course, the national disaster of the pandemic hit and kept everybody home.

So things are looking up for the company.  Surprising to me is the lack of depth in the portfolio at Blizzard and across the company.  The only thing new in Q2 was the Call of Duty: Warzone battle royale addon to the Call of Duty franchise and the promise of the Shadowlands expansion for WoW some time this year.

Activision Blizzard Q2 2020 Financial Results Presentation – Slide 7

Of course, maybe that shouldn’t surprise me.  Activision is mostly Call of Duty these days, and Blizzard has some other titles, but WoW is still the revenue juggernaut and when it sags there isn’t anything to take up the slack.  A new card pack for Hearthstone isn’t going to make a huge impact at this point and Diablo: Immortal still seems to be far from going live.

So I expect things will remain upbeat so long as we’re all encouraged to stay home as much as possible, and there no doubt be a spike when the Shadowlands expansion launches in Q4.  But the company remains the same.  It is WoW and everything else.

For those interested, the financial data, presentation, and audio of the conference call, can be found on the Activision Blizzard investor relations page.

The Restoration of Blizzard Margins and the Resurgence of WoW

What a difference a year can make.  Back in May 2019 I was writing about the sorry state of margins for the Blizzard portion of the Activision-Blizzard-King combo.

The numbers for Q1 2019 were somewhat grim for Blizzard.  While they brought in $344 million in revenue, the operating income… the profit… was only $55 million, giving them a 16% margin, which is horrible for a software/service company.  They were lagging behind King, which made more money and had a higher margin, and Activision, which made less money but still ended up with a higher operating income and thus a higher margin.

What was going on at Blizzard?  We had the meager offerings of the 2018 BlizzCon still fresh, with Diablo: Immortal being the centerpiece announcement.  StarCraft and Heroes of the Storm were on the outs.  Overwatch was slipping.  And the jewel in the Blizzard crown, World of Warcraft, was having a tough time holding on to people due to the myriad annoyance of the Battle for Azeroth expansion.  It was a bad time for the company.

Things began to turn around for Blizzard when WoW Classic hit late in 2019.  But it took the events of Q1 2020 to really boost Blizzard’s fortunes.

I feel like I should quote an exchange early in the movie Schindler’s List, where he talks about this missing ingredient that had kept him from business success in the past.  For him it was war, for Blizzard it was COVID-19.  Winter was keeping some people at home already, but worries about the virus and stay at home orders in many parts of the world helped fuel Blizzard’s quarter.

It was visible on the WoW servers, where things felt more crowded, and on the WoW Classic servers, where login queues and free server transfers appeared again.  As they laid it out on slide 8 of the presentation:

  • After doubling in the second half of 2019, World of Warcraft’s active player community increased further in Q1, as the team continued to deliver more content between expansions than ever before
  • Reach and engagement were particularly strong as regions introduced shelter-at-home measures through the quarter, with momentum increasing further in April
  • Increased engagement in modern WoW drove accelerating pre-sales for the upcoming Shadowlandsexpansion, slated for the second half of this year

While they had some modest praise for Hearthstone and Overwatch,

  • Hearthstone engagement improved sequentially, driven by the new Battlegrounds mode launched in November, and strong execution in live operations
  • Overwatch engagement increased meaningfully in March as its latest seasonal event coincided with stay-at-home effects

The words “sequentially” and “meaningfully” are pretty soft.  And then there was a mention of Diablo: Immortal, which may ship some day.

  • Diablo Immortal , developed for mobile in partnership with NetEase, remains on track to begin regional testing in the middle of the year

Given that, WoW was clearly the shining star this quarter, which led to the following revenue numbers.

Activision Blizzard Q1 2020 Financial Results Presentation – Slide 10

Blizzard is actually in third place for overall revenue out of the three company units, but that revenue was up by $108 million over last year and the increase was all profit, so that on the actual income line Blizzard was ahead of its two stable mates with a huge jump in operating margin.

Of particular note to me was the measure of Monthly Active Users, MAUs, between Q1 2019 and Q1 2020.  They were both the same, ringing in at 32 million active users.

For me, that seals the deal on my assertion that MAUs are a bullshit metric… or would have sealed the deal if I wasn’t already of that mind.  Any metric that stays flat as when revenue is up nearly 25% and margins have nearly tripled clearly isn’t measuring anything worthwhile in the case of a company like Blizzard.  The company ought to be embarrassed by the need to explain how detached their favored metric is.

And the future seems fairly bright for Blizzard in Q2.  As they noted, momentum was increasing in April, with people still at home and Blizz keeping some incentives, like the 100% xp boost, like to tempt people to work on just one more alt.

And beyond that… well, the Shadowlands expansion is coming, and any WoW expansion delivers a boost to revenue no matter how bad it is viewed after the fact.  They did say on the call that the target for Shadowlands is currently Q4 2020, so no August/September release this time around.  (Quote here) But unless they totally drop the ball with the expansion, Blizz looks like they are pretty well positioned for 2020 and into 2021.

The information, financial reports, presentation, and recording of the investors call can all be found over on the Activision Blizzard investor relations page if you wish to scope it out yourself.

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?

Related:

Quote of the Day for WoW Classic Fans

World of Warcraft® Classic drove the biggest quarterly increase to subscription plans in franchise history, in both the West and East.

-Activision-Blizzard Q3 2019 earnings report

WoW Classic brings another ray of sunshine.

Given what SuperData told us about WoW Classic previously, this was not unexpected.

This ray of sunshine however comes amidst some cloudy skies at A-B.

The company took a lot of heat at the start of the year when it announced layoffs in practically the same breath in which it announced record financial performances.  While people were outraged, the 2019 financial reports have supported the company’s pessimism.  Blizzard was especially hard hit with its margins dropping from 30% to 16% in Q1 2019 as Battle for Azeroth shed players while the company had nothing else new to attract people.  And things have remained down.  The charts show that Blizz has recovered a bit on margins, but now Activision is was down.

Activision Blizzard Q3 2019 Financial Results Presentation – Slide 9

And the talk at the presentation was largely about the long term tent pole products, Call of Duty and World of Warcraft.  Even as they try to diversify their stable of titles, the old champions have to carry water for everybody.  Even the up part of company, King and its mobile games, the emphasis was on the Candy Crush franchise.

This is a very common problem, creating a popular and very profitable product then never being able to create something that could match, much less surpass, that product.

There was even mention of possibly beefing up the WoW team.  And, it was recognized that WoW Classic gave the company a boost during an “off” year when WoW did not have an expansion set to go.  There was some uncertainty about how sustainable WoW Classic would be over the long term.  And certainly, if they don’t do anything else with it, it will dwindle off to a much smaller population.

Finally, Q3 ended on September 30, 2019.  The Hong Kong debacle did not come to pass until mid-October, so that may put something of a damper on Blizzard numbers for Q4.  Opening up pre-orders for Shadowlands during BlizzCon may offset that somewhat, but that is a short term solution for a long term problem.

You can find all of the quarterly result information at the Activision Blizzard investor relations site.