Activision Blizzard pushed out their Q1 2022 financials at 7:30am Eastern Time yesterday which, while it isn’t the Friday at 4pm routine, still strikes me as an hour suited to attracting less attention or getting bad news out of the way quickly. And Elon Musk promptly buried that news by buying Twitter. So there you go.
The date was a bit earlier than I expected as well, the pattern generally being that one gets the announcement in the first week of the second month of the quarter. But I guess if you aren’t going to do anything fancy you can get things out more quickly.
And Activision Blizzard isn’t doing anything fancy because of the Microsoft acquisition. They don’t have to impress analysts with a cool slide deck or an engaging conference call or throw out a buzzword salad because Microsoft has said they are going to pay $95 a share when the deal closes, which puts a pretty hard ceiling on the share price.
Of course, Activision Blizzard also has to not screw things up between now and when the deal closes because I am sure the contract for the acquisition is miles long and contains many provisions where by Microsoft can pay less or walk away if Bobby Kotick and company degrade the value of the company in any substantial way… or more so than they have already in any case.
This is the part where I tell you that they aren’t doing very well on that front at the moment.
The overall company reported revenue of $1.77 billion, down from $2.28 billion a year ago in Q1 2021 as both the Activision and Blizzard portions of the company slipped hard so far in 2022.
King, however, was up. Candy Crush Saga abides while Call of Duty and World of Warcraft fall.
I am only really interested in the Blizzard corner of the business, so how badly did they tank in Irvine?
Blizzard revenue in Q1 2022 was $274 million.
For comparison, Blizz brought in $419 million in Q4 2021, which itself was down noticeably from the $493 million posted in Q3. That was also off from the $433 posted in Q2 and the $483 million posted in Q1.
The holiday season was off for Blizz because they had nothing new to sell, but the new year was brutal, as even the low point of 2021 looks pretty sweet when compared to how 2022 is breaking for the division.
To go along with that, the Blizzard Monthly Active User count went down another 2 million users in Q1 2022. Over at Massively OP they have been tracking the user count decline, which went from 38 million users in Q1 2018 to just 22 million users in Q1 2022. Even during the peak COVID lockdown Blizzard’s user numbers were flat. Now we’re closing in on losing half of their user count in four years.
So not happy times down in Irvine.
What did they have to say about it? It was the usual hand waving about the product cycle of World of Warcraft and promises of better things to come.
Blizzard’s first quarter financial results were lower year-over-year, primarily reflecting product cycle timing for the Warcraft® franchise. Blizzard’s teams reached important milestones across its key franchises in recent months, and the second quarter represents the start of a period of planned substantial releases across Blizzard’s portfolio.
Blizzard continues to work on numerous new experiences to delight and expand the Warcraft community. The newest Hearthstone® expansion, Voyage to the Sunken City™, launched on April 12. Blizzard’s teams are working on major new content for World of Warcraft® including World of Warcraft: Dragonflight, the innovative upcoming expansion for the modern game, and World of Warcraft: Wrath of the Lich King® Classic. Blizzard is also planning to unveil more details about its first Warcraft mobile experience in the coming weeks.
Diablo® Immortal™ will launch on June 2, 2022 in most regions around the world, with the remaining regions in Asia-Pacific gaining access a few weeks later. Over 30 million people have already pre-registered for the game. In addition to offering a deep, authentic, and free-to-play Diablo experience on the mobile platform, Diablo Immortal will also be available free-to-play on Windows® PC, initially as an open beta starting on June 2, 2022, and will support cross-play and cross-progression.
Development on Diablo 4 and Overwatch® 2 is also progressing well. Company-wide internal testing of Diablo 4 is underway, and external testing of the player-versus-player mode of Overwatch 2 begins tomorrow, April 26, 2022.
This is a reminder, once again, as to how important World of Warcraft is to the company and its bottom line. Nothing delivers as much revenue as reliably as WoW, so the company is chained to it. They can never walk away from WoW as it keeps the lights on and the paychecks flowing while the company farts around trying to create a new cash spigot from one of its other franchises.
So the forward looking good news was about WoW Dragonflight and Wrath of the Lich King Classic and the recent Hearthstone expansion and some empty milestones related to the Diablo and Overwatch franchises that won’t be anywhere close to launch in 2022. I think they would have pre-orders open if they had any confidence in a 2022 release. Remember how far in advance Shadowlands pre-orders started?
The one release with a hard date, the one new thing that Blizzard has lined up to sell in 2022, is Diablo Immortal.
I have been more than a bit dismissive of Diablo Immortal since it was announced at BlizzCon 2018, referring to it as Candy Crush Diablo at the time. But it was primarily the tone deaf aspect of the announcement… gather all your PC and console fans in a big room and tell them you’re launching a mobile game… that struck me. How do you get that so wrong? The phrase “Don’t you guys have phones?” will live on for a decade or more due to that event.
And, the other thing I have harped on about Diablo Immortal was its long development time. They had a playable demo version at BlizzCon 2018. Here we are in 2022 and we’re just now getting a release date. Diablo Immortal will finally launch on June 2, 2022. How does this take so long?
As it turns out, Blizzard seemed to get it that their core player base was not on mobile, so they ported Diablo Immortal so we could play it on PC as well.
That is actually a pretty impressive demonstration of the company actually trying to listen and respond to user feedback.
I am not sure I would have delayed the mobile release for too long, and technically PC users are only getting access to the open beta of Diablo Immortal on PC on June 2nd, but getting it at all on PC was completely unexpected for me. (System requirements for phone and PC are up now.)
Pretty exciting stuff in that. But is it enough?
I am going to guess that the Diablo Immortal release date, with PC only in open beta, is primarily in place to shore up expected ongoing declining numbers for Blizzard. They need people to get in and spend on that cash shop.
After that, though, 2022 is looking light. Wrath of the Lich King Classic could easily be a Q3 2022 launch, which would carry the company another quarter, but I am not really feeling like WoW Dragonflight is going to make Q4 2022, which would make for another light holiday season. And, as I noted above, WoW is what makes or breaks Blizzard. They need players subscribed.
There we go.
I will say that at least Activision Blizzard knows how to mitigate bad news. They hit us with the bad news in the earnings announcement, then turned around and gave us the Diablo Immortal announcement with the good news about it being available on PC. Going through the gaming news headlines, there are bland entries about financials and excited ones about the ship date, PC compatibility, cross platform play, and all of that. Diablo Immortal on PC will dominate the news cycle compared to the financials.
They did not, pulling a random example out of the air, give us a bunch of bad news on a Friday afternoon and then opt to let it fester for two weeks with a vague promise of good news to come.
You may not like Activision Blizzard, but they know what they are doing in many regards… though that is sometimes the problem as well.