Since I posted last night I've seen a few arguments that the 5% drop is meaningless because revenues are up 27%. What these people are missing is the 5% drop is measured from January 1st to March 31st while the 27% increase in revenue is comparing Q1 2010 vs Q1 2011. The 5% drop is concerning because this is the first time Blizzard has acknowledged that their subscription base has declined. The 27% increase is about what I'd expect considering they have 3 things in Q1 2011 they didn't have in 2010, 1) Cataclysm box purchases at $40 each, 2) a surge in players coming back to the game @ $15/month to experience Cataclysm, and 3) Starcraft 2 sales. The revenue bump of $51mm could be attributed to new box sales alone assuming they sold a little over a million copies of Cataclysm in Q1 (not totally unreasonable considering a 12 million player base). The problem is all three of the things that grew revenue in Q1 are in a decline with no new revenue sources in the near term.
The most interesting comment from their press conference to me is them mentioning the player base leaving and that is typical after a release. Why would they say this if they didn't have to as Blizzard certainly had a great quarter? The reason is investors aren't dumb and for the reasons mentioned above that revenue vs prior is going to have a sharp downturn the rest of the year. They are throwing this out there to hold off investor questions and also so they can point to this again when the Q2, Q3, etc numbers come out. Keep in mind that Starcraft 2 came out in the 3rd quarter of 2010 so there is very little chance that Blizzard will be able to duplicate their performance in that quarter. Cataclysm hit in the 4th quarter so you can bet there will be a lot of pressure to get Diablo out the door by Thanksgiving but I doubt even that will be able to stem the tide if WoW subscriptions continue to decline. The number that keeps banging in my head is that 87% of Blizzard's 2010 profit came from WoW. That means that basically WoW was 87% and Starcraft2 was 13% or put another way ... you need 7 Starcraft 2s to equal WoW. The bottom line is if WoWs subscriptions continue to decline there is no way Blizzard can meet last year's profit even with Diablo.
All this news does is make me a bit sad for the executives at Blizzard because they've always prided themselves on releasing content when it is done but I wonder if investor pressure will allow them that luxury in the future. That's why I ended my previous comment with the line that Blizzard and Activision's relationship should be interesting to watch in the next year. If Diablo is released in December as a buggy mess that gets patched to playability in 2012 we will know that the investors are now running the release schedule and that is only bad news for fans of Blizzard games.
*** I do have an idea of where I think they are headed to stem the tide but I will leave that for Part III.
The most interesting comment from their press conference to me is them mentioning the player base leaving and that is typical after a release. Why would they say this if they didn't have to as Blizzard certainly had a great quarter? The reason is investors aren't dumb and for the reasons mentioned above that revenue vs prior is going to have a sharp downturn the rest of the year. They are throwing this out there to hold off investor questions and also so they can point to this again when the Q2, Q3, etc numbers come out. Keep in mind that Starcraft 2 came out in the 3rd quarter of 2010 so there is very little chance that Blizzard will be able to duplicate their performance in that quarter. Cataclysm hit in the 4th quarter so you can bet there will be a lot of pressure to get Diablo out the door by Thanksgiving but I doubt even that will be able to stem the tide if WoW subscriptions continue to decline. The number that keeps banging in my head is that 87% of Blizzard's 2010 profit came from WoW. That means that basically WoW was 87% and Starcraft2 was 13% or put another way ... you need 7 Starcraft 2s to equal WoW. The bottom line is if WoWs subscriptions continue to decline there is no way Blizzard can meet last year's profit even with Diablo.
All this news does is make me a bit sad for the executives at Blizzard because they've always prided themselves on releasing content when it is done but I wonder if investor pressure will allow them that luxury in the future. That's why I ended my previous comment with the line that Blizzard and Activision's relationship should be interesting to watch in the next year. If Diablo is released in December as a buggy mess that gets patched to playability in 2012 we will know that the investors are now running the release schedule and that is only bad news for fans of Blizzard games.
*** I do have an idea of where I think they are headed to stem the tide but I will leave that for Part III.
Posts
1 Comment to "Blizzard playerbase drops by 5% - Part II"