Between March 31st and June 30th the number of worldwide subscribers to World of Warcraft decreased by 1.5 million to 5.6 million, according to an SEC filing by Activision Blizzard, Inc. With the release of the Warlords of Draenor expansion last November, global subscribers had surpassed 10 million. Since then the MMORPG has lost 4.4 million paid users, and is currently 1.2 million below the 6.8 million tally from June of 2014. Anticipation for Warlords of Draenor brought many users back, which saw the number of subscribers increase to 7.4 million by mid-October last year. World of Warcraft reached its peak subscriber base of 12 million-plus late in 2010 with the arrival of the Cataclysm expansion. Activision Blizzard said that the percentage decline of paid users was much higher in Asia than in Western markets. The firm also pointed out that average revenue per user in the East was lower than in the West. Despite this Activision states that the overall monthly active users increased 35% over the previous year. At the Gamescom trade fair in Cologne, Blizzard announced its sixth expansion, Legion.
Impact: There is a great deal of confusion nowadays over how companies are reporting financials. However, the bottom line under any analysis is that for ATVI, earnings per share (EPS) are showing a nice healthy increase. Clearly much of this is due to the movement to digital models with products like Hearthstone, Heroes of the Storm and Destiny all being new ongoing revenue stream products. Under Non-GAAP analysis, digital revenue accounted for 80% of revenue in the quarter versus 73% in Q2 2014. Even under GAAP analysis digital revenue was 55% in the quarter versus 49% the previous year. Under either method, the conclusion is that based on trailing 12 month revenue, Activision Blizzard digital revenue has gone from about 40% a year ago to about 48% by the end of June.
As for World of Warcraft, a lot has changed since the first time World of Warcraft pushed past the 10 million-subscriber mark late in 2007. That milestone had been reached after a long period of monthly increases in paid player acquisition. The franchise had been playing with that 10 million number ever since. Wrath of the Lich King saw a raise to 11 million in 2008, Cataclysm to 12 million in 2010, Mists of Pandaria back down to 10 million in 2012, and the same figure for Warlords of Draenor last year. The trend now is that the WoW is losing more subscribers more swiftly after each expansion release. Asia does play a large part in this change. Blizzard’s game is no longer the novel heavyweight it once was in China. Chinese game developers have made tremendous strides since World of Warcraft first went to that market in 2005. Chinese computer players are quicker to drop an online game than their Western counterparts, and with so many AAA F2P titles to choose from, WoW no longer has the allure or staying power it once did.
The good news is that new Blizzard products seem to be doing very well without a high-end subscription model. The question is will they have the longevity of a World of Warcraft? Blizzard has never been a prolific developer preferring quality over quantity. As Activision Blizzard goes to a model where they have 70 million registered players engaged on a regular basis that must be engaged and kept track of, it becomes a different challenge than with the 10 million or so World of Warcraft users that were locked in at a premium monthly subscription.