World of Warcraft

In the universe of massively multiplayer online games (“MMOGs”), none come much bigger than World of Warcraft.

Such is the significance of World of Warcraft (“WoW”) in the MMOG space that at its height it accounted for almost 60% of all western consumer spending in the MMOG market.  And for its creator, Activision Blizzard, Wow has generated over $2.2bn in gaming subscriptions since 2005.

For a game that has been around for more than a decade, the focus has changed from growth to focusing on retention, slowing the so called “churn-rate” – the rate at which new and existing customers cancel their subscriptions.  And whilst some churn is inevitable it’s the scale of subscribers leaving, some 14% (1.3m) between January and March of this year, that has alarmed shareholders, and had them equally looking for the door.

The number of players at WoW has now fallen from its height in 2010 of around 12m to just over 8m today.  And Activision Blizzard CEO Bobby Kotick expects the decline to continue.  Shares in the company fell 5% on the news, and are unlikely to be marching north any time soon.

But what does this mean for Activision Blizzard; is this fall in players a huge concern, or a blip that can be ignored?  By any standard loosing over 30% of your players in two years is a cause for concern.  Those to a degree, as Zynga and other social gaming companies have more recently found, as a game gets aged you need to have other newer titles for players for players to switch over to.  There’s almost certainly some players who will have switched from WoW to other Activision Blizzard titles, but many will have simply gone elsewhere. And of those that did switch to other Activision Blizzard titles how many will have signed up for new monthly subscriptions?  Almost certainly very few.

And it’s the Zynga style business model, the free-to-play with micro-transactions, that appears to lie at the root of Activision Blizzard’s woes.  There are today very few MMOs that work as a viable business by charging monthly subscriptions – EVE Online is perhaps the one exception to the rule.

And these kind of business challenges are of course not confined to just WoW.  They’ll impact on Activision Blizzard’s other titles as well.  The company was also hit by an embarrassing bug in a Diablo III update earlier this week as players discovered that by cancelling in-game “gold” auctions, they could free of charge generate more – with one player said to have amassed a vault of some 371 trillion in-game gold using this bug-exploit.  Although the auction has been closed it’s certainly not been a good week for Activision Blizzard or its investor.

James Barnes,

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