Blizzard Entertainment, a subsidiary of Activision-Blizzard, is eagerly searching for the next World of Warcraft in order to retain the top spot in the online gaming with iconic titles. The giant game developer and publisher has introduced the most memorable games for the past two decades, but nothing like World of Warcraft series provided a stable revenue to the company’s income sheet every year since the game was introduced in 2004. However, the recent numbers have been in gradual decline from its peak in 2010, although the earning call on last Friday revealed some stability in the number of subscriptions of World of Warcraft.
According to the most recent yearly statement filed in February 22, 2013, World of Warcraft counted for 61 percent of the publisher’s revenue in 2012, compared to 90 percent and 89 percent in 2011 and 2010 respectively. The quarterly statement for the third quarter of 2013 shows that the revenue from Blizzard decline from $414 million in the third quarter of 2012 to $282 million in the third quarter of 2013. The 2012 revenue is due to the release of two of Blizzard’s best selling franchises, while the 2013 did not have comparable releases. The online subscription figures in the same periods show a decline but it is difficult to tell as the number represents all of online subscription features of Activision-Blizzard.
The slight increase of a number of subscriptions for World of Warcraft from the Friday earning call has come as a relief to Blizzard. With the new expansion, World of Warcraft: Warlords of Draenor coming soon, the number of subscription is bound to spike in 2013. The question, however, remains as to how the Irvine-based game developer is preparing itself for the day when World of Warcraft series stops providing a steady revenue stream to its bank account.
The answer seems to lie with Blizzard’s three-headed gaming development plan already in motion, as it is searching hard for a replacement for World of Warcraft. The obvious, simple development plan is to keep introducing expansions to World of Warcraft until the potential cost of developing expansions overshadows the potential revenue. This has worked since World of Warcraft: Burning Crusade in 2007; so there is no reason for Blizzard to suddenly drop this tactic.
The second development plan is to introduce existing Blizzard games to different platforms. Until recently, Blizzard was never able to introduce the successful titles to gaming consoles, although it had released some of the early games to different platforms in its fancy during the 90s. In 2013, the publisher finally introduced Diablo III to PlayStation 3 and Xbox 360 and presented the gaming experience in the console version as different from one in PC version released several months earlier. It also expects to release the special version of Diablo III: Reaper of Soul for PlayStation 4 some time later in 2014, while the PC version will be released in March 25, 2013. It is likely that the company has chosen Diablo over other title games to be released in console platforms because of the suitability of the game packed with action features that usually attract console gamers.
The third aspect is to release free games that heavily relies on micro transactions. Even if these games are free, Blizzard can expect that players will pay for additional features. The publisher has already introduced some of the microtransactions to World of Warcraft but these “items” that players buy do not make them outplay other gamers. With new games such as Hearthstone and Heroes of Storm, Blizzard is clearly taking a new position in the online gaming, as it eyes to make micro transactions as a major revenue source. For example, Riot Games, the developer of League of Legend, generates most of its income from micro transactions. It is reported that Blizzard has earned $213 million in 2013 only through micro transactions for World of Warcraft, which also charges players a monthly fee for playing time. The company is also reported to increase its effort in micro transactions for World of Warcraft with new hiring for new “Micro Transaction Strategy” division.
As a first step toward the revenue source purely based on micro transactions, Blizzard expects Hearthstone, its free-to-play game, to generate a significant revenue purely from the micro transactions. The game is an online card game similar to Dungeons & Dragon, a tabletop role-playing game in which a player with a better set of purchased cards can win. The company intends that players of Hearthstone will buy cards from its online store, which then can be used in the game against other players.
World of Warcraft, along with StarCraft and Diablo, has made Blizzard Entertainment unique in the gaming industry. Competitors, including Electronic Arts, have failed to dethrone Blizzard as the king of massively multiplayer online role-playing game (MMORPG). With the strong financial backing from the parent company Activision-Blizzard and the iconic titles still in the gamers’ hearts, Blizzard is actively searching to cement its position, as it takes multiple approaches to developing the next game that will make it stand among the crowd and generate enough revenue to keep investors happy, as World of Warcraft has done.
By Jonathan JY Jung