Tuesday, June 14, 2011

Michael's Comment

A few days ago I wrote about Activision|Blizzard's financial situation. Among the commenters was Michael, who disagreed with the quintessence of the post and the other comments. He did so in a well written comment, so check it out.

First, thanks for disagreeing. I honestly think we need more of that.
You are right that bloggers like to criticize, just like everybody. So let me point this one thing out as clearly as I can:

World of Warcraft is a phenomenal game. Many people claim that there's not much innovation. But they are dead wrong. The innovation may not have been obvious and it may not even have been in the game itself. But the company that is Blizzard introduced very innovative business methods and a very satisfying game experience. With breaks, I played it since beta. So, of course, I like it!

Also, if you entered the World of Warcraft today, you would still find a very good game. I don't think it is as good as it could be. And I don't think it is as good as it once was. And I could imagine a different kind of MMORPG that I would like to play much more. But, make no mistake: For many new players WoW is great.

Furthermore, the (roughly) $15 a month you pay for this game are a ridiculously low price on an absolute scale. I've often pointed out that I'd like to play games that required a higher price to be profitable. However, being profitable is really not WoW's problem, so I am alright with the 12.99€ a month Blizzard charges right now in Germany.

You are also correct in that one can not just throw money at WoW and it becomes magically better. It does not. A successful company grows steadily in an 'organic' way. A sudden influx of immense amounts of cash can destroy a company, just as it can destroy persons.

Where I disagree with your comment is that Blizzard couldn't spend more on WoW. You can have different teams working on different zones, quests and raid encounters. They can work in parallel. Sure, you need to make sure that the art style still feels coherent. But this problem is manageable.
Producing much more new content for WoW is possible. Look at how much was added during classic WoW and compare it with the later expansions.

You say
"The number of players who have actually completed all the existing content is very small."
This is correct, of course. But it has nothing to do with the desire for new content. I don't really need to elaborate, do I?

You say
"I have no doubt that Blizzard has weighed the cost of change against the opportunity cost of change, and found that they can fairly easily continue the cash cow as is, until their next MMO is released.".
If that is the case, then why have they redone the entire low leveling experience recently?

Even if milking WoW for cash were Blizzard's strategy right now, I'd say it is very badly executed. Loosing 5% of the player base during a few months, although WotLK just launched in China and Cataclysm just launched in NA/Europe, looks like a problem to me ...

Now, maybe Blizzard is working on a super-patch to hit when SW:TOR is released. But for a company that makes over a billion dollar profit a year with this game, this sounds like a lame excuse for not delivering enough content right now. Keep in mind that WoW was deliberately designed over the years so that it requires new content all the time! And keep in mind what a billion in this business means: Complete development of a AAA game like Rift cost about 50 million dollars!

Last but not least, I don't have so much of a problem with Blizzard not pouring money into WoW, and rather criticize the 2.2 billion dollar shares repurchase program. Many large companies never bought back shares or payed dividends; take Google for example who have over 30 billion in cash right now and wait for an opportunity to invest it. Google is also a good example for how fast a company can grow, if it has the right ambitions.

Looking at how the (relatively) small CCP drives forward the MMORPG genre with Dust 514, I have to blame the industry's giant to have become .. jaded.

The games industry is rapidly growing. Now is the time to invest! To attract the most talented people in the world and have them work on new online games. There's no need to have Zynga suck them all up to produce distractions.


  1. If Blizzard were to spend more money on WoW, where would they put it? Should they create more content right at the top of the pyramid for fully levelled and geared players, an investment that could never attract new subscriptions? If not what could they do now to the earlier parts of the game that would improve the experience of their player base?

    Adding vertical progression layer upon layer must eventually result in a complete fragmentation of the game, where anything new can only target some small segment of the population. Perhaps, the most sensible approach is to keep WoW on life support and use the $billions on it's replacement.

  2. "Many large companies never bought back shares or payed dividends"

    This is true, and the long run track record of companies that never return cash to shareholders is poor. When you invest in a company, you are entitled to ask (as the provider of capital), should the company keep its free cash, or return it to shareholders? If the investors believe the company can reinvest for profit, they will allow it to do so (as they do with google currently, but if you look at the ratings, not Microsoft, and certainly not mature industries like oil or big pharma) If the investors believe the company is better off running for cash and returning money, they are entitled to ask for that.

    Companies that do not wish to be subject to the whims of investors (who can get it wrong, albeit so can management, very often) can simply stay private. Many incredibly successful German companies do so; most of the Mittelstand does. Companies that IPO themselves, or sell themselves to listed companies, have taken the cash, and can't complain if their new owners ask for whatever return on their investment they see fit.

    It's a common myth that large companies "rule the roost". They are pretty much beholden to the stock market and the investment banks, and dance to their tune. Actiblizz is no different.