Activision Blizzard boasts ‘record quarter, record year’

With revenues and net bookings up, Activision Blizzard is riding high going into 2018. CEO Bobby Kotick introduced the Q4 2017 report by saying that it was “a record quarter to cap off a record year for Activision Blizzard.”

The studio’s net revenues shot up 6% to $7.02 billion and its revenues were up 1%, bringing in $2.04 billion during the quarter. The company’s stock price took a dip that it attributes to the Tax Cuts and Jobs Act, however. More than $4 billion of that net revenue came from in-game microtransactions, half of which came from the company’s PC and console titles.

Destiny 2 and Overwatch did its part to push earnings, with the former being the second-highest-grossing console game for 2017 in North America. Overwatch has witnessed “higher engagement” since its Overwatch League began. And while Blizzard continues to not report on the population of any given game, the studio said that it had 40 million monthly active users during the quarter.

The report did contain a slightly ominous tone, as the company said that PC and console business was down for the year 4% and 3%, respectively. Growth was seen both in mobile and “ancillary” revenues such as physical merchandise. While Destiny 2 and Call of Duty: WWII did help out, the lack of other major releases during the year might have triggered this decline in earnings.

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Sally Bowls

Yeah! WoW got a question on the conference call

Thanks. This is for Mike. Just wondering, what are your expectations for World of Warcraft: Battle for Azeroth in terms of the size, engagement, or any other innovation in the game for this expansion?

Mike Morhaime — Chief Executive Officer, Blizzard

Thanks for the question. So, at Blizzard, we always get excited about new launches. And we, in addition to our players, are very excited about Battle for Azeroth’s features, which include new Allied Races, to give players even more character customization options. Players who preordered the expansion have been enjoying early access to some of the Allied Races already, and that has helped drive early preorders. We’re very pleased with the results so far.

Battle for Azeroth also includes two huge continents for players to explore, as well as some new game play modes. Warfronts is a new cooperative mode where players will band together in massive battles inspired by Warcraft’s RTS roots. And the Island Expeditions mode will include randomized elements for small groups to enjoy with great replay ability which is very important in the game like World of Warcraft. Content always drives engagement. So, just like we did with Legion, we are planning a steady stream of content after launch to maintain engagement.

As for what’s ahead in 2018 with Battle for Azeroth, we’re looking forward to sharing more in the months to come and releasing expansion this summer. There’s a ton of buzz right now in the community and at Blizzard. The team is very excited about this expansion.

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Sally Bowls

Of course, if you are already wearing your 2019 tin-foil hats, you might think this applies to WoW, at least in China.

But the second opportunity is to take our very successful PC and console franchises and extend them to mobile. And we think this is the time to do it and it’s an exciting opportunity for few reasons. First, mobile gaming is of course now very much at scale, large and growing with billions of people around the world who essentially have a mini console or PC in a pocket. And kind of the second reason that the technology we feel has advanced to a point where we feel there is a mobile platform now that can fulfill the requirements of our core IP.

There is also for us, we think, a really important opportunity in Asia where we already have some of the most successful non-mobile franchises. And as you know, many of the top mobile games there now are based on existing console or PC IP. That was their roots in console and PC and they moved to mobile. And we think there is an opportunity for us as well over time to explore our IP on mobile in that region.

We obviously want to get this right, we want to do it well at super high quality for our players and audiences who matter a great deal to us. So, it takes the investment and time. But we do plan to see some early results there this year from our mobile investments and we expect more meaningful impact in 2019 and beyond. So, we’re working hard in the pipeline, and we will have more news to share down the road.

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Armsbend

Maybe Blizzard can make mobile not shitty.

Thanks for making both of these posts.

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Rumm

It would have to be a truly revolutionary game with a completely new mould for it to not suck, IMO. The issue with mobile is the controls – touch screens suck balls for anything past point and click.

I see this as Kotick with a shadowy hand pulling the strings from above. There’s quick, easy money in mobile, and Blizzard is a household name that all but guarantees a certain amount of exposure. I truly don’t think that I could ever be impressed by a mobile game by nature of the platform itself, and I believe that Blizzard being relegated to develop for mobile is a waste of talent and resources.

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Armsbend

If anyone can make a mobile game not suck it’s them. I don’t play HS anymore but when I did it was the least suck mobile out there. They never go in half-ass (minus the SC2/Diablo 3 release post-merger era). I’ll give them the benefit of the doubt until they prove me wrong.

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Sally Bowls

Years ago, Tobold blogged that Blizzard games were [more] popular because they were designed to be. I.e., it seemed that Everquest (or LoL or MTG) devs knew what the game should be and Blizzard was more focused on what the customers wanted. It turned out it was not waiting on a boat for 20 minutes.

So Blizzard coming to the party late, with a customer-driven, high-quality offering has a chance to be successful. I hope.

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Sally Bowls

I doubt any of the old school players will be impressed with mobile.
OTOH, there are hundreds of millions of mobile players. Ten Cent’s mobile MOBA has 100M MAU. But mobile is bigger than PC and growing faster than PC so obviously, they want to invest in it. But I don’t think they were planning on the old gamers coming along as much as going after the new and larger market.

Mobile is the classic example of why it is so important for the gaming companies to not listen to their customers; they would miss out on new markets.

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Koshelkin

I think Blizzard should split from Activision. I’d like to see how they do.

Xijit
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Xijit

Time will tell if Destiny 2 stays up there in the next quarter.

deekay_plus
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deekay_plus

doubtful. and i don’t think it’s so much because of the revenue qq trending hashtag but because there’s just not alot of variety to the content to keep people around, plus the way the progression works and “feels”.

there a much more interesting rewarding and varied shooter rpg loot grinders that have more rpg and loot in them on top of having a much better variety in activitis and legit open world feeling maps to crawl around.

which the last time i played before uninstalling we were doing weekly pub grind a few days after the reset and we were literally the only people doing it in our instance that day.

Bannex
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Bannex

The lengths kids go to try to extrapolate their wish that wow is dying is simply hilarious.

Keep trying! Eventually, you’ll be right but not anytime soon.

WoW is dead…. ROFL.

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Michael18

Has anyone heard how HotS is doing, lately?

In the recent articles about dying MOBAs it was always mentioned as the third game that might survive (after LOL, DOTA2), which surprised me because I thought it was believed to have stayed far behind expectations.

deekay_plus
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deekay_plus

it was along with sc2 and wow arena one of the blizz games that blizz had pushed for esports in ass backward ways, and somewhat suffered for it. but seems relatively popular and healthy. tho the big events this past year aren’t as good as the previous year’s continues to get new maps and heroes and seasonal events and whatnot.

i think it’s probably healthier in terms of people playing than sc2 is these days, but then it’s alot more accessible and generally better interfacing in the lobbies and menus than sc2 is/was.

if anything i’m more surprised that people think smite is competing with HOTS for 3rd place in the genre. but after giving it a go one night i think it’s hot garbage with all of hi rez’s baggage and a now super shitty revenue model iirc.

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Jack Pipsam

It was declining, had a bump from their 2.0 thing and then started declining again.

It’s not near death and I think Blizzard will keep it tracking along for a long time, but it wasn’t the huge hit they were hoping for.

I personally got annoyed by the Overwatchfication of the game. But updates still happen on a semi-regular basis, so I think for its own dedicated player-base it’s going along fine enough.

deekay_plus
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deekay_plus

eh it has lots of heroes and inspired maps from the other blizz games, so adding a catchign up ow heroes and maps makes sense.

which afaict the last few heroes have been from other games at least? tho i think the last map was vaguely overwatch influenced (but also completley unlike anything i’m aware of in overwatch aside from maybe aesthtic inspiration and the CGI trailer >>)

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Jack Pipsam

I meant more the 2.0 brought in loot-boxes, sprays and a more Overwatch influenced UI.

Sure I find the mechanics of their Heroes annoying in the game, but I meant more the influences they took.

deekay_plus
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deekay_plus

ahh ye, while i welcomed being able to get cool custom announcers and all that other shit it’s also annoying that i have to gamble for them or the meagre amounts of 2ndary currency that comes from lootboxes to get the ones i actually want.

that being said the odds of getting stuff you want or at least stuff for heroes one plays at all doesn’t seem too bad compared to some other games from other companies >>

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Sally Bowls

It depends on who gets to define those expectations and what is successful.
It is certainly not threatening LoL or DOTA. OTOH, we do not know what Blizzard’s expectations were, it may be outperforming those. I doubt a standalone HotS would be successful. But Blizzard gets to leverage other IP; their promotion costs are less since they can tell their 40M MAU about it. Because of Overwatch League and the other Bliz eSports, they can also do some eSports events that a standalone game could not justify,

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peor togs

So how is King doing for them?

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Despair

Terrible, down from 550mil players in 2014 to 290mil in a recent report (nearly half the playerbase gone since the acquisition). By this rate, Activision Blizzard will need over 15yrs to make a return on their investment.

It’s still bringing in a ton of money though, in fact more than Blizzard. However Activision is bringing in a lot more than both of them combined, and I have to wonder how long will they tolerate that.

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Sally Bowls

What Blizz said about King was

King was the biggest contributor to our record year of in-game net bookings. King continues to have two of the top ten grossing games on US iOS and Android app stores, a level of performance they have delivered for over four years now. For the first time, King actually held both the number one and the number two spots at same time with Candy Crush Saga and Candy Crush Soda Saga, respectively, demonstrating their remarkable durability in the Candy Crush franchise. Overall, King had an incredible year in 2017, delivering not only four straight quarters of growth in consumer spend on Candy Crush, but also a new mobile net bookings record with their biggest year, their best quarter in Q3, and their best week ever in Q4.
Finally, we continue to make progress on our companywide mobile pipeline. We are hard at work on initiatives across a number of our franchises. We plan to see some early results later this year, and for the bulk of our new mobile opportunities to be driving growth in 2019 and beyond.

King had an outstanding year with revenue and operating income up 7% and 12%, respectively, on a pro forma basis that includes the 2016 pre-acquisition period for King. This is a major accomplishment.

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MesaSage

Yes, their stock dropped – because Trump. LOL. Firm grasp of global economics right there, Blizz.

deekay_plus
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deekay_plus

i mean threatening millions of american jobs and trillions in corporate revenues over nafta week after week is gonna have some effect on wall street. idk how much video games would be hurt by killing nafta in the way he randomly shower thoughts drunk tweets about on teh regular btu seems the market is reacting in part to this paradigm.

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Armsbend

Until last week the stock market was on auto pilot into the upper stratospehere of price highs. Everyone else had no problem just cruising up, day after day.

deekay_plus
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deekay_plus

eh there ‘s been clear signs of incoming volatility for many reasons for the past year plus.

my buddy that got into investing recently is super happy about it so he can buy low lol.

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Armsbend

I didn’t understand how a corporate tax cut could be attributed to a stock price decline. Like seriously, what is the reasoning behind this?

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Sally Bowls

I am not an expert, but I am assuming it was because the recent law was not a tax cut, it was merely a tax rate cut. Previously, corporations who made money in Europe did not bring the money back to the US because the US corporate rate was higher than Europe. And thus paid 0% of those profits to the US. But now that overseas money is being taxed. So the corps are paying taxes on more revenue and their tax bill is going up. I recall a number of corps announced after the “tax cut” how much their taxes were going to increase.

with a loss per share of $0.77. However, that entire loss and then some was attributed to charges related to the recently passed Tax Cuts and Jobs Act. Without the impact of tax-related charges, the company said earnings per share for the quarter would have been $0.27.

So the “tax cut” cost ATVI $1.04 per share

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Armsbend

Thanks Sally!

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Brother Maynard

It’s like the cost of a general amnesty for criminals.
– Hey, Gordon, how much did it cost you to launder your past profits?
– Just 77 cents per share, could be worse!

For years they (and countless others) were declaring in Europe that all their international income goes back to the US, so they can’t be taxed and in the US they said all the international income was made through their EU office, so they can’t pay the US.

Now they legalise their black deals by jumping on what is basically a tax amnesty offer in the US and act like everything is dandy. Well, at least Apple got a part of the bill for the party – hopefully more will follow.

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Sally Bowls

I thought it was mostly two EU member states who were facilitating the corporations paying low/no taxes and the US was not really involved in that.

https://www.investopedia.com/terms/d/double-irish-with-a-dutch-sandwich.asp

https://en.wikipedia.org/wiki/Double_Irish_arrangement

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Brother Maynard

It was more than two – Ireland and the Netherlands were probably the most famous for it, but it involved many others (Cyprus and Luxembourg are also classic examples of making secret sweetheart deals). Corporations loved it and encouraged it, obviously, leading to a tax dumping race.

But in addition to the special regime awarded to them, they also often channeled their profits through specially set up stateless entities and then declared on each side of the Atlantic that their taxes are due on the opposite side.

When you add the two methods, you end up paying virtually no taxes at all. The famous example is Facebook, which in 2014 paid 4327 pounds in the UK taxes. Or Apple, with their effective tax rate of 0.005%.

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Schmidt.Capela

40 million active users is down both from the previous quarter (42M) and the previous year (41M). And with Heartstone and Overwatch singled out as strong performers in the report, the fall likely happened in Blizzard’s other online games (World of Warcraft, Heroes of the Storm, Diablo III, StarCraft II).

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Zora

Blizzard’s other online games (World of Warcraft, Heroes of the Storm, Diablo III, StarCraft II).

It just occurred to me how out of place diablo and online games feel in the same sentence, then someone pointed out to me that if you force an “online” component in your every title it makes it just so much easier to count beans and beef up the total headcounts for the global partecipation metrics.

Subtle, very subtle…

deekay_plus
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deekay_plus

eh diablo was an online game before online gaming was mainstream in the hobby of video games.

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Sally Bowls

Yeah but there are two issues that are far less subtle:
1) the important thing is recurring revenue and that is so much easier to do as online
2) Piracy is harder with an online game and the majority of SPG are stolen

I think being able to bump MAUs is welcome but a side benefit of the main motivations.