WoW generates half of Acti-Blizz earnings
by Michael Gray 
Jan 30th 2009 at 8:00PM
The folks over at CVG picked up an interesting note on our Activision-Blizzard overlords' 2008 fiscals. According to Arvind Bhatia, World of Warcraft probably generated 30 cents out of each 60 cents per share of earnings. Put another way, that's about $400 million for shares at the end of the fiscal year ending this past December.
Now, this is kind of the best guess of Mr. Bhatia, who works under the firm Sterne Agee. (And they certainly have a reputation that says we could probably believe them.) But even without Sterne Agee's reputation, a little back-of-the-envelope math shows that his analysis probably bears fruit. We already know that WoW has 11.5 million subscribers. At $15 dollars a pop per month, you're already looking at $172 million each month. But we know that a lot of folks have discount plans, and the charge isn't the same across the globe. I can easily believe a $400 million yearly earning from subscriptions, and am actually surprised it's not higher.
Of course, Bhatia has recently lowered some of his other estimates for ATVI, and warns that the consensus estimates predicting $5.2 billion in revenue are probably too high. Nonetheless, at the end of the day, this does say that World of Warcraft is doing just fine. We can feel free to threaten to quit over the latest nerf, the lights're going to stay on while we're out the door.
Filed under: Analysis / Opinion, Blizzard, News items
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Reader Comments (Page 1 of 1)
Keith Jan 30th 2009 8:11PM
Don't be surprised that it's only $400m. "Earnings" in this context is post-tax profits, not revenues.
Aykwa Jan 31st 2009 12:17PM
Exactly. Earnings as reported is the final profits made by a company after they pay their costs, taxes, etc. Blizz CERTAINLY has many more revenue streams than we could probably come up with. Besides subscriptions and the sales of the actual game, they get revenue from character transfers/renames, strategic and marketing partnerships, licensing agreements, etc. They also certainly have many more costs than most of us could ever realize. In the end, the estimate of $400 million a year in profits is $33 million a month of net gains. If we really want to look at that in terms of subscribers, than they average $3 a month of net profits from each of their subscribers.
vexis58 Jan 30th 2009 8:47PM
Not only monthly subscriptions, but a very large percentage of those 11.5 million people spent an extra $40 on the expansion in 2008. Some people haven't bought it yet, but a lot of people bought the collector's edition and spent more.
The Claw Jan 30th 2009 8:59PM
I expect random idiots on forums to go "oh 11.5 million subscribers x $15 a month revenue = $172 million," but it's pathetic and embarrassing that WoW Insider would make the same mistake. 5-6 million of those subscribers are in Asia where they don't use the same monthly subscription payment plan (and pay a lot less). You even say that you know the charge isn't the same worldwide - so why did you print that number??
If I recall correctly, Vivendi's last annual report (prior to the Activision deal) listed something like $900 million for Blizzard, which would be $75 million per month.
R.K. Jan 31st 2009 12:52AM
@The Claw
the $172m calculation is based on monthly. The $400m earning is yearly. $172m monthly * 12months > $400m / year. The author actually DID take into account that some part of the world didn't pay that much:
"But we know that a lot of folks have discount plans, and the charge isn't the same across the globe. I can easily believe a $400 million yearly earning from subscriptions, and am actually surprised it's not higher."
The Claw Jan 31st 2009 7:05AM
The point is that the $172 million figure should never have been mentioned, because multiplying the 11.5 million worldwide subscribers by the $15/month US subscription fee is completely meaningless. Completely. You might as well multiply the number of bytes in WoW.exe by your shoe size and call that their monthly revenue.
Teut Jan 31st 2009 1:13AM
Also take into consideration that half of the subscribers outside Asia are in europe, paying in Euro which is more $ due to the exchange rate.
Add the extra services like server transfers, character redesign, and the client sales (which is still in th etop 10) then you know that Blizz makes more than a Billion US$ per year just with WoW. Subtract costs from that (development, hosting, bandwidth, admin, development of the other games) and you come to the figure mentioned.
blkmasta55555 Jan 31st 2009 4:00AM
"We can feel free to threaten to quit over the latest nerf, the lights're going to stay on while we're out the door."
Wouldn't dissuade or stop me if I wanted to quit to make a point. The lights may still be on, but theyd be on a slightly lower wattage.
THJ Jan 31st 2009 11:49AM
Yeah, from 1,000,000,000,000 watts down to 999,999,999,999.9999 watts.
FantomRedux Jan 31st 2009 2:39PM
actually it would be down to 999,999,999,999, not 999,999,999,999,9999. l2count nabcayk
Jerome E. Jan 31st 2009 6:23PM
There's a lot wrong with this article.
Earnings do not equal revenue. If I buy a pair of shoes for $8 and sell it to you for $10, my revenue is $10 and my earnings are $2.
Maybe the author understands this simple distinction, but it's confusing in the post. And as The Claw pointed out, using 11.5 mil people x $15 is flat-out arbitrary, even if all you are talking about is revenue (instead of earnings). Might as well just multiply $15 x 287 million people and say, "yeah, I could see $400 mil in earnings."
I don't pretend to understand Blizzard's revenue model for WoW outside of the US and Europe, but neither should the author. If you don't understand it, don't touch it. Start by basing it off Blizzard's publicly stated US and EU subscriber base numbers and infer from there. And then say something like "but that's revenue -- remember, blizz needs to pay their employees and for data centers and marketing, etc."
Bleys Feb 1st 2009 2:47AM
I'm surprised that if Blizzard really is doing that well, why didn't they put more people on developing WoW and why did they release such a half-baked expansion.