Tuesday, June 09, 2009
Wolfshead on the decline of WoW
Wolfshead has a long post in which he charts the decline of World of Warcraft using Alexa.com data on the popularity of the WoW website. Interesting approach, and I do think that a decline in interest in WoW in the USA is certainly possible. But that is all Alexa.com measures. Europe has its own WoW website, so its not included in Wolfshead's charts. And China has again a different website, and is in fact a completely different environment, with a completely different business model.
Wolfshead also charts the Blizzard announcements on subscriber numbers, and points out that it basically flattened out. True again, but on top of that the numbers from Blizzard are getting fuzzier. At the start of World of Warcraft's history the growth in subscriber numbers was an indicator of the growth of Blizzard's revenue. Adding China boosted the numbers quite a bit, but each subscriber to the Chinese version gave Blizzard a lot less revenue per year than an US / Euro subscriber. Then Blizzard stopped saying how many of their 11.6 million subscribers play on which continent, and nowadays the total number of subscribers doesn't tell us much any more. It is thought that more than half of the players are in Asia. But not only do they pay 6 cents per hour instead of $15 per month, but they are also on a different timeline, with expansions coming out much later there. Blizzard switching operator in China from The9 to NetEase, and the resulting lawsuit is further muddying the waters. How well is World of Warcraft doing in China today? We don't know!
But while declining and fuzzy numbers make for good, sensationalist doomsaying, people tend to forget some rather basic facts: According to Activision Blizzard's 12/31/08 annual report, their "MMORPG platform" generated over $1 billion of revenue last year. And if you disregard Asia and various "free" virtual worlds, and just look at subscriber numbers of MMOs with monthly subscription fees in the USA and Europe, World of Warcraft even by the most pessimistic estimates still has 10 times the number of subscribers than the next biggest competitor. Saying that WoW is in decline is like saying that Bill Gates lost a lot of money in the current financial crisis. It's true, but it paints a completely misleading picture of the true finances of Blizzard and Bill Gates.
You don't need to be a financial analyst to forecast that Activision Blizzard's revenue from World of Warcraft will be lower in 2009 than it was in 2008. That is a simple consequence of there not being an expansion this year, and players getting bored of the last expansion over the course of the year. But is Michael Morhaime having sleepless nights because of that? Certainly not, because he has a rather solid backup plan. It looks roughly like this: Release Starcraft 2 in 2009, the next WoW expansion in 2010, Diablo 3 in either 2010 or 2011, and the next Blizzard MMO in 2011 or 2012. Each of these will sell millions, guaranteed. It is not an accident that Blizzard was recently named most bankable game developer.
Whether World of Warcraft's growth is slowing, it is flat, or it started to decline is actually pretty irrelevant. The change is obviously minor, whatever the direction. Yes, World of Warcraft will eventually decline. But it is highly unlikely to crash in a major way. The most likely scenario is a slow decline, with WoW still with us for years to come, serving as a cash cow to finance Blizzard's other developments. The day where World of Warcraft closes its last server is still many, many years in the future.