Orange County Business Journal

Blizzard Q2 Sales, Profits Up, WoW Subscriptions Down

Chris Casacchia Friday, August 3, 2012

Irvine-based online game maker Blizzard Entertainment Inc. saw a big subscription drop for its flagship World of Warcraft franchise in the second quarter, but those losses were more than offset by the wildly successful release of Diablo III.

Blizzard, a unit of Santa Monica-based Activision Blizzard Inc., posted revenue of $634 million, up 103% from a year earlier.

The company reported an operating profit of $371 million, up 175% from a year ago.

Blizzard did not release a game last year, which accounts for some of the substantial increases in both sales and profit. The gains ended a nine-month slump in sales and profit.

While Blizzard posted strong earnings, in large part to Diablo III’s record breaking sales totals, the company faces some serious questions on the staying power of its most successful game.

WoW lost 1.1 million subscribers in the June quarter, marking the first time in more than a year than subscriptions dipped below 10 million.

Blizzard finished the first six months of the year with 9.1 million WoW subscribers, which is still the most of any online role playing game.

Online subscription revenue, which includes WoW and Activision’s Call of Duty, fell to $475 million in the June quarter, down 37% from a year ago.

Investors and company watchers are expected to keep a close eye on those figures in the current quarter with the September release of World of Warcraft: Mists of Pandaria, the game’s fourth expansion set.

Blizzard’s customers pay about $40 for WoW and $15 a month to play it online.

Parent Activision’s financial results were driven by strong sales for Diablo III, which has tallied more than 10 million unit sales through July since its May release, smashing PC records along the way.

The company posted an adjusted profit of $22.2 million on $1 billion in revenue, beating Wall Street expectations on both targets.

Activision in the current quarter projects an adjusted profit of $7.7 million on sales of $740 million.

Wall Street analysts forecast an adjusted profit of $13.3 million on $728 million in sales.

Investors may have seized upon the profit target, sending Activision shares down 1.7% in afterhours trading to a market value of about $13.08 billion.