A few years ago, Blizzard Entertainment Inc. Chief Executive Michael Morhaime said he had one of those moments that told him “World of Warcraft” was going to be the world’s most popular online video game.
Some 5,000 fans showed up at a midnight launch at Fry’s Electronics store in Fountain Valley to be the first to buy the game, which now is played by some 12 million people around the world.
“At that early point, we didn’t even know if people knew about it,” Morhaime said.
When Morhaime and a few other Blizzard workers exited the freeway, “There was a ton of traffic and all of the parking lots nearby were full,” he said.
“There were waves of people walking toward Fry’s and we were wondering if something else was going on that night nearby,” Morhaime said.
Thousands of fans waited in a line that wrapped around Fry’s twice, around the perimeter of the parking lot and down the street, Morhaime said.
Not surprisingly, Fry’s ran out of games to sell.
“We had to go back to the office and sell the employees’ boxes of games,” he said. “We didn’t have any idea just how popular it would be.”
The rest, they say, is history.
The Business Journal picked Morhaime as our runner-up for businessperson of the year because Irvine-based Blizzard is one of the few local companies that can say it had a banner year.
Big 2008
The company is growing at a rapid clip, hiring locally and abroad, and it added more than 1 million subscribers to its ranks of “Warcraft” players during 2008.
2008 was “a pretty amazing year for Blizzard,” Morhaime said.
For 2007, Morhaime also earned the runner-up nod for our businessperson of the year by building Blizzard into a superstar company that allowed its French parent, Vivendi SA, to go after Santa Monica’s Activision Inc.
The combined company, dubbed Activision Blizzard Inc., was formed in a complex deal by Vivendi and valued at about $19 billion.
The deal was first announced in late 2007 and was cleared by the European Commission after regulatory hurdles in April.
A final vote by shareholders happened last summer.
Vivendi ended up with a 68% stake in Activision Blizzard.
The move made Activision Blizzard the biggest video game developer with yearly sales of $4 billion.
The Business Journal estimates that Blizzard saw 2008 sales of $1 billion to $1.5 billion. Earlier this year it nudged out Irvine business software maker Sage Software Inc. for the title of Orange County’s biggest software company in terms of sales.
In 2008 Blizzard was a key growth driver for the combined Activision Blizzard.
This is partly because Vivendi and Santa Monica-based Activision have given Blizzard a lot of autonomy.
“We’ve been doing our best to make sure that things really don’t change here,” Morhaime said. “We want to stay focused on making high-quality games.”
The combined company does share some resources, including administrative functions and reporting.
“They are very hands-off with what we do day to day, but they are, of course, very interested in what our plans for the future are,” Morhaime said.
Blizzard is used to being part of a bigger company.
It was bought by New Jersey’s Cendant Corp. in 1996.
In 1998, Cendant sold its games business to Havas SA, which at one point was France’s largest game maker. Vivendi bought Havas later that year.
“We’ve had a lot of experience running Blizzard as a division of a public company,” Morhaime said. “The big difference here is we are one step closer to the public markets. It requires that we spend more time than we used to in educating analysts and investors about Blizzard, where we used to be able to not deal with that side of the business.”
Understandably, the higher-ups at Activision are likely reluctant to mess with the special sauce that makes Blizzard a blockbuster game developer and marketer.
“We’ve gotten a lot of support from Activision and there is a lot of excitement,” he said.
Biggest Games
Blizzard and Activision can claim two of the biggest video games out there this year.
Activision’s “Guitar Hero World Tour” sold roughly 500,000 copies since its release in late October, a figure that doesn’t include holiday tallies.
“Guitar Hero III,” released in fall 2007, sold more than 9 million copies in the U.S., according to market tracker NPD Group Inc.
Blizzard’s latest installment, “World of Warcraft: Wrath of the Lich King,” claimed a slew of video game sales records.
Within a day of its release in November, “Wrath of the Lich King” sold nearly 3 million copies, making it the fastest-selling PC game of all time.
It went on to sell more than 4 million copies in its first month, setting a new record for monthly PC game sales. Both sales records were previously held by another Blizzard hit, “World of Warcraft: the Burning Crusade.”
The “World of Warcraft” franchise is a cash cow for Vivendi and gives Blizzard some sway in the media company.
“We are not a tiny division of the company anymore,” Morhaime said. “We are now a very meaningful part of it.”
Other Developments
Blizzard had some other milestones this year.
In June, it released “Diablo III,” the newest entry in the “Diablo” role-playing game series.
The company held a worldwide invitational in Paris, where game enthusiasts from all over the world came to play Blizzard’s games.
In October, it hosted more than 15,000 people at the convention center in Anaheim for its annual fan gathering dubbed BlizzCon.
“It’s sort of a thank you to our players,” Morhaime said. “We throw a party and let them hear from developers about our philosophies on game development and design.”
Blizzard’s market seems to show no signs of suffering under the recession.
“We have the advantage of having a subscription-based business and generating lots of recurring revenue,” he said.
Each of the 12 million players of “World of Warcraft” pays $15 a month to play with thousands of others over the Internet.
“A big factor we have going for us is the value of entertainment for the dollar,” Morhaime said.
“World of Warcraft” plays to a rather captive audience.
“It’s a very social game,” he said. “It’s not a solitary experience unless you want it to be. Players are interactive with other real individuals and form real friendships. They come home from work and log in,it’s almost like going to a local pub where everyone knows you.”
Morhaime, 41, grew up in the San Fernando Valley. He has a degree in electrical engineering from University of California, Los Angeles.
In 1990, he moved to OC and landed his first job out of college,writing test software for Lake Forest disk drive maker Western Digital Corp., which then had its headquarters in Irvine.
Morhaime helped start Blizzard in 1991 along with college buddies and fellow developers Allen Adham and Frank Pearce.
