Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Activision Blizzard, Inc. (ATVI), Electronic Arts Inc. (EA): Why the World of Warcraft Doomsayers Are Wrong

Activision Blizzard, Inc. (NASDAQ:ATVI) announced in late July that its flagship MMO, World of Warcraft, had dropped another 600,000 players, bringing its current player base to 7.7 million.

Activision Blizzard, Inc. (NASDAQ:ATVI)To be fair, many industry watchers have been saying for months that World of Warcraft’s subscription model is not sustainable in the new era of free-to-play games, and that the company is going to continue to experience a sharp decline in revenue as WoW ages.

So when Activision Blizzard, Inc. (NASDAQ:ATVI) announced the drop in its second-quarter results, it really just brought on more of the same tongue-clucking. But what a lot of the forum trolls didn’t seem to notice as they prepared Blizzard’s tombstone is that the company has already begun a shift in its business model. Blizzard is already well on its way to ensuring that World of Warcraft continues padding revenue to Activision Blizzard, Inc. (NASDAQ:ATVI)’s bottom line for many years to come, potentially with or without subscribers.

A toe in the water

What some of World of Warcraft’s detractors have failed to realize as they extol the virtues of the free-to-play business model is that Activision Blizzard, Inc. (NASDAQ:ATVI) has been laying the groundwork of a free-to-play game in World of Warcraft for years.

The company first waded into the micro-transaction pool in late 2009 with the launch of a store that offered World of Warcraft in-game pets for real world cash. The concept soon expanded and the store now has 21 different in-game pets, mounts, and decorative gear for sale.

Activision Blizzard, Inc. (NASDAQ:ATVI) has a long history of rolling out major changes to its game in baby steps over time. When the company decided that it wanted to make raiding, one of Warcraft’s end game activities more accessible, it didn’t just do it all in one fell swoop. The game went from difficult 40 man raids in the original release to mostly 25 man raids and couple of 10 mans in the first expansion pack. In Wrath of the Lich King, a 10-man version was created for every raid. Finally, the end of Cataclysm saw the introduction of the Raid Finder tool, a version of 25 man raids that was designed to be beaten in one night so that all players could finally see the content.

World of Warcraft isn’t going to go free-to-play tomorrow, Activision Blizzard, Inc. (NASDAQ:ATVI) has said as much. But there’s no doubt looking at the company’s history that it had started positioning itself for that possibility quite some time ago.


It should be no surprise then that as Blizzard has bled WoW subscribers over the last couple of years, the company has just recently taken the next logical step towards a free to play model.

The company is building an in-game micro-transaction store that will allow players to buy the pets, mounts, and vanity gear mentioned earlier without actually having to leave the game.

But this new tool that may at first glance be viewed as a way to offer an extra convenience to players could also be a bit of a Trojan horse.

At the bottom of Blizzard’s announcement was the information that this new in-game store will also offer two never before seen items: a potion that increases a player’s leveling speed by buffing their experience points per kill and an item called Lesser Charms of Good Fortune, which can be converted to get extra opportunities at new gear from raids.

As Blizzard knew these items, especially the charms, might be controversial on its Western servers, the company is testing these items out in just its Asian regions first. Again, Blizzard is preparing players for major change by slowly introducing them to a new idea, one step at a time.

Assuming these items make it over to North American servers at some point, the last chains of the subscription model will be broken. Sure, Blizzard is likely to keep charging a subscription for some time to come.

But if players become used to buying those lesser charms for more chances at getting gear, which is essentially one of the main draws of the end game, the final transition to free-to-play won’t seem nearly as drastic.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.