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Blizzard “Resets” Its Next Big MMO: What Does It Mean for Activision Blizzard, Inc. (ATVI)?

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Gamers and investors are still reacting to the recent news that the Blizzard Entertainment branch of Activision Blizzard, Inc. (NASDAQ:ATVI) has moved most of its developers off the company’s long awaited next MMO, codenamed “Titan” onto other projects.

Activision Blizzard, Inc. (NASDAQ:ATVI)

VentureBeat first broke the story that Blizzard recently reassigned as many as 70 of the 100 developers rumored to be working on the company’s next big title, leaving only a core group behind to redesign the game’s main concepts from scratch. Top executives at the company were said to be unhappy with the direction the game was taking and decided to change course. VentureBeat and other outlets reported that Titan, previously expected by some analysts to be revealed in November at the company’s Blizzcon convention in Anaheim, may now not see a public release until 2016 at the earliest.

After a day of speculation across the gaming community, Blizzard released an official response:

“We’ve always had a highly iterative development process, and the unannounced MMO is no exception. We’ve come to a point where we need to make some large design and technology changes to the game. We’re using this opportunity to shift some of our resources to assist with other projects while the core team adapts our technology and tools to accommodate these new changes. Note that we haven’t announced any dates for the MMO.”

Activision Blizzard, Inc. (NASDAQ:ATVI) hit a new 52 week high of $16.11 during early trading the morning of Tuesday, May 28, prior to VentureBeat’s story hitting the Internet late Tuesday afternoon. The stock has trended upward for most of 2013 but shares retracted over the next week, closing at $14.39 by the closing bell on Tuesday, June 4. With the Titan delay officially confirmed, gamers, analysts and investors are now speculating on where Activision Blizzard, Inc. (NASDAQ:ATVI) goes from here.

Blizzard’s cash cow continues decline

This isn’t the first time Blizzard has delayed a highly anticipated game. The company has reset a number of previous high profile games during their development cycle, including the original Starcraft,Warcraft 3 and 2012’s Diablo 3, still the best selling PC game of all time.

The reason the Titan news is giving some greater pause is that the game is expected by both gamers and investors to be Blizzard’s spiritual successor to the extremely successful MMO World of Warcraft, a game that continues to shred subscribers in its 9th year of existence.

Blizzard’s most recent earnings report on May 8 disclosed that its flagship title lost 1.3 million subscribers during its January to March quarter and now has roughly 8.3 million active accounts.

That is a dramatic dip from the nearly 10 million subscriptions the game boasted shortly after the launch of Mists of Pandaria, the game’s latest expansion pack released in September 2012, and is a one-third reduction from the 12 million subscribers the game boasted in 2010 at its peak.

Still, even at 8 million subscribers, the game brings in more than a billion dollars in revenue every year for Activision in subscription fees. But company executives have stated publicly they expect WoW’s decline to continue as it ages. World of Warcraft has been so successful for so long that it’s hard for some investors to imagine what Activision Blizzard, Inc. (NASDAQ:ATVI)’s bottom line will look like when the game is no longer padding the company coffers. Titan is widely viewed as Blizzard’s opportunity to reboot its MMO business in an attempt to duplicate World of Warcraft’s financial and critical success.

With Titan’s rumored delay to 2016, Activision now faces a tough question. How will Activision Blizzard, Inc. (NASDAQ:ATVI)’s revenue be affected over the next two years to three years if WoW continues to hemorrhage subscribers at a time when the company doesn’t have its next big thing ready to pick up the torch?

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