The loss of subscribers continues for World of Warcraft, as was revealed in the Activision earnings call today, dropping down to 10.3 million subscribers from last quarter, a loss of 800,000 subscribers. The trend has not been a good one this year; in Q1 Blizzard reported 11.4 million subscribers, in Q2 they reported 11.1 million, and now the number is 10.3 million. The trend line is not looking good, and added to that Blizzard's revenues for Q3 were not as good as last year.
Blizzard CEO Mike Morhaime did his best to finesse the issue with analysts: “Our revenues for the third quarter of 2011 are down versus last year, which included the record-setting launch of StarCraft 2.” That's a hard act to follow, so it's understandable that Blizzard wasn't able to match last year's performance. Morhaime then proceeded to talk about the elephant in the room: “WoW finished the quarter with 10.3 million active subscribers worldwide, which is down from the previous quarter. While the majority of these declines are coming from the East, WoW continues to be one of the most popular online games in China and remains by far the most popular subscription-based MMO in the world.”
Knowing that there would be questions from analysts about this issue, Morhaime started to talk about how Blizzard was addressing the issue. “We know there are improvements that we can make in game content,” he said, and proceeded to discuss some of the issues affecting the game, such as the fact that the Cataclysm expansion “was consumed quickly compared to our past expansion set Wrath of the Lich King.” Morhaime went on to talk about new things, like the next free content update coming in a few weeks, which will add the dragon Deathwing and a new RaidFinder feature to make it easier for casual players to join a raid.
While interesting, Morhaime's remarks didn't really address the issue of the subscriber losses directly. Analysts zeroed in on that, asking where engagement and subscriber levels for WoW are heading. This was not answered; Morhaime said, “We don't provide forecasts on subscriber levels.” The answer was so flat that COO/CFO Thomas Tippl felt compelled to expand on it, noting that Activision Blizzard's earnings forecasts included that data in their calculations. Of course, other revenue (such as Call of Duty sales) could help cover up for greater than expected losses in WoW subscribers. Left unsaid was any indication of exactly why Chinese subscribers are leaving WoW, though Morhaime did acknowledge that China is more than half of WoW's global subscriber base. A likely explanation is the growth of free-to-play MMOs in China is siphoning away their audience.
Morhaime also announced that a version of WoW localized for Brazil would begin on December 6th, which will likely help WoW's subscriber numbers. Will Q4 show another loss in subscribers, or will the decline finally halt or even turn around? The next earnings call should be very interesting.
