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Archive for November, 2009

Activision Blizzard (ATVI) update #8—Chinese bureaucrats in WoW fight

Posted by intelledgement on Sun, 08 Nov 09

Some light was shed last week on the long-standing delays suffered by licensees of our game publishing company, Activision Blizzard (ATVI) in China with respect to obtaining approval for their massively multiplayer online role-playing game (MMORPG), World of Warcraft (WoW) and various expansions thereto. Apparently, the delays cannot be ascribed to foot dragging on the part of the former licensee, The9 (TCTY), who were canned by Blizzard earlier this year, nor are they reflections of political or trade issues between the USA and China, as some have speculated. According to an article in Friday’s New York Times, the problems stem from a dispute between two Chinese government agencies over who has regulatory control of the huge Chinese online gaming market.

WoW is one of the top ten games MMORPG in China—an estimated 50 million mainlanders are active MMORPG participants—and the only one not published by an Asian-based gaming company (two others are South Korean and the rest are Chinese). The company provides no breakdown, but of the 11.5 million WoW players worldwide,about 4 million are believed to be mainland Chinese.

The first Chinese government agency that Blizzard dealt with—originally from 2003 through The9 and then since 2008 through their current exclusive licensee, NetEase (NTSE)—is the Ministry of Culture, and they have been reasonably accommodating. But for the last couple of years, the General Administration of Press and Publication (GAPP) has required The9 and now NetEase to gain approval of WoW publications—even requiring NetEase to make changes to things that had been approved for years under The9’s aegis in order to gain the goahead to relaunch the game. After months of delays, NetEase finally got the OK in September, but then on Monday, GAPP demanded that NetEase stop accepting new subscriptions and stop collecting fees on pain of losing their access to the internet.

How this will all get resolved is unclear, but it appears in general as if the GAPP is tasked with approving online games prior to publication and the Ministry of Culture with policing them afterwards, which should be good news for Blizzard. In any event, NetEase servers are still operating as of now, and according to the article, the latest GAPP list of “188 companies that it said were running unlicensed, vulgar or overly violent online games” omits NetEase and WoW.

Stay tuned.

Previous ATVI-related posts:

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Activision Blizzard (ATVI) update #7—3Q09 results provide surprize profit

Posted by intelledgement on Thu, 05 Nov 09

A third straight quarter of beating guidance on the top and bottom lines—including a penny/share profit when a loss had been expected—highlighted the 3Q09 results that our game publishing company, Activision Blizzard (ATVI) announced today. Revenues for the quarter amounted to $703 million as compared to guidance of $680 million. The 1¢/share profit handily beat the guidance of a loss of 3¢/share.

CEO Bobby Kotick stated, “Our performance was driven by positive audience response to Activision Publishing’s Guitar Hero 5, Marvel: Ultimate Alliance 2, and the Guitar Hero and Call of Duty franchises, as well as Blizzard Entertainment’s World of Warcraft. Year to date through September 30, the Guitar Hero franchise was the #1 best-selling third-party franchise in North America and Europe. For the month of September, sales of music games in the U.S. increased 72% in dollars year over year, which demonstrates the sustained interest in this new and important game category. During the quarter, we continued to see strong sales for Call of Duty World at War and associated map packs, which year to date have sold more than seven and half million units…. This success is the result of our focus on delivering the highest game quality and the best entertainment experiences possible for our consumers.”

Guidance for the calendar year remains unchanged: revenues of $4.05 billion and 26¢/share. For the fourth quarter, management anticipate revenues of $1.33 billion and a loss of 4¢/share.

Third quarter highlights included:

  • Year-over-year 3Q09 U.S. market share up 3.1 points to 13.3%
  • Year-over-year 3Q09 U.S. and European combined market share up 1.2 points to 12.1%
  • Year-to-date U.S. market share of the music/dance category up 5 points over 2008 to 51%
  • Year-to-date Guitar Hero World Tour #1 best-selling third-party title in North America and in the top ten 3Q09
  • Year-to-date Guitar Hero combined U.S. and European sales for the Xbox 360(TM) and PLAYSTATION(R) 3 increased 20% over 2008
  • 3Q09 Guitar Hero #1 third-party console and handheld franchise in Europe
  • Year-to-date and Call of Duty: World at War #2 best-selling third-party title in North America and in the top ten 3Q09
  • Year-to-date Blizzard Entertainment had three of the top-five bestselling PC games in units in North America and four of the top-10 bestselling PC games in units between North America and Europe combined
  • 18 August—Wolfenstein released
  • 21 August—Cataclysm, the third expansion for WoW, announced at BlizzCon; no release date has been specified by Blizzard but according to company president Mike Morhaime, it is targeted for 2010
  • 1 September—Guitar Hero 5 released
  • 9 September—Cabela’s Outdoor Adventures released, a simulation of big game hunting, freshwater fishing and bird hunting in collaboration with Cabela’s (CAB)
  • 15 September—Marvel: Ultimate Alliance 2 released, a collaboration with Marvel Comics (DIS)
  • 30 September—as of this date, Activision Blizzard had purchased $960 million, or approximately 89 million shares, of common stock at an average price of $10.81, under its stock repurchase program since the program’s inception in November 2008

The news from China continued to be mixed…or maybe “mixed up” would be a better description. Evidently ATVI’s new licensee, NetEase (NTSE), initiated a World of Warcraft (WoW) beta test in mid-July, expecting to be able to effect a full relaunch within a week or two. However, final approval from Chinese authorities was not immediately forthcoming, and after several weeks—keep in mind that back on 7 June, WoW effectively closed down in China when ATVI’s contract with their former WoW licensee, The9 (NCTY) ran out, leaving millions of Chinese WoW games stranded offline—NetEase opened up the free beta to everyone. While expensive, this beat the alternative of having frustrated Chinese WoW “defect” to Taiwanese WoW servers—slow to access from the mainland, and requiring them to start from scratch with a new character—or to another non-Blizzard game altogether. Finally, on 19 September, NetEase relaunched WoW in China, after a hiatus of 15 weeks. And last month, NetEase announced that the long-delayed Wrath of the Lich King update—launched in the rest of the world last November—would be released in China later this month.

But then, just Monday, we received a report that one Chinese agency—the General Administration of Press and Publications (GAPP)—had ordered NetEease to stop collecting subscriptions and signing up new subscribers, accusing them of “illegal” behavior, and threatening to yank the company’s internet access. The GAPP had been reviewing the content of WoW—it is not clear why this review was undertaken, as the content is the same as what had been running in China under The9’s aegis—and possibly there was miscommunication as to whether or not that review had been completed. Or perhaps it is a political thing. Doing business in China is a trial! But never boring…stay tuned.

In 4Q09, ATVI management plan to release:

  • Bakugan Battle Brawlers™
  • Band Hero
  • Call of Duty: Modern Warfare 2
  • DJ Hero
  • Tony Hawk: RIDE

Previous ATVI-related posts:

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