Loss of World Of Warcraft Subscribers Causes Activision Stock Price to Fall

Activision, the world’s largest gaming company, suffered a 5.2% drop in the value of its stock on Thursday, August 2, 2012, after the company announced that its popular MMO, World Of Warcraft (WOW) lost a million subscribers. The stock, which closed at $11.77, down 5 cents, fell even further to $11.16 in after-hours trading. Michael Morhaime, president of Activision owned Blizzard Entertainment, the publisher of WOW, attributed the loss of subscribers to a decline in Asian players. The Chinese government, in particular, has been passing regulations to limit how many hours a day its citizens can spend playing online games.

Morhaime said that subscribers fell to 9.1 million for the quarter ending on June 30, 2012; down from 10.2 million at the end of the first quarter. World Of Warcraft reached its pinnacle of success with 12 million subscribers in October, 2010. Morhaime also linked the decline in WOW subscribers to the overwhelming success of Blizzard’s PC based action role playing game, Diablo III, which has sold 10 million units since its release on May 15, 2012.

Blizzard expects the WOW subscriber base to bounce back when the highly anticipated Mists Of Pandaria expansion is released on September 25, 2012. Company executives are confident about the appeal of World Of Warcraft, according to Activision chief executive, Bobby Kotick, who said he was still “bullish” on WOW. “It’s a unique experience,” Kotick said. “The numbers that shift up and down in terms of subscribers are not reflective of the franchise. The franchise is enduring, and it has a unique audience.”

The loss of WOW subscribers was the only sour note in an otherwise positive second quarter for Activision. The company surprised Wall Street analysts by posting $185 million in net income on $1.08 billion in revenue for the quarter ending June 30, 2012. Although the figures were somewhat lower than lasts year’s $335 million in net income and $1.15 billion in revenue for the same quarter, the results were higher than the analysts expected.

It remains to be seen how much of the decline in subscriptions can be attributed to the trend towards the free to play model that is becoming more prevalent in online gaming. Recently, several prominent MMOS (Massively Multiplayer Online Games) have embraced free to play including Lord Of The Rings Online And Aion. On August 1, 2012, Electronic Arts broke the expected news that its struggling MMORPG, Star Wars: The Old Republic, would offer a free to play option in the Fall of 2012. The long awaited Guild Wars 2, from Korean gaming giant NCsoft, will be free to play when it debuts on August 28,2012, although there will be a one time charge for the game’s software.

Despite the all the recent changes in the payment models for online gaming and the loss of WOW subscribers, Activision remains confident that their portfolio of single player games and online games will continue to attract record breaking numbers of gamers and produce significant revenues for the company.