One Gamer’s Perspective On Why World Of Warcraft Is Really Losing Subscribers

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Trefis
ATVI: Activision Blizzard logo
ATVI
Activision Blizzard

Is Activision Blizzard‘s (NASDAQ: ATVI) biggest cash cow, World of Warcraft (WoW), in trouble? If we assess the decline in the number of subscribers in the first two quarters of 2015, it looks like something is seriously wrong, considering the figure dropped by almost 44%. However, the game is also a victim of its own success. Its current subscriber base of 5.6 million gamers, paying a monthly fee of nearly $15, is by no means a small feat. However, it dwarves in comparison to where the franchise was during the launch of The Wrath of The Lich King in 2008. So why is it that the subscriber base spiked after the recent expansion launch (Warlord of Draenor) and fell drastically again? Can the company do something to stabilize the situation? The sudden jump in the subscriber base after the recent expansion launch can be attributed to a lot of veteran players, in our view, returning to the game to check out Blizzard’s promise of novel features and partial return to the original lore, albeit in an alternative timeline. However, it turned out to be a transient phenomenon in an otherwise long-term trajectory of subscriber decline.

Our $29 price estimate for Activision Blizzard’s stock is roughly the same as the current market price.

In this analysis, we put forth the views of an analyst among us who is an expert gamer, as the details of the following comments suggest. Based on this input, we explain why we believe the game is losing subscribers, as follows:

  • When World of Warcraft started in 2004, there were fewer MMORPG (mega multiplyer online role playing games) alternatives than there are today. The sheer growth in the competition, the advent of free-to-play games, and the newer generation spending more time on mobiles, has diluted the power of World of Warcraft’s appeal. In other words, the digital entertainment world has a lot more options than it did a decade ago and, therefore, the company is not able to replace the disconnecting subscribers with newer ones.
  • The real lore/story that hooked a lot of WoW players pretty much ended with the end of its second expansion, The Wrath of the Lich King, which is when the game’s subscriber base peaked. We note for the non-gaming reader that a gripping story is a big part of what attracts MMORPG players. It is not just about the game play and exploration. Since then, Activision Blizzard’s expansions have looked more like ad hoc fillers packaged to look like a natural story progression. In reality, the story had nowhere to go after the fall of The Lich King (the game’s primary antagonist).
  • WoW’s difficulty has reduced continuously since its launch. While this attracted a lot of casual players to the game, it alienated some of the more serious players. The character progression became easier and this was exciting for a lot of players at first. But the sense of accomplishment was gone and players became bored fast as they achieved too much in a short span of time. This resulted in an increase in cancelled subscriptions. It was a good move in the short run, but was always going to be detrimental to the long-term franchise. Did Blizzard forget that it is not the destination but the journey that matters?
  • Re-hashing of game content is further creating a sense among WoW subscribers that the game doesn’t have anything new to offer. The latest expansion, Warlords of Draenor, had its zones modeled on the second expansion, The Burning Crusade, which came out in early 2007.  Additionally, there are fewer new dungeons with every expansion, and the game play has largely remained the same. The novelty factor has worn off and the players are very much accustomed to the game now. While this has caused an increase in the skill of an average WoW player, it has also resulted in monotony creeping in much earlier.
  • A lot of new players prefer the free-to-play gaming model instead of one that is subscription based. Charging players every month to let them play on its servers has worked brilliantly for Blizzard in the past, but may not click with the younger generation.
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So what happens next? Let’s face it, the game has lost its novelty and there is little that Activision Blizzard can do to take it back to its glory days. The real story is over and the character progression has lost the elements of exclusivity that players continually strive for. The decline in the subscription base is likely to continue. To combat that, it is likely that Blizzard will introduce new expansions faster than ever so that the players remain engaged. Having said that, it is possible that the subscriber base may stabilize at some point where the rate at which the older players leave will match the rate at which the new players join. That’s going to be a small number though. Currently Trefis estimates that the game constitutes less than 10% to Blizzard’s value. This number could shrink going forward as there is more clarity on the subscriber trajectory.

Thus do we offer the views of our gaming analyst.  Have any thoughts on the matter? Let us know in the comments section, and see the links below for more information and analysis:

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