Tuesday, May 12, 2009

Can Blizzard survive being the most bankable game studio?

Blizzard Entertainment was recently announced as the most successful game studio this year as calculated by Develop magazine. I'm not really sure what qualifies them to rank game studios, but their website says their calculations are based on sales data, critical success, and industry standing. Still it seems suspicious since the Develop 100 had Blizzard Entertainment ranked 46 spots lower last year. I know Wrath of the Lich King moved a lot of boxes, but World of Warcraft has been dominating the PC sales charts hand and hand with the Sims for the last four years. So why are trade publications only now starting to notice?

Well its no secret that Blizzard doesn't make bad games. The management for the company seems slightly different from other game studios and allows for long delays in production to fine tune a game. That's not to say they would allow a project to become vaporware or a 100 million dollar disaster like Tabula Rasa. Just look at Starcraft Ghost which Blizzard had no problems axing when it became apparent the quality wasn't there. Blizzard's dedication to quality isn't something that recently appeared and earned it a spot on the list. No the real reason is most likely that it's becoming more widely known just how much money World of Warcraft is earning from subscription fees alone.

I've long suspected that Blizzard has been making close to a 100 million dollars a month on subscriptions and it's recently been confirmed in several earnings report. Additionally, a subscription service whose only real cost is server maintenance and customer support has to have a great profit to revenue ratio. It's been theorized that a AAA MMO takes about 50 million dollars to develop and that number has been thrown around a couple of times for Warhammer Online. That means even if only half of the subscription revenue is profit then Blizzard still recoups its initial investment on World of Warcraft every month of the year.

Those kinds of investment returns just stand out like a sore thumb and it's probably why Blizzard was swallowed up by Activision. I just hope Blizzard can survive the future as the most bankable game studio while still producing high quality products. Last year there were some rumblings about the decision to split Starcraft 2 into three separate games. Some people thought it seemed a little too much like a naked money grab, something a mega studio like EA or Activision would do. While the giants of the game industry are very good about squeezing every last cent from a franchise they also make a lot of lackluster crap in the process.

With a good percentage of the profits earned by Activision this last quarter coming from World of Warcraft you have to wonder if Blizzard will be pushed to maintain this pace. It's fine if they are able to keep their revenue up by making the same high quality games we've come to expect from them. If all three Starcraft 2 games introduce a fair amount of quality content then I'm not one to complain. I think most gamers have come around to the idea simply because it gets the multi-player version into our hands faster. However, the next "innovative" idea might not have the same silver lining. It's makes me wonder if Blizzard can juggle quality, quantity and profits equally in the future or if short-term profits will start to become the priority.

2 comments:

Openedge1 said...

This goes hand in hand with my post on MMO Support - do we get what we pay for?You state
Additionally, a subscription service whose only real cost is server maintenance and customer support has to have a great profit to revenue ratioBut, according to the service agreement, Blizzard really does not have to offer anything in the way of support.
Thus all we REALLY pay for is to log into their game.
Blizzard is total greed, and this goes to show how well this company is doing on the need for players to continually login thanks to the addiction of these games.

Sad.

Anonymous said...

Additionally, a subscription service whose only real cost is server maintenance and customer support has to have a great profit to revenue ratio...They also have to pay for all the developers who do patches/updates, the forum guys, the developers, rent offices, pay the janitors, etc. I'm not saying Blizzard isn't raking in tons of money, but to say that they only pay for some customer support people and their server costs is pretty ludicrous.