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Wow. OK that was alot of talking. I got half way through and gave up 
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An interesting read. A lot of the questions I would have asked seemed to have been answered. But Bronze Terran though...he'll get better. Soon.
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Atleast he acknowledged the fact that the posts on blizz forums are terrible. Also- great response on why they announced a release date so early.
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On November 19 2012 23:54 Hider wrote:Show nested quote +On November 19 2012 23:38 paralleluniverse wrote:On November 19 2012 23:26 Hider wrote:On November 19 2012 23:11 paralleluniverse wrote:On November 19 2012 22:59 Hider wrote:On November 19 2012 22:29 Jiddra wrote:On November 19 2012 21:25 Hider wrote:
"Well our focus right now is really on the content in Heart of the Swarm, not around what other things we can add necessarily in terms of micro-transactions or business. I think that it's much more important that we focus on making a great expansion and I think the current model is a viable model."
This is completely wrong, unfortunately. It's not really a viable profit-maximiation business model, and if shareholders/analysts paid as much attention Activision Blizzard as they do with Apple and everyone of their products, they would have demanded Mike Morhaimme to be fired immediately.
But please, Sound like you think HotS is Blizzards only game in dev!  It's very viable model for HotS in relation to all other products being developed within Blizzard. They will sell plenty enough of the game to make it a profitable affair, It's not like they panic over night and say "Ohhh all the plans we have for releases and business dev the coming 5-6 years must be scrapped, we MUST make HotS micro transaction!!!" MM is probably the guy sitting safest on his post within ActivisionBlizzard. He doesn't even need to answer economy questions at the conference calls, they know that isn't his strong side. They look to him to make the great games within Blizzard that then can be monetized by ActivisionBlizzard. Your first point is completely wrong. As someone who have spend considerable amount of time analyzing the financial statement of ATVI (probably more so than most analysts), I know what they are spending their ressources on (Titan), and unfortunately that's the problem. With the current business model ATVI has little incentive to make a esports-supportive game (as they don't make money out of it). Also Sc2 doesn't appear that much to casuals. Right now Sc2 (and HOTS) is an inbetweener and doesn't do anything particularly well. Regarding MM. Your right, he is sitting safely and that's my entire point. Analysts/investors do not spend enough time analyzing the business model of Sc2/Wow/d3 (unfortunately). Compare this to the work they do on Apple, and you realize they analyze every single competitor. Every single product in detail etc. With ATVI, unfortunately, they are just kinda lazy/priortizes larger companies. Eh. It's quite normal that the CFO answers "number" question. But regards to the CEO of Blizzard he should be asked questions regarding business model of each game and how they plan to respond to it. I read probably the most recent 4-5 earnings conferences call. Analysts are not asking the right questions (not just related to sc2). They ask the easy question so they can put a few numbers into their model and then go home early. Even though Sc2 is just a veyr small part of ATVI, a rework of the sc2 business model could still increase shareholder v alue. Why is it that no single analyst yet has asked that question (which a journalist made yesterday regarding a change in the business model of Sc2). And this is the problem. Mike Morhaimme is better as a PR guy than the business guy. Blizzard would improve shareholder value by hiring a few MBA'ers, and as a player the experience would probably be improved as well (even though I would have to pay a bit more though). If analysts/investors spend more time studying/analyzing the company, Mike Morhaimme would be under a lot more pressure. Milking money out of a game is good for the players and good for the game? No, it's good for shareholder's profit though. There could be nothing worse for the game than for it to be turned into the standard free to play microtransaction model that makes DotA 2 heroes look like April's fool jokes, and locks LoL heroes behind a paywall. Or where they basically sell items that add power such as in CoD or in virtually every single MMO, under the excuse that it adds so little power that it's somehow OK. Depends on how they do it. If ATVI just charges a higher price and doesn't offer anything besides that, your right. Bad for customers. But what I suggest is that ATVI needs to monetize esports. In return they give devote more ressources to updating the game etc. Hire progamers as developers. RIght now (despite their constant PR), Blizzard don't have an incentive to do that as they barely make any money out of esports. Blizzard is a big, rich company, yet you act as if they cannot afford to hire pro gamers. In fact, there is absolutely no reason why hiring a pro gamer would be anymore expensive than hiring any random developer. So there's no reason to think that money is holding them back there. Blizzard makes money based on royalties for esports tournaments. How do you know that they "barely make any money out of esports"? And even if that's true, that doesn't mean it's a bad business strategy. They may be trying to increase their market share at the expense of short term profits. This is a common strategy. For example, some game consoles are sold at a loss, the Kindle is also sold at a loss to maximize Amazon's market share. 1) Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back. Why do you think WOW has a lot more developers than sc2? My best guess is that Blizzard makes revenue estimates for Sc2 and then use x% of those revenues on developing costs. This is quite normal for business's. 2) Royalities are absolute peanuts. ATVI is a billion dollar company, how much money do you think Blizzard makes out of those tournaments on an annual basis? Barely any right... You can also look at the financial statement. Take Blizzard's revenues and subtract revenues from subscription (related to WOW). You'll notice that there barely are revenue left. 3) This is completelye another discussion, and I think you are comparing apples to oragnes to a 3rd thing. First of all market share is the wrong term for Amazon's kindle strategy. Amazon never expects to make any money out of Kindle, neither long/term nor shot-term. However, what they try to set up is an effective ecosystem. Kindle sales have syngery effects on Amazon's other revenues. Sc2 not so much. Also remember that the change in business model doesn't necessarily hurt the maket share if the game becomes cheaper to play for casuals. But in general, the term market share is completely irrelevant in this scenario. Regarding long-term effect; the current business model is really bad for the long-term as the brand value of starcraft has signifcantly deterioated among casuals. My best guess is that sales of Sc3 will be even worse than sc2. With the current business model I am not totally convinced that a potential Sc3 will be profitable for ATVI.
Hider is correct that that royalities are nothing compaired to Blizzard overall revenue. Most of the money they make and spend is on WoW and supporting it. Managing a game that large cost a lot of money, the servers do not run or take care of themselves.
Blizzard has a lot of its plate and SC2 is the smallest of its games. Diablo 3 almost doubled SC2's first year sales since release with a total of 10 million sold. That is a HUGE number for a PC exclusive and almost 50% more that SC2. Not that SC2 sold poorly, there are plenty of developers who would love those sales for any game, let alone a RTS. But Blizzard's largest problem right now is WoW. Activision is taking heat from investors due to a drop in stock. That is mostly due to sales being soft for everyone in the video game industry, but also that WoW has peaked and their investors for Blizzard to make the next big thing(aka project titan).
In short, Blizzard has money, but a lot of it is going to developing a new huge game on the scale of WoW. SC2 needs to stand on its own legs and people cannot expect Blizzard to just "hire more people" because WoW makes money. It is a horrible buisness practice to use the profit from one product to prop up another product.
And on the subjet of the micro transactions, that buisness model is only a few years old. Blizzard is likely going to wait to see how it does on the long term, rather than spend a lot of money on something people may be sick of in two years. We don't want doing what everyone else in tech does, and chase the money(i.e. Call of Duty vs Medal of Honor). They should hold off doing that stuff until they finish what they are working on right now.
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On November 20 2012 02:22 Hider wrote:Show nested quote +On November 20 2012 01:52 paralleluniverse wrote:On November 19 2012 23:54 Hider wrote:On November 19 2012 23:38 paralleluniverse wrote:On November 19 2012 23:26 Hider wrote:On November 19 2012 23:11 paralleluniverse wrote:On November 19 2012 22:59 Hider wrote:On November 19 2012 22:29 Jiddra wrote:On November 19 2012 21:25 Hider wrote:
"Well our focus right now is really on the content in Heart of the Swarm, not around what other things we can add necessarily in terms of micro-transactions or business. I think that it's much more important that we focus on making a great expansion and I think the current model is a viable model."
This is completely wrong, unfortunately. It's not really a viable profit-maximiation business model, and if shareholders/analysts paid as much attention Activision Blizzard as they do with Apple and everyone of their products, they would have demanded Mike Morhaimme to be fired immediately.
But please, Sound like you think HotS is Blizzards only game in dev! It's very viable model for HotS in relation to all other products being developed within Blizzard. They will sell plenty enough of the game to make it a profitable affair, It's not like they panic over night and say "Ohhh all the plans we have for releases and business dev the coming 5-6 years must be scrapped, we MUST make HotS micro transaction!!!" MM is probably the guy sitting safest on his post within ActivisionBlizzard. He doesn't even need to answer economy questions at the conference calls, they know that isn't his strong side. They look to him to make the great games within Blizzard that then can be monetized by ActivisionBlizzard. Your first point is completely wrong. As someone who have spend considerable amount of time analyzing the financial statement of ATVI (probably more so than most analysts), I know what they are spending their ressources on (Titan), and unfortunately that's the problem. With the current business model ATVI has little incentive to make a esports-supportive game (as they don't make money out of it). Also Sc2 doesn't appear that much to casuals. Right now Sc2 (and HOTS) is an inbetweener and doesn't do anything particularly well. Regarding MM. Your right, he is sitting safely and that's my entire point. Analysts/investors do not spend enough time analyzing the business model of Sc2/Wow/d3 (unfortunately). Compare this to the work they do on Apple, and you realize they analyze every single competitor. Every single product in detail etc. With ATVI, unfortunately, they are just kinda lazy/priortizes larger companies. Eh. It's quite normal that the CFO answers "number" question. But regards to the CEO of Blizzard he should be asked questions regarding business model of each game and how they plan to respond to it. I read probably the most recent 4-5 earnings conferences call. Analysts are not asking the right questions (not just related to sc2). They ask the easy question so they can put a few numbers into their model and then go home early. Even though Sc2 is just a veyr small part of ATVI, a rework of the sc2 business model could still increase shareholder v alue. Why is it that no single analyst yet has asked that question (which a journalist made yesterday regarding a change in the business model of Sc2). And this is the problem. Mike Morhaimme is better as a PR guy than the business guy. Blizzard would improve shareholder value by hiring a few MBA'ers, and as a player the experience would probably be improved as well (even though I would have to pay a bit more though). If analysts/investors spend more time studying/analyzing the company, Mike Morhaimme would be under a lot more pressure. Milking money out of a game is good for the players and good for the game? No, it's good for shareholder's profit though. There could be nothing worse for the game than for it to be turned into the standard free to play microtransaction model that makes DotA 2 heroes look like April's fool jokes, and locks LoL heroes behind a paywall. Or where they basically sell items that add power such as in CoD or in virtually every single MMO, under the excuse that it adds so little power that it's somehow OK. Depends on how they do it. If ATVI just charges a higher price and doesn't offer anything besides that, your right. Bad for customers. But what I suggest is that ATVI needs to monetize esports. In return they give devote more ressources to updating the game etc. Hire progamers as developers. RIght now (despite their constant PR), Blizzard don't have an incentive to do that as they barely make any money out of esports. Blizzard is a big, rich company, yet you act as if they cannot afford to hire pro gamers. In fact, there is absolutely no reason why hiring a pro gamer would be anymore expensive than hiring any random developer. So there's no reason to think that money is holding them back there. Blizzard makes money based on royalties for esports tournaments. How do you know that they "barely make any money out of esports"? And even if that's true, that doesn't mean it's a bad business strategy. They may be trying to increase their market share at the expense of short term profits. This is a common strategy. For example, some game consoles are sold at a loss, the Kindle is also sold at a loss to maximize Amazon's market share. 1) Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back. Why do you think WOW has a lot more developers than sc2? My best guess is that Blizzard makes revenue estimates for Sc2 and then use x% of those revenues on developing costs. This is quite normal for business's. 2) Royalities are absolute peanuts. ATVI is a billion dollar company, how much money do you think Blizzard makes out of those tournaments on an annual basis? Barely any right... You can also look at the financial statement. Take Blizzard's revenues and subtract revenues from subscription (related to WOW). You'll notice that there barely are revenue left. 3) This is completelye another discussion, and I think you are comparing apples to oragnes to a 3rd thing. First of all market share is the wrong term for Amazon's kindle strategy. Amazon never expects to make any money out of Kindle, neither long/term nor shot-term. However, what they try to set up is an effective ecosystem. Kindle sales have syngery effects on Amazon's other revenues. Sc2 not so much. Also remember that the change in business model doesn't necessarily hurt the maket share if the game becomes cheaper to play for casuals. But in general, the term market share is completely irrelevant in this scenario. Regarding long-term effect; the current business model is really bad for the long-term as the brand value of starcraft has signifcantly deterioated among casuals. My best guess is that sales of Sc3 will be even worse than sc2. With the current business model I am not totally convinced that a potential Sc3 will be profitable for ATVI. Maybe because WoW is a giant game, which has a subscription fee so that new content, such as quests, dungeons, raids, etc can be constantly produced? And SC2 isn't. It's a RTS, no content is produced other than expansions and patches, and fixing up the clusterfuck that was B.net 0.2. SC2 isn't WoW, it doesn't have a subscription fee and 10 million players that require a content patch every few months, so it obviously makes less money. Here's their financial statement: http://investor.activision.com/secfiling.cfm?filingID=1104659-12-75353&CIK=718877Subtracting revenue from subscription doesn't give a small number (subscriptions: 226, PC and others: 314). So I suggest you stop making things up about how Blizzard works, with completely unsubstantiated statements like: "Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back." Like Mike Morhaime explain in this interview, free esports is good because it brings people in, which is basically the strategy of making a losses on Kindles and game consoles. Take a moment and think about what you are writing. Why is WOW a great success? Partly because of the business model. Also, I never said they should copy WOW. I said they should be inspired. They could also be inspired by COD which make a shitton of money. But they should optimize the business model to sc2, and the current business model is not optimized. Again regarding the financial statement. Think about what you are reading. Maybe D3 had an impact? Look at quarters prior to D3 release . Also I don't know why you look at PC revenues (as it includes COD). Or include revenue estimate from D3 in your calculations. According to my estimations Sc2 generated revenues of 1-20 millions (primarily explained by the games sold) on most quarters after the initial release. I guess they probably make 0.5-3 million on esports on an annual basis. That is relativelye little compared to it's potential. With an improved business model they should probably have been capable of generating 40$/annual basis in revenues from the most active players/viewers on an annual basis. That is roughly equal to 40* 300 = 12 million on an annual basis extracting the purchase price of sc2. Next time you respond, please take a moment and think about what I am actually writing. A more rational response would question the realism of whether they can succesfully "price discriminate". Like how would they do that in practice?
My question is do you really think that there are 300,000 people willing to pay $40 a year for SC2 to get that 12 million per year total? That's step one, I'm a huge follower of SC2, and I know a lot of people who are, but I really can't afford to be spending that much per year on it. The $50+ purchase price up front was so much for me that I needed to wait until someone bought it for me as a gift to get it, (I'm a broke college graduate who has to help with a mortgage payment/loans, every $50 counts a lot, some people laugh at that, I don't). There's in all likelihood many others like me as well who would have trouble paying $40 a year for the game. Step 2 is the implementation of price discrimination as you mentioned and that is a difficult issue, but still, lets not ignore step 1. Step 1 I say is quite important, having a strong enough market size of people willing to spend hundreds of dollars over the course of a game that HAS an upfront cost, (and thus barrier to entry, thus limiting its initial potential market penetration) is an issue.
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Canada11321 Posts
Good questions monk
I'm glad to hear they still read TL. I sometimes despair that they only read their own forums, so that's something at least.
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Thanks for sharing Very interesting stuff.
A couple of typos here & there but it's all good
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Eh him being Bronze either means he doesn't know a thing about starcraft or he doesnt play.
Because I play with almost only the mouse, but I know what beats what in most matchups so I can stay in gold easily
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On November 20 2012 03:11 Mozzery wrote:Show nested quote +On November 20 2012 02:22 Hider wrote:On November 20 2012 01:52 paralleluniverse wrote:On November 19 2012 23:54 Hider wrote:On November 19 2012 23:38 paralleluniverse wrote:On November 19 2012 23:26 Hider wrote:On November 19 2012 23:11 paralleluniverse wrote:On November 19 2012 22:59 Hider wrote:On November 19 2012 22:29 Jiddra wrote:On November 19 2012 21:25 Hider wrote:
"Well our focus right now is really on the content in Heart of the Swarm, not around what other things we can add necessarily in terms of micro-transactions or business. I think that it's much more important that we focus on making a great expansion and I think the current model is a viable model."
This is completely wrong, unfortunately. It's not really a viable profit-maximiation business model, and if shareholders/analysts paid as much attention Activision Blizzard as they do with Apple and everyone of their products, they would have demanded Mike Morhaimme to be fired immediately.
But please, Sound like you think HotS is Blizzards only game in dev! It's very viable model for HotS in relation to all other products being developed within Blizzard. They will sell plenty enough of the game to make it a profitable affair, It's not like they panic over night and say "Ohhh all the plans we have for releases and business dev the coming 5-6 years must be scrapped, we MUST make HotS micro transaction!!!" MM is probably the guy sitting safest on his post within ActivisionBlizzard. He doesn't even need to answer economy questions at the conference calls, they know that isn't his strong side. They look to him to make the great games within Blizzard that then can be monetized by ActivisionBlizzard. Your first point is completely wrong. As someone who have spend considerable amount of time analyzing the financial statement of ATVI (probably more so than most analysts), I know what they are spending their ressources on (Titan), and unfortunately that's the problem. With the current business model ATVI has little incentive to make a esports-supportive game (as they don't make money out of it). Also Sc2 doesn't appear that much to casuals. Right now Sc2 (and HOTS) is an inbetweener and doesn't do anything particularly well. Regarding MM. Your right, he is sitting safely and that's my entire point. Analysts/investors do not spend enough time analyzing the business model of Sc2/Wow/d3 (unfortunately). Compare this to the work they do on Apple, and you realize they analyze every single competitor. Every single product in detail etc. With ATVI, unfortunately, they are just kinda lazy/priortizes larger companies. Eh. It's quite normal that the CFO answers "number" question. But regards to the CEO of Blizzard he should be asked questions regarding business model of each game and how they plan to respond to it. I read probably the most recent 4-5 earnings conferences call. Analysts are not asking the right questions (not just related to sc2). They ask the easy question so they can put a few numbers into their model and then go home early. Even though Sc2 is just a veyr small part of ATVI, a rework of the sc2 business model could still increase shareholder v alue. Why is it that no single analyst yet has asked that question (which a journalist made yesterday regarding a change in the business model of Sc2). And this is the problem. Mike Morhaimme is better as a PR guy than the business guy. Blizzard would improve shareholder value by hiring a few MBA'ers, and as a player the experience would probably be improved as well (even though I would have to pay a bit more though). If analysts/investors spend more time studying/analyzing the company, Mike Morhaimme would be under a lot more pressure. Milking money out of a game is good for the players and good for the game? No, it's good for shareholder's profit though. There could be nothing worse for the game than for it to be turned into the standard free to play microtransaction model that makes DotA 2 heroes look like April's fool jokes, and locks LoL heroes behind a paywall. Or where they basically sell items that add power such as in CoD or in virtually every single MMO, under the excuse that it adds so little power that it's somehow OK. Depends on how they do it. If ATVI just charges a higher price and doesn't offer anything besides that, your right. Bad for customers. But what I suggest is that ATVI needs to monetize esports. In return they give devote more ressources to updating the game etc. Hire progamers as developers. RIght now (despite their constant PR), Blizzard don't have an incentive to do that as they barely make any money out of esports. Blizzard is a big, rich company, yet you act as if they cannot afford to hire pro gamers. In fact, there is absolutely no reason why hiring a pro gamer would be anymore expensive than hiring any random developer. So there's no reason to think that money is holding them back there. Blizzard makes money based on royalties for esports tournaments. How do you know that they "barely make any money out of esports"? And even if that's true, that doesn't mean it's a bad business strategy. They may be trying to increase their market share at the expense of short term profits. This is a common strategy. For example, some game consoles are sold at a loss, the Kindle is also sold at a loss to maximize Amazon's market share. 1) Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back. Why do you think WOW has a lot more developers than sc2? My best guess is that Blizzard makes revenue estimates for Sc2 and then use x% of those revenues on developing costs. This is quite normal for business's. 2) Royalities are absolute peanuts. ATVI is a billion dollar company, how much money do you think Blizzard makes out of those tournaments on an annual basis? Barely any right... You can also look at the financial statement. Take Blizzard's revenues and subtract revenues from subscription (related to WOW). You'll notice that there barely are revenue left. 3) This is completelye another discussion, and I think you are comparing apples to oragnes to a 3rd thing. First of all market share is the wrong term for Amazon's kindle strategy. Amazon never expects to make any money out of Kindle, neither long/term nor shot-term. However, what they try to set up is an effective ecosystem. Kindle sales have syngery effects on Amazon's other revenues. Sc2 not so much. Also remember that the change in business model doesn't necessarily hurt the maket share if the game becomes cheaper to play for casuals. But in general, the term market share is completely irrelevant in this scenario. Regarding long-term effect; the current business model is really bad for the long-term as the brand value of starcraft has signifcantly deterioated among casuals. My best guess is that sales of Sc3 will be even worse than sc2. With the current business model I am not totally convinced that a potential Sc3 will be profitable for ATVI. Maybe because WoW is a giant game, which has a subscription fee so that new content, such as quests, dungeons, raids, etc can be constantly produced? And SC2 isn't. It's a RTS, no content is produced other than expansions and patches, and fixing up the clusterfuck that was B.net 0.2. SC2 isn't WoW, it doesn't have a subscription fee and 10 million players that require a content patch every few months, so it obviously makes less money. Here's their financial statement: http://investor.activision.com/secfiling.cfm?filingID=1104659-12-75353&CIK=718877Subtracting revenue from subscription doesn't give a small number (subscriptions: 226, PC and others: 314). So I suggest you stop making things up about how Blizzard works, with completely unsubstantiated statements like: "Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back." Like Mike Morhaime explain in this interview, free esports is good because it brings people in, which is basically the strategy of making a losses on Kindles and game consoles. Take a moment and think about what you are writing. Why is WOW a great success? Partly because of the business model. Also, I never said they should copy WOW. I said they should be inspired. They could also be inspired by COD which make a shitton of money. But they should optimize the business model to sc2, and the current business model is not optimized. Again regarding the financial statement. Think about what you are reading. Maybe D3 had an impact? Look at quarters prior to D3 release . Also I don't know why you look at PC revenues (as it includes COD). Or include revenue estimate from D3 in your calculations. According to my estimations Sc2 generated revenues of 1-20 millions (primarily explained by the games sold) on most quarters after the initial release. I guess they probably make 0.5-3 million on esports on an annual basis. That is relativelye little compared to it's potential. With an improved business model they should probably have been capable of generating 40$/annual basis in revenues from the most active players/viewers on an annual basis. That is roughly equal to 40* 300 = 12 million on an annual basis extracting the purchase price of sc2. Next time you respond, please take a moment and think about what I am actually writing. A more rational response would question the realism of whether they can succesfully "price discriminate". Like how would they do that in practice? My question is do you really think that there are 300,000 people willing to pay $40 a year for SC2 to get that 12 million per year total? That's step one, I'm a huge follower of SC2, and I know a lot of people who are, but I really can't afford to be spending that much per year on it. The $50+ purchase price up front was so much for me that I needed to wait until someone bought it for me as a gift to get it, (I'm a broke college graduate who has to help with a mortgage payment/loans, every $50 counts a lot, some people laugh at that, I don't). There's in all likelihood many others like me as well who would have trouble paying $40 a year for the game. Step 2 is the implementation of price discrimination as you mentioned and that is a difficult issue, but still, lets not ignore step 1. Step 1 I say is quite important, having a strong enough market size of people willing to spend hundreds of dollars over the course of a game that HAS an upfront cost, (and thus barrier to entry, thus limiting its initial potential market penetration) is an issue.
1) I never actually said they should be paying $40 directly. I am talking about generating/extracting. This could be through advertising. One example. Why do people go to Teamliquid to watch streams. Why aren't popular streams incorporated into bnet 2.0? Think about what this had done for bnet 2.0.
2) Yet you are willing to buy Hots right? You spend $40 on the game, and many other do even though tey don't care about the game. That makes me think. Why not just make major patches which (like which adds 1 new units or rebalances the game somewhat) every 9thmonth/year or so. Blizzard could sell them for $10 or so. Casuals wouldn't be forced to buy it, but Blizzard could probably sell 300k (that's 3M). Obviously this should be done right, and in corporation with progamers and the tournament scene, so people have time to prepare for it. But with proper execution this would be great.
Like look at COD. Besides selling 30M games a year Activision has found a way to further generate revenues by mappacks and Call of Duty (though that's cancelled now). Why can't Blizzard do the same thing?
Most likely there are 200k SC2 players who are more passionate than the 2M that paid $50 a year for COD elite.
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On November 20 2012 04:19 Hider wrote:Show nested quote +On November 20 2012 03:11 Mozzery wrote:On November 20 2012 02:22 Hider wrote:On November 20 2012 01:52 paralleluniverse wrote:On November 19 2012 23:54 Hider wrote:On November 19 2012 23:38 paralleluniverse wrote:On November 19 2012 23:26 Hider wrote:On November 19 2012 23:11 paralleluniverse wrote:On November 19 2012 22:59 Hider wrote:On November 19 2012 22:29 Jiddra wrote:[quote] But please, Sound like you think HotS is Blizzards only game in dev! It's very viable model for HotS in relation to all other products being developed within Blizzard. They will sell plenty enough of the game to make it a profitable affair, It's not like they panic over night and say "Ohhh all the plans we have for releases and business dev the coming 5-6 years must be scrapped, we MUST make HotS micro transaction!!!" MM is probably the guy sitting safest on his post within ActivisionBlizzard. He doesn't even need to answer economy questions at the conference calls, they know that isn't his strong side. They look to him to make the great games within Blizzard that then can be monetized by ActivisionBlizzard. Your first point is completely wrong. As someone who have spend considerable amount of time analyzing the financial statement of ATVI (probably more so than most analysts), I know what they are spending their ressources on (Titan), and unfortunately that's the problem. With the current business model ATVI has little incentive to make a esports-supportive game (as they don't make money out of it). Also Sc2 doesn't appear that much to casuals. Right now Sc2 (and HOTS) is an inbetweener and doesn't do anything particularly well. Regarding MM. Your right, he is sitting safely and that's my entire point. Analysts/investors do not spend enough time analyzing the business model of Sc2/Wow/d3 (unfortunately). Compare this to the work they do on Apple, and you realize they analyze every single competitor. Every single product in detail etc. With ATVI, unfortunately, they are just kinda lazy/priortizes larger companies. Eh. It's quite normal that the CFO answers "number" question. But regards to the CEO of Blizzard he should be asked questions regarding business model of each game and how they plan to respond to it. I read probably the most recent 4-5 earnings conferences call. Analysts are not asking the right questions (not just related to sc2). They ask the easy question so they can put a few numbers into their model and then go home early. Even though Sc2 is just a veyr small part of ATVI, a rework of the sc2 business model could still increase shareholder v alue. Why is it that no single analyst yet has asked that question (which a journalist made yesterday regarding a change in the business model of Sc2). And this is the problem. Mike Morhaimme is better as a PR guy than the business guy. Blizzard would improve shareholder value by hiring a few MBA'ers, and as a player the experience would probably be improved as well (even though I would have to pay a bit more though). If analysts/investors spend more time studying/analyzing the company, Mike Morhaimme would be under a lot more pressure. Milking money out of a game is good for the players and good for the game? No, it's good for shareholder's profit though. There could be nothing worse for the game than for it to be turned into the standard free to play microtransaction model that makes DotA 2 heroes look like April's fool jokes, and locks LoL heroes behind a paywall. Or where they basically sell items that add power such as in CoD or in virtually every single MMO, under the excuse that it adds so little power that it's somehow OK. Depends on how they do it. If ATVI just charges a higher price and doesn't offer anything besides that, your right. Bad for customers. But what I suggest is that ATVI needs to monetize esports. In return they give devote more ressources to updating the game etc. Hire progamers as developers. RIght now (despite their constant PR), Blizzard don't have an incentive to do that as they barely make any money out of esports. Blizzard is a big, rich company, yet you act as if they cannot afford to hire pro gamers. In fact, there is absolutely no reason why hiring a pro gamer would be anymore expensive than hiring any random developer. So there's no reason to think that money is holding them back there. Blizzard makes money based on royalties for esports tournaments. How do you know that they "barely make any money out of esports"? And even if that's true, that doesn't mean it's a bad business strategy. They may be trying to increase their market share at the expense of short term profits. This is a common strategy. For example, some game consoles are sold at a loss, the Kindle is also sold at a loss to maximize Amazon's market share. 1) Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back. Why do you think WOW has a lot more developers than sc2? My best guess is that Blizzard makes revenue estimates for Sc2 and then use x% of those revenues on developing costs. This is quite normal for business's. 2) Royalities are absolute peanuts. ATVI is a billion dollar company, how much money do you think Blizzard makes out of those tournaments on an annual basis? Barely any right... You can also look at the financial statement. Take Blizzard's revenues and subtract revenues from subscription (related to WOW). You'll notice that there barely are revenue left. 3) This is completelye another discussion, and I think you are comparing apples to oragnes to a 3rd thing. First of all market share is the wrong term for Amazon's kindle strategy. Amazon never expects to make any money out of Kindle, neither long/term nor shot-term. However, what they try to set up is an effective ecosystem. Kindle sales have syngery effects on Amazon's other revenues. Sc2 not so much. Also remember that the change in business model doesn't necessarily hurt the maket share if the game becomes cheaper to play for casuals. But in general, the term market share is completely irrelevant in this scenario. Regarding long-term effect; the current business model is really bad for the long-term as the brand value of starcraft has signifcantly deterioated among casuals. My best guess is that sales of Sc3 will be even worse than sc2. With the current business model I am not totally convinced that a potential Sc3 will be profitable for ATVI. Maybe because WoW is a giant game, which has a subscription fee so that new content, such as quests, dungeons, raids, etc can be constantly produced? And SC2 isn't. It's a RTS, no content is produced other than expansions and patches, and fixing up the clusterfuck that was B.net 0.2. SC2 isn't WoW, it doesn't have a subscription fee and 10 million players that require a content patch every few months, so it obviously makes less money. Here's their financial statement: http://investor.activision.com/secfiling.cfm?filingID=1104659-12-75353&CIK=718877Subtracting revenue from subscription doesn't give a small number (subscriptions: 226, PC and others: 314). So I suggest you stop making things up about how Blizzard works, with completely unsubstantiated statements like: "Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back." Like Mike Morhaime explain in this interview, free esports is good because it brings people in, which is basically the strategy of making a losses on Kindles and game consoles. Take a moment and think about what you are writing. Why is WOW a great success? Partly because of the business model. Also, I never said they should copy WOW. I said they should be inspired. They could also be inspired by COD which make a shitton of money. But they should optimize the business model to sc2, and the current business model is not optimized. Again regarding the financial statement. Think about what you are reading. Maybe D3 had an impact? Look at quarters prior to D3 release . Also I don't know why you look at PC revenues (as it includes COD). Or include revenue estimate from D3 in your calculations. According to my estimations Sc2 generated revenues of 1-20 millions (primarily explained by the games sold) on most quarters after the initial release. I guess they probably make 0.5-3 million on esports on an annual basis. That is relativelye little compared to it's potential. With an improved business model they should probably have been capable of generating 40$/annual basis in revenues from the most active players/viewers on an annual basis. That is roughly equal to 40* 300 = 12 million on an annual basis extracting the purchase price of sc2. Next time you respond, please take a moment and think about what I am actually writing. A more rational response would question the realism of whether they can succesfully "price discriminate". Like how would they do that in practice? To paraphrase Hider’s point, if Blizzard made more shit for SC2, we and a lot of other people would likely buy it. If even if was made more like DLC and we could buy skin packs, people would jump at the chance to buy more stuff for SC2 and extend the life of the game. By not doing this, one could argue that Blizzard is leaving money on the table. I am sure Blizzard is aware they could take advantage of this, but they are not set up to do so right now. Unlike Riot, XboxLive ,Steam and other free to play games, they do not have a system set for these sorts of purchases at this time. Also, the rise of free to play, micro transactions and post release DLC has only become super prevalent in the last year or so. By that time, Blizzard was knee deep in HotS, releasing Diablo 3, their WoW expansion and working on Project titan. I am sure that Blizzard will get into a more service based model between now and LotV, but they are already to deep in to HotS to change gears now. They are going to polish that off now and then move on to other thing. My question is do you really think that there are 300,000 people willing to pay $40 a year for SC2 to get that 12 million per year total? That's step one, I'm a huge follower of SC2, and I know a lot of people who are, but I really can't afford to be spending that much per year on it. The $50+ purchase price up front was so much for me that I needed to wait until someone bought it for me as a gift to get it, (I'm a broke college graduate who has to help with a mortgage payment/loans, every $50 counts a lot, some people laugh at that, I don't). There's in all likelihood many others like me as well who would have trouble paying $40 a year for the game. Step 2 is the implementation of price discrimination as you mentioned and that is a difficult issue, but still, lets not ignore step 1. Step 1 I say is quite important, having a strong enough market size of people willing to spend hundreds of dollars over the course of a game that HAS an upfront cost, (and thus barrier to entry, thus limiting its initial potential market penetration) is an issue. 1) I never actually said they should be paying $40 directly. I am talking about generating/extracting. This could be through advertising. One example. Why do people go to Teamliquid to watch streams. Why aren't popular streams incorporated into bnet 2.0? Think about what this had done for bnet 2.0. 2) Yet you are willing to buy Hots right? You spend $40 on the game, and many other do even though tey don't care about the game. That makes me think. Why not just make major patches which (like which adds 1 new units or rebalances the game somewhat) every 9thmonth/year or so. Blizzard could sell them for $10 or so. Casuals wouldn't be forced to buy it, but Blizzard could probably sell 300k (that's 3M). Obviously this should be done right, and in corporation with progamers and the tournament scene, so people have time to prepare for it. But with proper execution this would be great. Like look at COD. Besides selling 30M games a year Activision has found a way to further generate revenues by mappacks and Call of Duty (though that's cancelled now). Why can't Blizzard do the same thing? Most likely there are 200k SC2 players who are more passionate than the 2M that paid $50 a year for COD elite.
To paraphrase Hider’s point, if Blizzard made more shit for SC2, we and a lot of other people would likely buy it. If even if was made more like DLC and we could buy skin packs, people would jump at the chance to buy more stuff for SC2 and extend the life of the game. By not doing this, one could argue that Blizzard is leaving money on the table.
I am sure Blizzard is aware they could take advantage of this, but they are not set up to do so right now. Unlike Riot, XboxLive ,Steam and other free to play games, they do not have a system set for these sorts of purchases at this time. Also, the rise of free to play, micro transactions and post release DLC has only become super prevalent in the last year or so. By that time, Blizzard was knee deep in HotS, releasing Diablo 3, their WoW expansion and working on Project titan.
I am sure that Blizzard will get into a more service based model between now and LotV, but they are already to deep in to HotS to change gears now. They are going to polish that off now and then move on to other thing.
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The best news out of all of this is he's starting to play sc2 and puts out that "I WILL BE" silver or gold next time you see me.
And the best news of that news?
He's terran.
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I knew my boy Mike was Terran!
Morhaime fighting!!
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I really like point Morhaime made about the HotS release date. When they announced it this early all tournament organizers can plan their 2013 circuits with that date in mind so we won't see an MLG 2 days after HotS launch still played in WoL. Shows that they really care and think about the esports ecosystem.
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Most important part of that interview imo is that they aren't confined to their own battlenet forums.
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Morhaime vs Browder showmatch!
For charity or whatever.
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Great markting from blizzard as always, to bad they don't live up to it.
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On November 20 2012 04:37 Plansix wrote:Show nested quote +On November 20 2012 04:19 Hider wrote:On November 20 2012 03:11 Mozzery wrote:On November 20 2012 02:22 Hider wrote:On November 20 2012 01:52 paralleluniverse wrote:On November 19 2012 23:54 Hider wrote:On November 19 2012 23:38 paralleluniverse wrote:On November 19 2012 23:26 Hider wrote:On November 19 2012 23:11 paralleluniverse wrote:On November 19 2012 22:59 Hider wrote:
[quote]
Your first point is completely wrong. As someone who have spend considerable amount of time analyzing the financial statement of ATVI (probably more so than most analysts), I know what they are spending their ressources on (Titan), and unfortunately that's the problem. With the current business model ATVI has little incentive to make a esports-supportive game (as they don't make money out of it). Also Sc2 doesn't appear that much to casuals. Right now Sc2 (and HOTS) is an inbetweener and doesn't do anything particularly well.
Regarding MM. Your right, he is sitting safely and that's my entire point. Analysts/investors do not spend enough time analyzing the business model of Sc2/Wow/d3 (unfortunately). Compare this to the work they do on Apple, and you realize they analyze every single competitor. Every single product in detail etc. With ATVI, unfortunately, they are just kinda lazy/priortizes larger companies.
Eh. It's quite normal that the CFO answers "number" question. But regards to the CEO of Blizzard he should be asked questions regarding business model of each game and how they plan to respond to it. I read probably the most recent 4-5 earnings conferences call. Analysts are not asking the right questions (not just related to sc2). They ask the easy question so they can put a few numbers into their model and then go home early.
Even though Sc2 is just a veyr small part of ATVI, a rework of the sc2 business model could still increase shareholder v alue. Why is it that no single analyst yet has asked that question (which a journalist made yesterday regarding a change in the business model of Sc2).
And this is the problem. Mike Morhaimme is better as a PR guy than the business guy. Blizzard would improve shareholder value by hiring a few MBA'ers, and as a player the experience would probably be improved as well (even though I would have to pay a bit more though).
If analysts/investors spend more time studying/analyzing the company, Mike Morhaimme would be under a lot more pressure. Milking money out of a game is good for the players and good for the game? No, it's good for shareholder's profit though. There could be nothing worse for the game than for it to be turned into the standard free to play microtransaction model that makes DotA 2 heroes look like April's fool jokes, and locks LoL heroes behind a paywall. Or where they basically sell items that add power such as in CoD or in virtually every single MMO, under the excuse that it adds so little power that it's somehow OK. Depends on how they do it. If ATVI just charges a higher price and doesn't offer anything besides that, your right. Bad for customers. But what I suggest is that ATVI needs to monetize esports. In return they give devote more ressources to updating the game etc. Hire progamers as developers. RIght now (despite their constant PR), Blizzard don't have an incentive to do that as they barely make any money out of esports. Blizzard is a big, rich company, yet you act as if they cannot afford to hire pro gamers. In fact, there is absolutely no reason why hiring a pro gamer would be anymore expensive than hiring any random developer. So there's no reason to think that money is holding them back there. Blizzard makes money based on royalties for esports tournaments. How do you know that they "barely make any money out of esports"? And even if that's true, that doesn't mean it's a bad business strategy. They may be trying to increase their market share at the expense of short term profits. This is a common strategy. For example, some game consoles are sold at a loss, the Kindle is also sold at a loss to maximize Amazon's market share. 1) Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back. Why do you think WOW has a lot more developers than sc2? My best guess is that Blizzard makes revenue estimates for Sc2 and then use x% of those revenues on developing costs. This is quite normal for business's. 2) Royalities are absolute peanuts. ATVI is a billion dollar company, how much money do you think Blizzard makes out of those tournaments on an annual basis? Barely any right... You can also look at the financial statement. Take Blizzard's revenues and subtract revenues from subscription (related to WOW). You'll notice that there barely are revenue left. 3) This is completelye another discussion, and I think you are comparing apples to oragnes to a 3rd thing. First of all market share is the wrong term for Amazon's kindle strategy. Amazon never expects to make any money out of Kindle, neither long/term nor shot-term. However, what they try to set up is an effective ecosystem. Kindle sales have syngery effects on Amazon's other revenues. Sc2 not so much. Also remember that the change in business model doesn't necessarily hurt the maket share if the game becomes cheaper to play for casuals. But in general, the term market share is completely irrelevant in this scenario. Regarding long-term effect; the current business model is really bad for the long-term as the brand value of starcraft has signifcantly deterioated among casuals. My best guess is that sales of Sc3 will be even worse than sc2. With the current business model I am not totally convinced that a potential Sc3 will be profitable for ATVI. Maybe because WoW is a giant game, which has a subscription fee so that new content, such as quests, dungeons, raids, etc can be constantly produced? And SC2 isn't. It's a RTS, no content is produced other than expansions and patches, and fixing up the clusterfuck that was B.net 0.2. SC2 isn't WoW, it doesn't have a subscription fee and 10 million players that require a content patch every few months, so it obviously makes less money. Here's their financial statement: http://investor.activision.com/secfiling.cfm?filingID=1104659-12-75353&CIK=718877Subtracting revenue from subscription doesn't give a small number (subscriptions: 226, PC and others: 314). So I suggest you stop making things up about how Blizzard works, with completely unsubstantiated statements like: "Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back." Like Mike Morhaime explain in this interview, free esports is good because it brings people in, which is basically the strategy of making a losses on Kindles and game consoles. Take a moment and think about what you are writing. Why is WOW a great success? Partly because of the business model. Also, I never said they should copy WOW. I said they should be inspired. They could also be inspired by COD which make a shitton of money. But they should optimize the business model to sc2, and the current business model is not optimized. Again regarding the financial statement. Think about what you are reading. Maybe D3 had an impact? Look at quarters prior to D3 release . Also I don't know why you look at PC revenues (as it includes COD). Or include revenue estimate from D3 in your calculations. According to my estimations Sc2 generated revenues of 1-20 millions (primarily explained by the games sold) on most quarters after the initial release. I guess they probably make 0.5-3 million on esports on an annual basis. That is relativelye little compared to it's potential. With an improved business model they should probably have been capable of generating 40$/annual basis in revenues from the most active players/viewers on an annual basis. That is roughly equal to 40* 300 = 12 million on an annual basis extracting the purchase price of sc2. Next time you respond, please take a moment and think about what I am actually writing. A more rational response would question the realism of whether they can succesfully "price discriminate". Like how would they do that in practice? To paraphrase Hider’s point, if Blizzard made more shit for SC2, we and a lot of other people would likely buy it. If even if was made more like DLC and we could buy skin packs, people would jump at the chance to buy more stuff for SC2 and extend the life of the game. By not doing this, one could argue that Blizzard is leaving money on the table. I am sure Blizzard is aware they could take advantage of this, but they are not set up to do so right now. Unlike Riot, XboxLive ,Steam and other free to play games, they do not have a system set for these sorts of purchases at this time. Also, the rise of free to play, micro transactions and post release DLC has only become super prevalent in the last year or so. By that time, Blizzard was knee deep in HotS, releasing Diablo 3, their WoW expansion and working on Project titan. I am sure that Blizzard will get into a more service based model between now and LotV, but they are already to deep in to HotS to change gears now. They are going to polish that off now and then move on to other thing. My question is do you really think that there are 300,000 people willing to pay $40 a year for SC2 to get that 12 million per year total? That's step one, I'm a huge follower of SC2, and I know a lot of people who are, but I really can't afford to be spending that much per year on it. The $50+ purchase price up front was so much for me that I needed to wait until someone bought it for me as a gift to get it, (I'm a broke college graduate who has to help with a mortgage payment/loans, every $50 counts a lot, some people laugh at that, I don't). There's in all likelihood many others like me as well who would have trouble paying $40 a year for the game. Step 2 is the implementation of price discrimination as you mentioned and that is a difficult issue, but still, lets not ignore step 1. Step 1 I say is quite important, having a strong enough market size of people willing to spend hundreds of dollars over the course of a game that HAS an upfront cost, (and thus barrier to entry, thus limiting its initial potential market penetration) is an issue. 1) I never actually said they should be paying $40 directly. I am talking about generating/extracting. This could be through advertising. One example. Why do people go to Teamliquid to watch streams. Why aren't popular streams incorporated into bnet 2.0? Think about what this had done for bnet 2.0. 2) Yet you are willing to buy Hots right? You spend $40 on the game, and many other do even though tey don't care about the game. That makes me think. Why not just make major patches which (like which adds 1 new units or rebalances the game somewhat) every 9thmonth/year or so. Blizzard could sell them for $10 or so. Casuals wouldn't be forced to buy it, but Blizzard could probably sell 300k (that's 3M). Obviously this should be done right, and in corporation with progamers and the tournament scene, so people have time to prepare for it. But with proper execution this would be great. Like look at COD. Besides selling 30M games a year Activision has found a way to further generate revenues by mappacks and Call of Duty (though that's cancelled now). Why can't Blizzard do the same thing? Most likely there are 200k SC2 players who are more passionate than the 2M that paid $50 a year for COD elite. To paraphrase Hider’s point, if Blizzard made more shit for SC2, we and a lot of other people would likely buy it. If even if was made more like DLC and we could buy skin packs, people would jump at the chance to buy more stuff for SC2 and extend the life of the game. By not doing this, one could argue that Blizzard is leaving money on the table. I am sure Blizzard is aware they could take advantage of this, but they are not set up to do so right now. Unlike Riot, XboxLive ,Steam and other free to play games, they do not have a system set for these sorts of purchases at this time. Also, the rise of free to play, micro transactions and post release DLC has only become super prevalent in the last year or so. By that time, Blizzard was knee deep in HotS, releasing Diablo 3, their WoW expansion and working on Project titan. I am sure that Blizzard will get into a more service based model between now and LotV, but they are already to deep in to HotS to change gears now. They are going to polish that off now and then move on to other thing.
But as long as a potential change to the business model is profitable, they can always hire more people to do it. The time they spent on titan, WOW, d3 whatever should be somewhat irrelevant in this decision.
But my biggest problem with Mike Morhaimme is the Bnet 2.0 failure. I can't think of any worse platform, both from a business perspective and a consumer perspective. It fails to make money and it fails to bring people together. I guess he is the one responsible for Bnet 2.0, and that is why I believe if shareholders/analysts paid more attention they would demand changes to management. Espeically since he directly states he has no plans to change the business model.
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Pretty interesting read, MM looks like a pretty straightfoward guy (as much as you can be being a CEO of course ...)
.... w8 ..... he'z in BronZ3 ?? ZoMg GTFO n00b !
:p
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did mike actually say at the end that he does not believe the multiplayer features to be critical to the success of starcraft 2 ?
with that i rest my case on why bnet .002 is so bad and basically suggesting we would "buy it anyway".
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On November 20 2012 05:19 Hider wrote:Show nested quote +On November 20 2012 04:37 Plansix wrote:On November 20 2012 04:19 Hider wrote:On November 20 2012 03:11 Mozzery wrote:On November 20 2012 02:22 Hider wrote:On November 20 2012 01:52 paralleluniverse wrote:On November 19 2012 23:54 Hider wrote:On November 19 2012 23:38 paralleluniverse wrote:On November 19 2012 23:26 Hider wrote:On November 19 2012 23:11 paralleluniverse wrote:
[quote]
Milking money out of a game is good for the players and good for the game? No, it's good for shareholder's profit though.
There could be nothing worse for the game than for it to be turned into the standard free to play microtransaction model that makes DotA 2 heroes look like April's fool jokes, and locks LoL heroes behind a paywall. Or where they basically sell items that add power such as in CoD or in virtually every single MMO, under the excuse that it adds so little power that it's somehow OK. Depends on how they do it. If ATVI just charges a higher price and doesn't offer anything besides that, your right. Bad for customers. But what I suggest is that ATVI needs to monetize esports. In return they give devote more ressources to updating the game etc. Hire progamers as developers. RIght now (despite their constant PR), Blizzard don't have an incentive to do that as they barely make any money out of esports. Blizzard is a big, rich company, yet you act as if they cannot afford to hire pro gamers. In fact, there is absolutely no reason why hiring a pro gamer would be anymore expensive than hiring any random developer. So there's no reason to think that money is holding them back there. Blizzard makes money based on royalties for esports tournaments. How do you know that they "barely make any money out of esports"? And even if that's true, that doesn't mean it's a bad business strategy. They may be trying to increase their market share at the expense of short term profits. This is a common strategy. For example, some game consoles are sold at a loss, the Kindle is also sold at a loss to maximize Amazon's market share. 1) Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back. Why do you think WOW has a lot more developers than sc2? My best guess is that Blizzard makes revenue estimates for Sc2 and then use x% of those revenues on developing costs. This is quite normal for business's. 2) Royalities are absolute peanuts. ATVI is a billion dollar company, how much money do you think Blizzard makes out of those tournaments on an annual basis? Barely any right... You can also look at the financial statement. Take Blizzard's revenues and subtract revenues from subscription (related to WOW). You'll notice that there barely are revenue left. 3) This is completelye another discussion, and I think you are comparing apples to oragnes to a 3rd thing. First of all market share is the wrong term for Amazon's kindle strategy. Amazon never expects to make any money out of Kindle, neither long/term nor shot-term. However, what they try to set up is an effective ecosystem. Kindle sales have syngery effects on Amazon's other revenues. Sc2 not so much. Also remember that the change in business model doesn't necessarily hurt the maket share if the game becomes cheaper to play for casuals. But in general, the term market share is completely irrelevant in this scenario. Regarding long-term effect; the current business model is really bad for the long-term as the brand value of starcraft has signifcantly deterioated among casuals. My best guess is that sales of Sc3 will be even worse than sc2. With the current business model I am not totally convinced that a potential Sc3 will be profitable for ATVI. Maybe because WoW is a giant game, which has a subscription fee so that new content, such as quests, dungeons, raids, etc can be constantly produced? And SC2 isn't. It's a RTS, no content is produced other than expansions and patches, and fixing up the clusterfuck that was B.net 0.2. SC2 isn't WoW, it doesn't have a subscription fee and 10 million players that require a content patch every few months, so it obviously makes less money. Here's their financial statement: http://investor.activision.com/secfiling.cfm?filingID=1104659-12-75353&CIK=718877Subtracting revenue from subscription doesn't give a small number (subscriptions: 226, PC and others: 314). So I suggest you stop making things up about how Blizzard works, with completely unsubstantiated statements like: "Yeh one would think that they could afford to hire more developers. However it is definitely money that is holding them back." Like Mike Morhaime explain in this interview, free esports is good because it brings people in, which is basically the strategy of making a losses on Kindles and game consoles. Take a moment and think about what you are writing. Why is WOW a great success? Partly because of the business model. Also, I never said they should copy WOW. I said they should be inspired. They could also be inspired by COD which make a shitton of money. But they should optimize the business model to sc2, and the current business model is not optimized. Again regarding the financial statement. Think about what you are reading. Maybe D3 had an impact? Look at quarters prior to D3 release . Also I don't know why you look at PC revenues (as it includes COD). Or include revenue estimate from D3 in your calculations. According to my estimations Sc2 generated revenues of 1-20 millions (primarily explained by the games sold) on most quarters after the initial release. I guess they probably make 0.5-3 million on esports on an annual basis. That is relativelye little compared to it's potential. With an improved business model they should probably have been capable of generating 40$/annual basis in revenues from the most active players/viewers on an annual basis. That is roughly equal to 40* 300 = 12 million on an annual basis extracting the purchase price of sc2. Next time you respond, please take a moment and think about what I am actually writing. A more rational response would question the realism of whether they can succesfully "price discriminate". Like how would they do that in practice? To paraphrase Hider’s point, if Blizzard made more shit for SC2, we and a lot of other people would likely buy it. If even if was made more like DLC and we could buy skin packs, people would jump at the chance to buy more stuff for SC2 and extend the life of the game. By not doing this, one could argue that Blizzard is leaving money on the table. I am sure Blizzard is aware they could take advantage of this, but they are not set up to do so right now. Unlike Riot, XboxLive ,Steam and other free to play games, they do not have a system set for these sorts of purchases at this time. Also, the rise of free to play, micro transactions and post release DLC has only become super prevalent in the last year or so. By that time, Blizzard was knee deep in HotS, releasing Diablo 3, their WoW expansion and working on Project titan. I am sure that Blizzard will get into a more service based model between now and LotV, but they are already to deep in to HotS to change gears now. They are going to polish that off now and then move on to other thing. My question is do you really think that there are 300,000 people willing to pay $40 a year for SC2 to get that 12 million per year total? That's step one, I'm a huge follower of SC2, and I know a lot of people who are, but I really can't afford to be spending that much per year on it. The $50+ purchase price up front was so much for me that I needed to wait until someone bought it for me as a gift to get it, (I'm a broke college graduate who has to help with a mortgage payment/loans, every $50 counts a lot, some people laugh at that, I don't). There's in all likelihood many others like me as well who would have trouble paying $40 a year for the game. Step 2 is the implementation of price discrimination as you mentioned and that is a difficult issue, but still, lets not ignore step 1. Step 1 I say is quite important, having a strong enough market size of people willing to spend hundreds of dollars over the course of a game that HAS an upfront cost, (and thus barrier to entry, thus limiting its initial potential market penetration) is an issue. 1) I never actually said they should be paying $40 directly. I am talking about generating/extracting. This could be through advertising. One example. Why do people go to Teamliquid to watch streams. Why aren't popular streams incorporated into bnet 2.0? Think about what this had done for bnet 2.0. 2) Yet you are willing to buy Hots right? You spend $40 on the game, and many other do even though tey don't care about the game. That makes me think. Why not just make major patches which (like which adds 1 new units or rebalances the game somewhat) every 9thmonth/year or so. Blizzard could sell them for $10 or so. Casuals wouldn't be forced to buy it, but Blizzard could probably sell 300k (that's 3M). Obviously this should be done right, and in corporation with progamers and the tournament scene, so people have time to prepare for it. But with proper execution this would be great. Like look at COD. Besides selling 30M games a year Activision has found a way to further generate revenues by mappacks and Call of Duty (though that's cancelled now). Why can't Blizzard do the same thing? Most likely there are 200k SC2 players who are more passionate than the 2M that paid $50 a year for COD elite. To paraphrase Hider’s point, if Blizzard made more shit for SC2, we and a lot of other people would likely buy it. If even if was made more like DLC and we could buy skin packs, people would jump at the chance to buy more stuff for SC2 and extend the life of the game. By not doing this, one could argue that Blizzard is leaving money on the table. I am sure Blizzard is aware they could take advantage of this, but they are not set up to do so right now. Unlike Riot, XboxLive ,Steam and other free to play games, they do not have a system set for these sorts of purchases at this time. Also, the rise of free to play, micro transactions and post release DLC has only become super prevalent in the last year or so. By that time, Blizzard was knee deep in HotS, releasing Diablo 3, their WoW expansion and working on Project titan. I am sure that Blizzard will get into a more service based model between now and LotV, but they are already to deep in to HotS to change gears now. They are going to polish that off now and then move on to other thing. But as long as a potential change to the business model is profitable, they can always hire more people to do it. The time they spent on titan, WOW, d3 whatever should be somewhat irrelevant in this decision. But my biggest problem with Mike Morhaimme is the Bnet 2.0 failure. I can't think of any worse platform, both from a business perspective and a consumer perspective. It fails to make money and it fails to bring people together. I guess he is the one responsible for Bnet 2.0, and that is why I believe if shareholders/analysts paid more attention they would demand changes to management. Espeically since he directly states he has no plans to change the business model.
Hiring new talent hard and not something Blizzard can just do instantly. Also, employees have huge overhead, programmers do not come cheap and it takes a lot of time for them to become familiar with a new system. They are likely better off using current programmers on any project after HotS is completed, as they are the ones who are most familiar with the current code.
Battlenet 2.0 is a combined is a product of WoW and the need for Blizzard to keep the battle.net accounts under one roof. The thing is a work in progress and has some pretty awesome features, including cross game messaging(which I still use to this day with friends to play other Blizzard games). The lack of chatrooms at launch seems like a huge misstep, but most users do not with to be exposed to the masses of the internet.
In regards to the comment about micro transactions, he said that they have no plans to change their business model at this time. That is code for “Yo, we are going to release HotS and see how this free to play shit works out. We might work on it, but need to look into it further”. Free to play could be a flash in the pan, like Zynga, who was king of the world 2 years ago, but is now currently on fire and bleeding money. Blizzard is taking the long term approach as a business and not chasing the fast money that may not be there a year from now.
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