EPTIt had a few tidbits I hadn't heard about:
1. Blizzard spent more than $100 million developing SC2.
2. They expect a *profit* of between $500 million and $1 billion in operating profit over the lifespan of the game.
3. One of the main points of beta testing was to "migrate" WoW players to play SC2.
4. All of this occurs against a backdrop of falling sales and profits in PC gaming in general.
My own thoughts: At $60 a pop, assuming a marginal cost per box of $5, you need to sell about 11 million units to make back the $100 million development cost and make the low end profit expectation of $500 million.
That excludes marketing costs, which can be huge. Television commercials, banners on websites, viral campaigns, whatever. Call marketing another $100 million.
Now Blizzard needs to sell 12.7 million units to meet the low end profit expectation, and 21.8 million units to meet the high end.
To get some perspective on 12.7 million units and 21.8 million, the original Starcraft sold 11 million units total over its 10+ years of life. (the article below says so.) Call of Duty: Modern Warfare 2 is the best selling game in history, and it sold 15 million units (Source: http://articles.latimes.com/2010/jan/14/business/la-fi-warfare-game14-2010jan14)
My point with all this? I think that Activision/Blizzard has pretty much announced to Wall Street that Starcraft is going to be the best selling game of all time by a wide margin.
+ Show Spoiler +
Activision Bets Big on PC Game
Company Has Spent More Than $100 Million Developing 'Starcraft' Sequel
By DAN GALLAGHER
[Blizzard] Blizzard
'Starcraft II' is a sequel to a science-fiction strategy game that was released 12 years ago. The videogame goes on sale July 27.
Game developers at Blizzard Entertainment have been putting the finishing touches on "Starcraft II," a sequel to a science-fiction strategy game that was first released 12 years ago.
Although videogame sales are in a slump, expectations for "Starcraft II" are high. Blizzard's parent company, Activision Blizzard, has spent more than $100 million developing the computer-based game.
Analysts expect it will sell several million units globally this year, giving a profit boost to Activision's bottom line.
"There is no shortage of consumers for 'Starcraft'," Activision Chief Executive Bobby Kotick said in an interview last month. "For a game that is more than 10 years old, there's millions of people still playing it."
At a meeting of analysts last month, Mr. Kotick described Starcraft as one of the company's seven "pillars of opportunity." He said each pillar has the potential to deliver between $500 million and $1 billion of operating profit over its life span.
"Starcraft II" goes on sale July 27 for $60. The game and its predecessor are set around a battle between three species in the 26th century.
The first "Starcraft" has been one of the best-selling titles for the PC, having moved more than 11 million units since its first release.
Blizzard President Mike Morhaime said the company may be able to migrate some fans of its blockbuster "World of Warcraft" franchise to the game.
"We've brought in a lot of new players in the beta testing who've been playing 'World of Warcraft' but have never tried Starcraft," he said in an interview at the company's headquarters in Irvine, Calif.
The release of "Starcraft II" plays into a larger trend by Activision and other videogame makers to seek growth outside the traditional console-based, retail games business, where momentum has been slowing of late.
For the first five months of this year, sales of game software in the U.S. fell more than 6% compared with the same period in 2009, according to data from the NPD Group, which tracks sales of game products through traditional and online retail channels.
U.S. sales of videogame hardware, software and accessories for June fell to approximately $2.2 billion from $2.3 billion a year earlier, according to NPD.
Analysts say NPD doesn't cover other channels in the game market, most notably games that are sold in digital formats over online services such as Xbox Live and the PlayStation Network.
NPD says it has started to measure spending outside the traditional retail channel, including used games, rentals, subscriptions and digitally delivered content.
Such channels are becoming increasingly important to the sector. Activision's March quarter was driven in large part by online play of its blockbuster "Call of Duty: Modern Warfare 2" and the downloadable expansion pack called "Stimulus Package."
Michael Pachter of Wedbush Morgan expects the PC game segment to offset declines in the console game business this year—thanks mostly to the "Starcraft II" release and a coming "Warcraft" expansion.
Game publishers have been pushing to build out their digital businesses, but Activision has a leg up on the competition through Blizzard, a maker of online games that merged with Activision in 2008. The "Warcraft" multiplayer online franchise brings in a steady stream of monthly subscription revenue.
While "Starcraft II" won't use a subscription model in the U.S., the game will offer subscriptions in other markets such as Korea. Plus, PC games offer larger profit margins than console titles, as revenue doesn't need to be shared with console manufacturers.
Eric Handler, analyst at MKM Partners, said Activision is focusing on franchises that not only have the potential for strong retail sales, but the most opportunities for additional revenue from digital initiatives like downloadable content and microtransactions.
"I think it's a very sound strategy for them," he said.
Write to Dan Gallagher at dan.gallagher@dowjones.com
Company Has Spent More Than $100 Million Developing 'Starcraft' Sequel
By DAN GALLAGHER
[Blizzard] Blizzard
'Starcraft II' is a sequel to a science-fiction strategy game that was released 12 years ago. The videogame goes on sale July 27.
Game developers at Blizzard Entertainment have been putting the finishing touches on "Starcraft II," a sequel to a science-fiction strategy game that was first released 12 years ago.
Although videogame sales are in a slump, expectations for "Starcraft II" are high. Blizzard's parent company, Activision Blizzard, has spent more than $100 million developing the computer-based game.
Analysts expect it will sell several million units globally this year, giving a profit boost to Activision's bottom line.
"There is no shortage of consumers for 'Starcraft'," Activision Chief Executive Bobby Kotick said in an interview last month. "For a game that is more than 10 years old, there's millions of people still playing it."
At a meeting of analysts last month, Mr. Kotick described Starcraft as one of the company's seven "pillars of opportunity." He said each pillar has the potential to deliver between $500 million and $1 billion of operating profit over its life span.
"Starcraft II" goes on sale July 27 for $60. The game and its predecessor are set around a battle between three species in the 26th century.
The first "Starcraft" has been one of the best-selling titles for the PC, having moved more than 11 million units since its first release.
Blizzard President Mike Morhaime said the company may be able to migrate some fans of its blockbuster "World of Warcraft" franchise to the game.
"We've brought in a lot of new players in the beta testing who've been playing 'World of Warcraft' but have never tried Starcraft," he said in an interview at the company's headquarters in Irvine, Calif.
The release of "Starcraft II" plays into a larger trend by Activision and other videogame makers to seek growth outside the traditional console-based, retail games business, where momentum has been slowing of late.
For the first five months of this year, sales of game software in the U.S. fell more than 6% compared with the same period in 2009, according to data from the NPD Group, which tracks sales of game products through traditional and online retail channels.
U.S. sales of videogame hardware, software and accessories for June fell to approximately $2.2 billion from $2.3 billion a year earlier, according to NPD.
Analysts say NPD doesn't cover other channels in the game market, most notably games that are sold in digital formats over online services such as Xbox Live and the PlayStation Network.
NPD says it has started to measure spending outside the traditional retail channel, including used games, rentals, subscriptions and digitally delivered content.
Such channels are becoming increasingly important to the sector. Activision's March quarter was driven in large part by online play of its blockbuster "Call of Duty: Modern Warfare 2" and the downloadable expansion pack called "Stimulus Package."
Michael Pachter of Wedbush Morgan expects the PC game segment to offset declines in the console game business this year—thanks mostly to the "Starcraft II" release and a coming "Warcraft" expansion.
Game publishers have been pushing to build out their digital businesses, but Activision has a leg up on the competition through Blizzard, a maker of online games that merged with Activision in 2008. The "Warcraft" multiplayer online franchise brings in a steady stream of monthly subscription revenue.
While "Starcraft II" won't use a subscription model in the U.S., the game will offer subscriptions in other markets such as Korea. Plus, PC games offer larger profit margins than console titles, as revenue doesn't need to be shared with console manufacturers.
Eric Handler, analyst at MKM Partners, said Activision is focusing on franchises that not only have the potential for strong retail sales, but the most opportunities for additional revenue from digital initiatives like downloadable content and microtransactions.
"I think it's a very sound strategy for them," he said.
Write to Dan Gallagher at dan.gallagher@dowjones.com
