For a company that released Destiny and Call of Duty: Advanced Warfare to much pomp and circumstance, you would be forgiven for thinking that Activision Blizzard (NASDAQ: ATVI) was fully devoting the end of 2014 to its console titles, unaware that they were also releasing a new World of Warcraft expansion pack as well. After all, with the 8th generation of consoles celebrating their one-year anniversary, who would really get excited about another expansion of a decade-old online game that's long past its prime? How much can Warlords of Draenor really impress gamers and investors who now look at Warcraft as a money machine rather than the coveted title it once was?
As it turns out, gamers and investors can be very excited about this new expansion, so excited that both Activision's share price and Warcraft subscription numbers jumped thanks to glowing reviews and surprisingly high demand.
Draenor success foretold in Q3 earnings report
Warlords of Draenor is turning out to be the surprise hit this season, though this might have been hinted at during Activision's last earnings report. Last month, Activision reported an increase in Warcraft monthly subscribers, the second time this year this has happened, but the first time in over five years where subscriptions have increased without a new expansion on the shelves. This excited some investors, who still consider the $1 billion flagship franchise as an important indicator of the company's quarterly financial strength despite long downward trends for subscribers. By showing an increase to 7.4 million monthly users, it shows that old players had high levels of excitement for this new expansion, and are getting back in so that they can fully enjoy all that Draenor will have to offer.
Happy days are here again?
The new subscriptions last quarter foretold a possibly big launch for Draenor, and the opening sales figures did not disappoint. Within 24 hours, over 3.3 million copies of the game were sold, and by some estimates, monthly subscriptions rose to over 10 million users. This was the most successful expansion launch since Cataclysm in 2010, and the highest monthly subscription totals since 2011. Put into perspective, the last expansion, Mists of Pandaria, took a full week to hit 2.2 million units sold, and it is the first time the franchise hit the 10 million subscriber mark since 2011, which was a decline from 2010.
While the full financial benefits of this new version of the game won't be known until Activision releases its Q4 earnings sometime next year, this resembles a stronger than expected turnout for a franchise that had been considered past its prime, and with in-house titles like Hearthstone boasting 20 million subscribers using a more modern, mobile-friendly model of gaming. These sales figures for Draenor may not change the narrative completely for the franchise. It still demonstrates that Warcraft is far from dead as it celebrates its 10th anniversary.
Why investors should be excited this quarter
It has been a long time since Warcraft was boasting sales and monthly subscription figures like the ones Draenor is inspiring, and that should make Activision an attractive company for investment in 2015. While the company is increasingly diverse in its offerings, World of Warcraft remains its most important game from a financial perspective, despite signs of age. Hitting the 10 million subscription mark may mean that the game has a new lease on life and fatter profits for the company. It's still a 2004 game at heart though given the pay model that is used and some of the "creaky" mechanics of gameplay, so Activision still needs to either update the subscription procedure or wean investors off of Warcraft and in favor of games like Hearthstone which is a more casual game with a growing revenue stream thanks to in-game payments.
Regardless, this is Warcraft's moment in the sun, and it can celebrate turning 10 years old as a hot franchise once again.
Disclosure: The author is long ATVI.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.