World of Warcraft Has Lost its "WoW" Factor
Activision's beloved franchise may be crushing Star Wars: The Old Republic, but this MMO is no longer a cash cow.
In fact, it might just be a cow -- one that's waiting to be tipped over. But what is the cause? How can World of Warcraft be dying if its chief competitor is struggling to compete?
"I think the profitability metrics around [Star Wars: The Old Republic] are going to be lower than what many Wall Street analysts expected," Brian Sozzi, the Chief Equities Analyst for Nothing But Gold Productions, told Benzinga, adding that Electronic Arts (NASDAQ: EA) has hyped the game on every earnings call during the course of its development. "So they have nobody but themselves to blame for what happened. I find it ironic that they're kind of backtracking a little bit, trying to reset expectations since the subscriber count isn't there."
Sozzi blames the transition from home (console/PC) to mobile (smartphone) gaming as part of the reason for The Old Republic's struggles.
"Every phone that gets sold, every upgrade that happens to an iPhone, is essentially a vote against staying on the computer and playing Star Wars," said Sozzi, who also believes that the Star Wars brand has lost some of its wow-factor among gamers. "Even World of Warcraft has lost some of its wow-factor. But the reason it loses some of its wow-factor is because there's so many more competing products."
For better or worse, our attention spans are getting shorter. Sozzi believes that this has helped boost Facebook (NASDAQ: FB) gaming.
"[Consumers] don't necessarily have the time to be immersed in these games as they were a couple years ago," said Sozzi. "And after a while they get stale. You know how to navigate the challenges, you know how to game the system. Are you willing to continue to pay to be in that experience? Are you willing to pay 10 bucks a month for a magic sword? I think after a while it gets old."
Lost and Gone Forever?
In one year, World of Warcraft lost two million subscribers. Wondering about the game's future, I asked Sozzi if WoW will continue to lose players in 2012.
"I would think so," he said. "[But] World of Warcraft already has this installed universe, whereas Electronic Arts needed to [get] a stronger installed universe as soon as the game [arrived] and it just didn't happen. But World of Warcraft, I think, sure, you'll see content upgrades. You'll see new and interesting items around it. But I think that, too, has lost some of its wow-factor as well."
Rising to the Call
World of Warcraft's future may be in jeopardy, but as Yoda once said, "There is another."
"Activision (NASDAQ: ATVI) created a whole universe around Call of Duty during the last holiday season," said Sozzi. "Before that universe even existed, those [users] might have been people who were on World of Warcraft."
Going forward, Sozzi believes that Call of Duty will continue to be Activision's strongest franchise. "When I think Activision, I think Call of Duty," he said. "I don't think World of Warcraft at all. To the casual person watching TV commercials, I think Call of Duty has always been Activision Blizzard. The matter for them is to continue to build out that universe around Call of Duty, try to mitigate the subscriber loss of World of Warcraft through new content editions, and maybe even try to create another title."
Creating a new title is easier said than done, however. "A couple of years ago they ran into a brick wall when they hyped up True Crime and they discontinued that title," Sozzi recalled. "It's hard for them. They're essentially what Take-Two (NASDAQ: TTWO) is with Grand Theft Auto, but Activision has created a whole amazing universe around two titles that Take-Two doesn't have."
Guitar Hero Out, Skylanders In
While the success of Guitar Hero and Tony Hawk's Pro Skater might be a distant memory, Activision was successful in creating one new hit franchise last year.
"I like Skylanders," said Sozzi. "That speaks to Activision. I like that they continue to innovate. Toys with video games -- that was neat. It was a really strong seller. I think that has given them another bankable franchise that they needed. Ultimately it gets them into a part of the store where they weren't and where many video game companies aren't. They're just in packaged goods. Now you have Activision selling, again, a whole other entire universe."
As a game targeting kids, I asked Sozzi if he thought Skylanders could face the same kinds of challenges that THQ's (NASDAQ: THQI) uDraw encountered during its second year at retail.
"I would say no," he said. "I think uDraw was a bad product from the get-go. I never warmed up to it. I didn't think it was interactive enough. It didn't have that cool-factor. I think these [Skylanders] toys do have their wow-factor."
"Five years from now, will we be talking about this particular game and them selling toys?" Sozzi questioned. "I don't know. But I think in terms of this holiday season, I think it will be another big franchise for them."
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