This will probably be a boring read for some of you, but I found it pretty interesting.

It's the risk assessment section of Activision Blizzard's SEC filings / reports that discusses Vivendi's concern regarding the MMORPG platform which has been re-iterated every year until about 2009. Just to make it clear to Blizzard and their investors. =]

I particularly like the first introductory paragraph:

Risks Related to the Vivendi Games Business

"Vivendi Games is dependent on Blizzard’s World of Warcraft franchise."

Here are some other tidbits:

- "The majority of Vivendi Games’ total net sales are derived from Blizzard’s World of Warcraft franchise."
- "To remain the leader in the MMORPG category, it is important that Vivendi Games continue to refresh World of Warcraft or develop new MMORPG products that are favorably received.."
- "A substantial portion of Vivendi Games’ revenues are derived from subscriptions paid by World of Warcraft subscribers."

It sounds like they put all of their eggs into one basket. :)

- "If consumer demand for World of Warcraft games declines and Vivendi Games has not introduced new MMOG or other products that replace World of Warcraft’s potentially decreasing revenue, or added other sources of revenue.."
- "..if new business models emerge that offer online subscriptions for free or at a substantial discount to current MMOG subscription fees, Vivendi Games’ revenue and profitability will decline."

This might be evidence of pressure put on by Vivendi that "encouraged" Blizzard's new paid services. (e.g. Server transfers, class/faction changes, character customizations, and other microtransactions.)

If they can't reverse their declining numbers, they might be forced to start selling additional virtual items: gold, gear, levels, etc. =]

- "The development of MMOG products requires substantial up-front expenditures. Vivendi Games may not be able to recover development costs for its future MMOG products."
- "..if future MMOG products do not achieve expected market acceptance or generate sufficient sales and subscription revenues upon introduction, Vivendi Games may not be able to recover the development and marketing costs associated with new products, and its financial results could suffer."

Blizzard, your next gen MMO better not screw up! I know.. It's highly unlikely.

- "Consumer preferences for games are usually cyclical and difficult to predict, and even the most successful titles remain popular for only limited periods of time, unless refreshed with new content."

This is very interesting and so true. That's why I'm looking forwards to the opening day sales reports of Cataclysm. I want to see if their new approach will significantly improve sales. If they don't get 5+ million sales in the first 4 weeks, it clearly demonstrates waning interest in the game - which is one of Vivendi's fears.

Blizzard will play it up though, and announce the total sales made during the first 24 hours of the Cataclysm release. (Let's hope it's atleast 3 million). After that, there won't be any more announcements and they'll conveniently skip the following week.

I'm also predicting that they'll only announce sales, but make no mention of new "Active Subscriber" counts. And if they don't meet the minimum requirements (sales) mentioned above, player counts will continue to drop unless they can re-open the Chinese market. (Keep your fingers crossed!)

- "In order to remain competitive in the MMOG market, Vivendi Games must continuously develop new products and enhancements to existing products."

Develop new products and enhancements.. but don't innovate. Stick with what we know.

- "If World of Warcraft subscribers become dissatisfied, they may chose not to renew their memberships in order to engage in other forms of entertainment (including competing MMOG offerings) and Vivendi Games may not be able to replace lost subscribers."
- "..if general economic conditions decline, consumers may decrease their discretionary spending on entertainment items such as MMOG games and users may choose not to renew their World of Warcraft subscriptions. A decrease in the overall subscription base of World of Warcraft could substantially harm Vivendi Games’ operating results."

This is common sense, but I wish Blizzard would pay more attention to it. There are bad reviews, declining customer support satisfaction, support lines are tied up for weeks at a time, and they're still laying off support staff. They're also adding/removing unwanted features (not listening to the customers.) It's already hurting Vivendi's operating results, and unless this gets fixed soon, they'll be losing even more subscribers that they won't be able to replace.