In the past, Blizzard has stated that they lose money during each of their annual conventions. I think this is another thing where it's all about wording and interpretation though.

In 2009, Frank Pearce stated that "But in terms of any kind of financial gain, it actually is a loss for us." It's a marketing investment, and the amount of loss they incurred can potentially return ten times the amount in revenue. So, he must obviously mean that it's an expensive investment initially but there is financial gain at a later date.

Say a rock concert costs $5 million to put on, but they earn $20 million in ticket sales. It's still a completely honest statement to claim that the concert was a substantial loss for the organization or that "in terms of financial gain, it actually is a loss." You can still have a financial gain, but consider it a loss.. if you were expecting a 99% profit margin for example. That's a substantial loss, even though you made profit.

Blizzard never made the same comment about BlizzCon 2010 though. So, I'm curious how much they spent and made last year.

- Renting out the Anaheim Convention Center cost them $107,650 per day.
- They were given a free move-in and move-out date, but let's assume they were given an additional two days (costs 50% of one normal day). That's a total of $269,125 in rental fees for the two day event (includes electricity, network, etc.) plus moving time.
- Entertainment costs (Tenacious D being the highest) cost no more than $400,000.
- Food services, staff and equipment rental, goody bags (which hardly cost Blizzard anything), advertising costs (promotion, tickets, hanging banners/signs), and shipping of internal equipment cost about $1 million.
- Of course, I'm overestimating here on purpose. Other than the Blizzard goody bags, I personally know how much something like this really costs. In my case though, it was over 5,000 computers setup/shipped for a much larger facility (and a farther distance away), plus seat/table rentals, cabling, food services, staff, security, signage, etc. I think BlizzCon had about half that amount.

But let's say for arguments sake that all of their expenses cost TWICE the total amount instead, so $3.4 million for absolutely everything. =]

BlizzCon 2010 tickets cost $150 per person, and the virtual event cost $40 per ticket. According to RAYV, they serviced over 550,000 customers for this past BlizzCon 2010.

There were over 27,000 attendees @ $150 person = $4,050,000
There were over 550,000 virtual attendees @ $40 per person = $22,000,000

So excluding game sales, food sales, merchandising (which has previously been described as selling "hundreds of thousands of dollars"), and other marketing/promotion factors, they earned a minimum of approx. $26 million in ticket sales alone (versus $3.4 million in expenses.)

Before live streaming, I could still see BlizzCon making a small profit (when tickets cost less) but virtual tickets for live feeds were made available in 2009 when Blizzard stated that there was a financial loss. Then again, Frank Pearce described the costs as past tense..

This is a very interesting question. Most players are convinced that Blizzard makes a loss on sales of authenticators, and it's very difficult finding information to the contrary unless you know someone who works in the industry.

There have been plenty of alternatives available, so I was always curious why Blizzard chose authenticators. For example, in-game virtual keyboards (for PIN codes or passwords) are highly successful in other MMORPG's and inexpensive to implement (but, there's no direct profit to be made by doing this). Unfortunately, despite the cost of the device, there's also the chance that you might lose your token, damage it, or have battery issues and until a replacement is shipped, you're locked out of your account.

Two-factor authentication can also be made available through other sources (besides specific mobile devices) for free. For example, a soft token through a webpage or a second PC.

Anyways..

The Blizzard authenticator is in fact a Vasco Digipass Go 6, a cheaper model of token. There's a wowwiki entry on the authenticator as well.

(Just a quick note by the way. Hardware tokens are really just small LCD clocks with a factory-encoded key. Software tokens are the same - a very basic timer application that generates a code at specific intervals based on a uniquely assigned key/seed. They don't communicate back to any centralized servers or anything like that.. yes, some people actually believe that. They're just small standalone clock algorithm and a decoder. They're not hard to create either.. a basic soft-token apps literally take 1-2 hours to program and there's even plenty of open source examples online.)

There are certain plans where you can get the Mobile Authenticator for "free", but generally the Blizzard software tokens for mobile phones cost $0.99 (you also pay for download charges.) That's $1 to Blizzard for a simple 500 kb software app. Not bad.

Hardware authenticators cost $6.50 in the US, where free shipping is available. I'll use that as a base, even though they're more expensive in other countries (£4.80 or 6 Euros plus shipping can cost upwards to £10.00 or more.)

Online retailers sell the hardware token for $10 individually, but you can purchase these yourself from resellers in bulk for about $5.

I wanted to know how much manufacturers paid for something like this though, so I contacted a source in the manufacturing industry. His response: "Bill of materials? In volume, pennies."

Apparently, the components needed for this type of token shouldn't be more than $0.90 (including the casing). So, let's say the cost of manufacturing (well, assembling) is $1 per unit at the most, and Blizzard aesthetics (i.e. "a sticker") costs $1.. even though you know that these cost a fraction of a cent. At the very most these tokens cost $3 in total to manufacture, but in reality though, they're far less. Since they ship in bulk, individual transportation costs would also be in pennies. (Note: I was also told that "tokens are cheaper to make than crappy dollar-store calculators" if that helps put things into perspective.)

So yeah.. I think it's safe to say that both Blizzard and Vasco are definitely making a significant profit on authenticator sales. I'd be really interested in seeing their contract, but I'm assuming that Blizzard takes in the larger half of their split.

I think the reason why people think Blizzard is taking a loss is because they don't understand the technology and imagine the authenticator being a very expensive piece of new technology (with a satellite uplink that decodes passwords directly from Blizzard). After all, the Blizzard sticker makes it look very cool and shiny. Or maybe, they just don't know how much it truly costs to manufacture and ship goods. Or they see online retailers selling the model for $15-30 each, and assume retail prices are just slightly above manufacturing costs.

Or maybe they just forgot the saying "there's no such thing as a free lunch". This reminds me of Blizzcon actually.. it's said that the 2009 Blizzcon was a "substantial loss" for the company.. but I wonder what they mean by that? Sure, it cost a lot up front.. but how much did they reap in longterm revenue and marketing potential?

Anyways, I just want to correct a common misgiving that Blizzard is taking a loss on authenticator purchases. It's almost as ridiculous as those claims that Blizzard has "never had a security breach" because "they're required by law to announce data breaches, which they never have so logically there's never been a breach." =]

* UPDATE (03/15/2011):

Found this project online, it's a more expensive and complicated type of token/authenticator (active proximity, not passive) for unlocking SmartPhones.

This token can be built in volume for about $0.75 USD each. It's definitely more complicated than the Vasco Digipass (which is just a fancy clock with an algorithm), but it gives you a really good idea of component costs before assembly. A really good example nonetheless for those unbelievers. =]

Talk to an electrical engineer, and they'll tell you how much things really cost.

To help put things into perspective, do you have technical support experience? How long does it take you to install a new harddrive, memory, an operating system, or scanning for viruses? Staples charges $50 for a HD, $40 for memory, $100 for an O/S install, and $200 for a scan/removal. PC users with no experience believe that these prices are reasonable.. but you know better don't you? =]

* ANOTHER UPDATE:

And here's official proof directly from Vasco, the manufacturers, themselves.

This is a 2006 document detailing the Digipass line. In 2004, the cost per token was ~$3.50. In 2005, it was ~$3.00 each. And in 2006, it cost ~$2.00 each per token. They have probably made improvements in manufacturing technology since then, and bulk sales have definitely increased quite substantially so you could assume that their DigiPass Go 6 tokens cost $2 at the very most to manufacture (parts, construction, etc.)

The ASP (Average Selling Price) is also quite interesting. Apparently, wholesale distributors sell these things for 5-20x what they cost to manufacture.

Another rumor which states that Blizzard's next expansion pack will be called "Emerald Nightmare".

This rumor originated on MMO-Champion.com:

Leak Confirms 'Emerald Nightmare' as Next World of Warcraft Expansion

While it will not surprise players familiar with the game's extensive lore, an anonymous source within the Activision-Blizzard team responsible for the best-selling World of Warcraft MMORPG and it's two expansions has confirmed the next to be titled 'Emerald Nightmare'. It will take places after the events of "Stormrage", a novel authored by Richard A. Knaak which explores Malfurion Stormrage's attempts to cleanse the Emerald Dream of Xavius's corruption. The source also confirmed a tentative release date of Q4 2012, consistent with the release schedule of previous expansions.

It sounds a little dubious since it's written "news style" to give the appearance that it was copied from another source, however it did in fact originate on MMO-Champion.

It was re-posted on the official Blizzard forums, however it was only up for 1 hour before Blizzard deleted the thread. You can see the original read here.

Cached copies of the Forum Post (http://us.battle.net/wow/en/forum/topic/2016644135) can be found here and here, but they won't be up for much longer though.

The user Leynah wrote: "Just got word from my anonymous source at Blizzard that this source smells and leaves crumbs all over his desk. He made no mention of refuting the claim... just complained about the guy."

As you recall, Cataclysm details were "leaked" on MMO-Champion, however that was by Boubouille (the site admin) who had a known relationship with Blizzard. This 'Emerald Nightmare' rumor was started by a new user.

It's not really a big surprise, though, if the next expansion has something to do with the Emerald Dream. Blizzard has already hinted at it in the past (future expansions packs will be "a dream and a nightmare") and it has been speculated by many users.

A future expansion pack will no doubt contain the Emerald Dream and Nightmare, but the origin of this rumor is questionable (e.g. "It will take places", "World of Warcraft MMORPG and it's two expansions" (pre-Cataclysm rumor I'm guessing), the "news-look" even though this is the original source, the age of the account, and that it was re-posted to the WoW forums seconds later by a Level 1 account named 'Fdhgj', who also then deleted their own account.) So yeah.. I'm calling bullshit on this rumor.