Some mildly interesting stuff:

- Cataclysm sales were supposed to push them over $600 million in revenue (for Cataclysm sales alone, excluding new subs and older WoW game purchases), but they earned $544 million instead. GAAP Revenue was $340 million for this most recent quarter, but they're deferring $204 million to next quarter. Nice way to show a constant revenue growth each quarter. =]

- Earnings basically showed those 4.7 million Cataclysm sales over 3 months as detailed earlier. Since they were expecting to earn about $320 million (if Cataclysm never launched) for the quarter, and that $544 million included all new WoW/TBC/WOTLK sales as well, there doesn't appear to be much of an increase in new subscriptions at all. Cataclysm was supposed to be the expansion pack to bring back all of the old players, but the impact has been minimal.

- That's actually good news for their next expansion pack really. Since the shattering experiment failed, they'll need to do something really big for the next expansion pack to get player's interest back: tons of new dungeons, a couple new professions, and at least two new hero classes would be nice. Maybe a third faction? =] It's going to have to be something very impressive to bring back the masses.

- The new "Project Beachhead" digital platform for Call of Duty.. paid services, communication, online community, exclusive content, digital downloads, and such. It'll basically be Battle.net for the CoD franchise - remember how they eventually wanted to bring everything together as one gigantic "Battle.net"?

- They're discontinuing Guitar Hero and disbanding associated business units (e.g. laying people off, closing studios). They're also killing off True Crime: Hong Kong.

- Activision Blizzard will be announcing an "innovative new universe with broad appeal that will be revealed at Toy Fair later this week and will bring the world of toys, video games and the Internet together in an unprecedented way." This is the first time Activision will be exhibiting at Toy Fair and this isn't for Blizzard related games, so I'm not really interested. It will probably be about their LEGO series or Zhu Zhu Pets or something.. meh.

- Outlook not so good for Blizzard titles in 2011, but they promised at least 2 major releases in 2012. Those would most likely be Diablo 3 and their next SC2 Expansion Pack (Heart of the Swarm) though. Their next-gen MMO is still years away.

- NetEase will be doing their Starcraft 2 launch in China. I wonder how it's going to be received in China..

- Heart of the Swarm will have more details (e.g. release date?) in the "coming months". Diablo 3 beta will be starting soon too (they're playing it cool with Diablo 3, as usual, they don't want to make any announcements yet and want to make sure the game is perfected before release).

The call is over now.. I was hoping for more, but not surprised at all.

FYI.. their stock is falling rapidly as a result of this call too. Mostly because of their statement on low revenue/guidance this year. 2011's going to really suck for both Activision and their customers. =[

* UPDATE:

Confirmation regarding lay-offs. Both Vicarious Visions and Freestyle Games have been hit with notices shortly after the meeting. According to Activision Blizzard's 8-K, they'll be getting rid of approx. 500 employees. The decision was made Feb. 3, and will be taking place on March 31 for the staff.

This same time last year, they laid off approx. 200 people. Apparently, February is the time of month when the non-performing studios need to start worrying.

Take-Two's Quarterly Earnings call is today at 1:30PM PST. And Activision Blizzard's call is tomorrow at 1:30PM PST as well.

The reason you've been seeing a bunch of new game announcements and release dates over the past couple weeks is because we're in the middle of various shareholders meetings and it's the beginning of a new year for gamers.

In the past, Mike Morhaime has used this call for official announcements like release dates, new games, and new services. Take-Two has also announced new games or release dates during this time.

Would be nice if Activision Blizzard were to announce the Diablo 3 release date tomorrow, rather than fans having to wait until BlizzCon 2011. They usually have one big announcement they want to make at BlizzCon.. so that's why I'm hoping the release date is announced much sooner.

* UPDATE:

Looks like the Take Two call was pretty disappointing and simply reiterating what everyone already knew. Their future lineup is looking pretty thin, and I think they're putting all of their bets on MLB2K11, Top Spin 4, DNF, LA Noire and BioShock Infinite. It's nice to see more of a PC lineup for 2011 and 2012 though (e.g. The Darkness 2, X-COM, Bioshock Infinite, and Spec Ops: The Line). At least we'll see X-COM this year but I was hoping for something new, oh well.. hope Activision Blizzard has some good news tomorrow.

I'm starting to get a bad feeling about DNF too.. the game is starting to look very linear and just like DOOM 3 (incl. the dated graphics.) I think there are going to be a lot of disappointed fans when the game comes out with very poor reviews and sales. So if you own stocks in TTWO, I would recommend waiting until the official release date announcement and sell off shares about 1 month before the release date. Then, just buy back shares (at a much reduced price) after the TTWO stock tumbles. =]

First QA question was about Max Payne 3. No updates today, "still being worked on" is what they said last.

He also asked about other versions (platforms and/or DLC) of Red Dead Redemption, but they don't have any announcements about it yet: "nothing to say about future iterations."

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.