Thursday, September 29, 2016

Activision-Blizzard Reviewed by the SEC

Let me just start this blog post by saying that, while the title of this sounds ominous, being reviewed and going through a comment letter process with the Securities and Exchange Commission (the "SEC") is not at all unusual for a public company.  In fact, the SEC tries to review most public companies at least once every 3-5 years.  Activision-Blizzard had not been reviewed since 2012, so in that sense, they were due.

This was a relatively short initial comment letter, particularly for a company as large and complex as Activision-Blizzard and they only went through three rounds of comments over about a four month period of time, which is fairly typical.

Typically, when you receive one of these letters, the SEC gives you two weeks to respond, although they are generally pretty flexible about granting extensions if there are circumstances that make it difficult to gather the information they're requesting and respond that quickly and Acti-Blizz actually requested and received an extension on their second round of comments.  Once you receive one of these letters and start working on your response, the response letter that you're drafting also gets reviewed by your legal counsel and by your audit firm, which adds to the length of time these take to prepare.

Typically, once you respond to the SEC's questions, they will then take somewhere around 2 weeks to review your response and will then potentially get back to you with either follow up or new questions.  So in general, these things typically take a month to a month and a half for each round of comments, and it's not at all unusual to go through a couple of rounds of questions and answers.  At the end of the process, you'll get the anxiously awaited "We have no further comment" letter from the SEC at which point the entire exchange gets posted to the SEC website for the world to see.

So that's the context and the background of the whole SEC comment letter process.

Acti-Blizz's original letter was received back in early April, and the SEC's first question was around a topic that we've discussed here a few times:  the Monthly Active User metric ("MAU's").  Here's the question that the SEC asked:

They asked two other questions in the letter, one related to the period of time over which they were recognizing revenues for certain games and whether they had considered disclosing that time period either by major game title or by game type.

The second question related to what was in some of their other cost of sales categories and whether those related to product sales, services or other.

Here is Acti-Blizz's response to the MAU question:

Monthly average users (MAUs) is a player engagement metric that the Company has been evaluating as an emerging “key performance indicator” in light of various business developments discussed below. Although player engagement helps drive players’ investment in our games, mainly through digital sales transactions, prior to the current year (2016) we have not viewed MAUs as a “key performance indicator” or concluded that a discussion of MAUs was required in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) for investor understanding of our business.  Instead, we have considered digital revenues, which we have provided and discussed in MD&A since 2011, as providing direct and relevant financial information about the growth in our digital business. We believe that our discussion and analysis of digital revenues performance has provided investors with the information required to evaluate the Company’s trends and performance, in accordance with Section III.B.1 of SEC Release No. 33-8350.
 In light of the development of our year-round engagement model, and growth of the free-to-play (“FTP”) and in-game items purchases business model across our franchises, in the second half of 2015 we began to consider the utility of the MAU metric by accumulating data, working to harmonize the metric across businesses, performing reviews and quality checks, and seeking alignment with senior management.  As a result, we began using MAU as a metric in communications with investors, such as earnings releases, beginning in August 2015, but do not believe that MAU was a key performance indicator required to be discussed in MD&A prior to 2016.

 With our recent acquisition of King Digital Entertainment Limited (“King”), which closed on February 23, 2016 and significantly increased the size of our FTP business model, we have concluded that MAUs are now a key performance indicator for our business.  Therefore, in future filings, we plan to include a discussion of MAUs within our MD&A.

So one of the interesting things here is it makes it clear that some of the additional disclosures that we were seeing out of Blizzard in the last quarter or two were at least in part in response to a request from the SEC.

In the third round of comments, the SEC introduced a couple of new questions to the conversation, including focusing on some of the non-GAAP measures that we'd previously discussed in an earlier blog post.  Specifically, there were three questions around their presentation of non-GAAP measures:

In Blizzard's response, they basically agreed to make the changes that the SEC was requesting to their future earnings releases, which led to the changes that we talked about in Q2.    And that ended the comment letter process for them.

The other mildly interesting point to note is that the SEC doesn't only review the official quarterly and annual Form 10-Q and Form 10-K's.  The 3 comments listed above are based on a review of the company's earnings release and not it's financial statements.

Wednesday, September 14, 2016

So Much To Do!

So I've been level 110 for around a week now, and I'm still finding myself completely overwhelmed by the amount of things to do.  A week later, and I'm still not geared enough for heroics (although I'm VERY close, sitting at 808).

So I guess we were all whining a bit about lack of content, so boy did we get it.  And it's almost overwhelming.

  • World quests (including daily emissary quests)
  • Profession quests (for me, both tailoring and enchanting)
  • Cooking quests and Nomi work orders
  • Class order hall quest line
  • Class order hall mission (including training troops)
  • Artifact weapon stuff, including training artifact knowledge
  • Suramar quests (I've finished all of the other zones, but I've barely scratched the surface of this one).
  • Nightfallen rep - there are two dungeons gated behind Nightfallen rep along with portions of my profession quest chains
  • Fishing / working towards the fishing artifact rod and reel
Needless to say, with all of this going on, I haven't made any progress at all on leveling other alts.  In Warlords, my second character hit max level 26 days after launch.  We're at 15 days now, and I don't feel like I'm likely going to get there in the next 11 days given that my next highest level character is sitting at 101.  But that's okay.  Because that means there is a lot to keep me occupied and engaged this time around.

In terms of gearing, I seem to be having equal luck from world quests and normal dungeons.  If I wasn't doing so much other stuff, I think I likely could have geared up for heroics fairly quickly, but it honestly hasn't been a priority.  There also seems to be a fair amount of reasonably priced 815 gear on the auction house on my server to supplement where needed, but I haven't felt the need at this point.  (And maybe others haven't as well, given the "reasonably priced" part)  I find the Companion App is better for figuring out which gear related world quests I want to go after because they're easier to pick out there.



Thursday, September 8, 2016

Joar Hits 110, and Still Lots to Do

So I managed to get to 110 yesterday on my warlock and then promptly got overwhelmed by the amount of things that I still needed to do.  Before unlocking world quests, I needed to get to Friendly with a number of factions, which meant doing a couple more quests in Stormheim beyond where I'd dinged.  It also meant heading to Suramar and doing a couple of quest chains there.

Then that opened up the window of world quests and all the fun to be had with those.  Plus I still have my Class Order quest line and a bunch of profession quests, and while I've been mucking about doing the profession quests, I haven't actually been doing much of anything to level my actual professions.  (Am I the only one that thinks its a bit odd that you don't actually get profession skill for doing all these quests?)

I also want to start working on fishing and cooking a bit to see how those go.  I figured out the recipe system with Nomi in Dalaran, so am accumulating lots of fun and exciting cooking recipes.  I just need some fish to go with a few of them.

So there's lots to do.  Oh, and I still haven't decided if I want to be affliction or destro.  Affliction was really annoying me while leveling with the little ghosts that it leaves for every mob that you kill, courtesy of your artifact weapon.  I also see all the posts on the forums and such as how affliction is absolutely bottom of the barrel in DPS right now, although given that I'm not going to be doing anything past LFR at this point, and we're still very early, I'm not sure that's even worth looking at.

In terms of leveling time on Joar, my first toon in an expansion is always extremely slow, because I do things like read quest text, and explore a bit, so he was at 25 hours and 11 minutes /played from 100 to 110.  This actually pretty in line with previous expansions.  Warlords was 24 hours and 30 minutes.  MOP was actually 28 hours.  The first toon that I leveled in Cataclysm actually was my paladin and not my warlock and he clocked in at 35 hours played to max level in that expansion.  And yes, I'm fully aware that it's a bit sad that I actually have all that data.

I'm also debating whether the death knight or the hunter will be up next.  I'm inclined to switch between melee and caster (particularly since we now have a nice even number of each thanks to the new DH hunter class, at least Horde side for me, alliance side tends to be melee heavy because I play both enhancement and feral there).

So far, I'm enjoying the expansion.  More updates next week.