Analysis of the Q4 Earnings Release

So instead of my normal blog-based analysis of the Q4 Earnings Release, this quarter I did it in podcast format with Alt from Alternative-Chat and Mick Montgomery from The Starting Zone podcast was kind enough to put it up as an episode of The Starting Zone.

So a big thank you to both Alt and Mick.  And here is the link to the podcast analysis of Activision-Blizzard's Q4 Earnings Release:

Starting Zone Podcast - Q4 Earnings Release

Playing Some Rift

So yesterday I went in and started playing a little bit of RIFT.  I'd run through my normal garrison activities for the day, and started working my warrior through Mt. Hyjal, and then just stopped and decided I wanted to do something else.

RIFT is a game that I've played since launch and really enjoyed.  I got a mage to max level in the original game, and even did a bit of experts and raiding, but once Storm Legion came out, I started falling behind.

So now I'm playing a little bit of catch up.  My mage is finally finished with the Storm Legion content and working his way through the Nightmare Tide leveling zones.  Those have been fun so far and I'm about half way through 61 at this point.  I'm leveling as a Harbinger / Chloro build.  You Warcraft fans out there are going to snort your drink out of your nose at this point, but this is actually a melee build for mages.

See, the interesting thing with Rift is that any "calling" (their word for classes) can basically play any role - tank, healer, melee or ranged.  So you can have a ranged warrior, or a healing warrior, and a melee mage, or a tanking mage.  There is a warlocky option for mages in Rift, but I was really enjoying the Harbinger through the Storm Legion zones, so I'm sticking with it for now.  I've also heard good things about Pyro builds (think fire mage), so I may try that out soon.

I've got toons in various states from the other 3 callings as well.  I've got a cleric at level 28 (who I play like a shadow priest), I've got a rogue at level 25 (who I play like a hunter), and a warrior at level 6.  Yeah.  I've never been much of a warrior guy.

So I may work on getting my mage to max level and then play through the content in the Planetouched Wilds, just to see what that's like.  Stay tuned for updates.

Ding, Level 100 #21, And More Gold-Making

So I managed to hit level 100 yesterday on my alliance shadow priest.  Not a bad way to start off the month of February.  I'm working on my alliance warrior next, saving the monk for last.  The warrior is currently working his way through Howling Fjord of all places.  I wasn't sure I'd ever done that on the alliance side, but now that I've started through it, I realized I had.  

Since on the horde side, I'd leveled my warrior as fury, on the alliance side, we're going arms.  All of the characters that I've been leveling lately, seem to have been taking right around a total of 2 days played to get to 100.  That just really blows my mind when I step back and consider that way back in the day, a total of 6 days played to 70 was absolutely bonkers fast.

How things change.

Beyond the leveling stuff, I'm continuing to crank out the gold horde side with 11 fully functioning garrisons.  Things are starting to crank up alliance side as well.  I've got follower groups fully geared on at least 3 different alliance toons, and working my way there on another 5.  It's the usual mix of treasure hunters and trading posts to keep the gold flowing.

Beyond that, there's not a ton going on for me in Warcraft these days.  Just peeking into alpha news now and again and waiting for the beta to come out.

Space Oddities and Glass Spiders

So it was August 1987, and I was disappointed.  Seriously disappointed.  For an artist like David Bowie, clearly Red Rocks Amphitheater (which was coincidentally 2 miles from my childhood home), was the perfect venue for a David Bowie performance.

But it wasn't to be. This tour (the Glass Spider tour) was simply too big. Heck, the Serious Moonlight tour hadn't even set foot in Colorado, so understandable that they'd want to reach a wider audience.  so instead, I found myself sitting at Mile High Stadium.  Oh hell yes, I still went to the concert.  I may have been disappointed, but I wasn't nuts.  And it was AMAZING.

So this week, I'll be leveling to the accompaniment of the legendary Mr. Bowie.

So there's been a little bit of progress on the leveling front so far this year.  As mentioned in my "Year In Review" post, I did manage to get toon #19 to 100 before the end of the year, and I also managed to get toon #20, my alliance rogue, to 100 pretty quickly in the New Year.  I'm now working on my alliance shadow priest who is working his way through Northrend.  Next up is going to be the alliance warrior, and then the monk to round out my full set of 11 alliance max level toons.

I may comment more on this later on, but I've been findings a bit rougher going in Northrend leveling dungeons lately.  Things that used to be easy and lots of xp seem to be causing groups a lot more trouble these days.  It's the normal suspects - pulling too much, standing in bad, ignoring mechanics, not staying with the group (general rule of thumb - stay with the tank and healer, not that complicated folks).

I have typically run a lot of dungeons while working through the Northrend zones and then stopped once I hit Cataclysm zones, but I've been looking closely at the impact the new normal is having on my xp per hour, and really debating whether that still makes sense.

2015 Year In Review

So as is my tradition on this blog, I've decided to do a quick year in review for 2015.  Interestingly enough, as I finished up 2014, the Warlords of Draenor expansion was relatively new.   Has it really only been a year?  It feels like forever.  At December 31 of last year, I had managed to level exactly 3 characters to 100.  I will likely finish up #19 sometime this week (and #20 probably sometime next week), so you can do the math on that.

Unlike previous years, I didn't have any shiny new MMO releases that I tried.  Last year involved a brief flirtation with Wildstar and some time spent on Diablo.  This year, while I did play a little bit of RIFT, there wasn't really any major attention spent to other titles.

A lot of this year was spent on Garrisons and using them to accumulate gear and gold.  That's been fairly successful with really minimal effort and has really replaced inscription as my low effort gold raising technique.

I did the legendary quest chain on 3 different toons, and then promptly asked myself why the hell I bothered doing that.  The effort burnt me out on raiding and LFR pretty badly, and as a result, I haven't set foot in LFR in meaningful way since August.

But I'm enjoying the leveling scene, and I'm looking forward to Warlords.  My rogue is currently sitting at 91 in his garrison accumulating garrison resources and will probably push to 100 next week.  After that it is alliance priest, warrior and monk, probably in that order.  Then I may do a third hunter and a third mage if time allows.  I may level this one as fire just because I've never ever ever even tried that.  So why not, right?

Cheers,

Joar

Rogue Progress

So I managed to finish up Northrend yesterday on my rogue.  Rogues are an odd conundrum for me, because I really enjoy leveling rogues, but it's not a class that I enjoy at all at end game.  But every time while leveling I always find myself wondering why that is.

So the rogue will be heading off to the Cataclysm zones now shortly and hopefully not too much longer until he's safely parked and accumulating Garrison Resources while I finish the push on my warlock from 91 to 100.

Next up after the rogue will be my shadow priest, followed probably by warrior and then monk.  And then if I still have time after all that, I may start a third hunter.

Garrisons continue to be very lucrative with only a minimal time investment, not only in terms of gold generation, but the added benefit of improving my alts' gear, which should make leveling them in Legion that much easier.  Of course, if there ends up being some kind of loot pinata as part of the pre-expansion event, all that time gearing up followers may have been essentially wasted, but that's okay.  Not everyone will need to take up the stick and whack the pinata.

Not Much of An Update

So I haven't published anything here in two weeks now, and it's honestly because, particularly with the U.S. Thanksgiving holiday in the middle, there really hasn't been much going on.  My Warcraft activity has been fairly limited and has consisted mostly of getting up and doing Garrison missions across 18 different toons, and then working a little bit on leveling warlock #3.

So the warlock is sitting at level 79 and almost almost done with Wrath and ready to move on to Cataclysm.  I pretty seriously dislike the Cataclysm dungeons, so I'll probably be mostly questing through those zones and may pick up the dungeons again in Pandaria.

My plan is to park the Warlock in their garrison at level 91 to let them accumulate garrison resources for a bit while I go back to working on some of the alliance toons.

So that's it for now.

Cheers.

You Really Can't Go Wrong With a Third Warlock

So I went ahead and started a third warlock last week so that I could have one of each spec at max level when Legion came out.  That warlock is now sitting at level 60 and working his way through Hellfire Peninsula.  Good progress for just a few days worth of work.

After the warlock is done, I'll likely go back to my alliance group, where I have four more toons that need to be pushed from somewhere in the 60's or 70's through to max level.  Rogue will be up next, followed by priest, then monk then warrior.  Because warriors are always last with me.  For absolutely no good reason.

If I'm able to finish those four up, I'll probably go back and start a third hunter on my new third Horde server.

Meanwhile, Garrison operations alliance side are now making good progress and starting to generate some cash for my toons on that server.  One of the interest side effects of leveling some of these toons from pre-90 is that they didn't have time parked in their garrison accumulating garrison resources, so most of them are running very short on resources by the time they hit max level.  What that means is having to wait a few days in some cases to accumulate enough to upgrade to level 3 and then to build out the various buildings I need for my gold making and leveling strategies.

And yes, I'm well aware that I could build lumber mills for each of them or fly around looking for treasures, but I'm not interested in investing that kind of time.  I'm looking for something that I can do in a minute or two per day with each toon.

So that's the update at this point.

Cheers,

Joar

Thoughts on Legion Info From Blizzcon and Ding, Level 100 #18

So I could spend the next several hundred words going completely nuts over this and that gameplay element that was introduced at Blizzcon and that we can expect in Legion.  But I went back and looked at reactions that I'd written after the last couple of Blizzcon intros of new expansion content, and it seems I pretty consistently missed the mark.  What I was most excited about in each case either never happened, or ended up being something disappointing.

So I'm going to go with these general comments:

• The idea of zones scaling to fit where you are and give you more choice about which order you quest in is fantastic.  How it actually works in practice will likely depend on if you are able to leave one of the zones out completely and still hit max level (which I'm guessing will be possible with full heirlooms and other xp boosts).  If that's the case, then I'm a huge fan.  Otherwise, I'm not sure the ability to just change the order in which I quest does all that much for me.  But we'll see.
• Transmog stuff.  I know this is going to bug most of you immensely, but I'm just not a big transmog guy.  Can't be bothered.  So I honestly don't care.  Big fan of freeing up tabard space though!
• Artifact weapons.  Sounds cool.  Reserving judgment until I see how it works.  My main worry here is if you'll have the ability to go back and complete an artifact for a second spec on the same character without it being too insanely time consuming.  In the meantime, I'm almost feeling like I need a separate character for each spec.  Of course, that's absurd.  But, we may try that anyway.
• Class halls.  Same deal.  Sounds cool.  But so did garrisons.
• Profession overhaul.  Anything that you can do to fix professions at this point will be hugely welcome.  That being said, I'm also going to reserve judgment on this one until I see it in action.

I also managed to hit level 100 on my mage this week, making him my 18th max level character.  Technically my rogue is up next.  He's currently sitting at level 69 in Borean Tundra, so he's got a ways to go.  The mage was fun, but started to feel extremely squishy toward the end of the leveling train.  After the rogue, it'll be shadow priest, then warrior then monk (how did the monk end up last?).

There is a big part of me that wants to go ahead and start another warlock and level them all the way up on another server.  We'll have to see how that goes. If I get around to leveling a third set of toons (probably Horde side, either on Thrall or Drenden), it'll be warlock for sure and then hunter.  After that, not as sure.

Cheers,

Joar

Analysis of Q3 Earning Release and King Entertainment Acquisition

Activision-Blizzard released their third quarter earnings last night followed by an earnings call this morning.  A few highlights from the release:  GAAP Warcraft revenue was down 5% for the quarter.  Non-GAAP revenue was down 26%.  See my post on the second quarter release for explanation of what the differences between those two are.  On a year-to-date basis, GAAP revenues were up 14% but non-GAAP revenues were down 18%.  Note that based on discussions in the slide deck that they went through in their earnings call, it appears that foreign currency is actually driving a lot of these decreases rather than any real decrease in results.

For those of you wondering how the whole foreign currency thing works, I'll use an average European subscriber to illustrate.  The subscription rate in Europe is €12.99 per month.  Last year, during the third quarter, the average exhange rate was 1.32 dollars per Euro, so last year, in the third quarter, that subscriber would have shown up on Blizzard's financial statements as generating US$17.15 per month.  This year, the average exchange rate in the third quarter was 1.11, so that same subscriber paying the exact same thing shows up as US$ 14.42, a decrease of 16%.  On a year-to-date basis, that decline would work out to 17.8%.  So that's what I'm referring to above.

Total Blizzard revenue was down 5% for the quarter with operating income down 22%.  Unlike a lot of multinational companies, the currency declines may have a bigger impact on their bottom line, because a lot of their expenses are in the U.S. in dollars, so don't benefit from the same foreign currency changes decreasing expenses as well as revenue.

Year to date, total Blizzard revenue was down 7% with operating income down 30%.

Despite those results, for Activision Blizzard as a whole, it was still an extremely profitable quarter with year to date earnings per share up more than 50% over prior year.  They are sitting at the end of September with almost $4.4 billion of cash on their balance sheet and $4.1 billion of debt, or $300 million of net cash.  Of course, the transaction with King Entertainment, which I'm going to discuss a bit more is going to cause cash to go down, and debt to go up.

One other interesting point came out of the earnings call itself.  The Company noted that they would no longer be disclosing total subscriber metrics for World of Warcraft after this quarter.  What they said on the call was that they believe there were better metrics out there for tracking "engagement."  I suspect this means that rather than information on subscribers, we'll begin to see data disclosed on Monthly Active Users ("MAU's") which is the metric that they use for most of their other platforms, along with information on play time per day per user.

Last but not least, there were absolutely no Warcraft related questions in the Q&A session following the call, which is not completely surprising given the King transaction.

King Entertainment Transaction

So in terms of the King Entertainment transaction, here are a few highlights.  The total purchase price of $5.9 billion is going to be paid using $3.9 billion of cash that they have on hand and $2.3 million of new debt (that is basically just being issued under their existing credit facilities).  They will inherit almost $1 billion of cash from King, so their cash balance following the deal should still be in the $2 billion range.

For the first six months of the year, King Entertainments revenue has been declining at a rate of around 11%.  However, their SEC filings are reported in US dollars, so they are subject to the same foreign currency issues mentioned above for Blizzard.  Their monthly active users grew at about a 3% rate over prior year.

King Entertainment is a little bit more profitable overall than Activision Blizzard.  Here is a great slide from their call this morning that shows how the two companies compare in terms of revenue and EBITDA for the previous twelve months:

Following the completion of the transaction, the combined company will have approximately $6.4 billion of debt.  However, the two companies combined generated around $1.8 billion of free cash flow in 2014, so there should be some really strong opportunities to pay down debt over the next few years.  Even at $6.4 billion, their debt stands at only 2.5x their expected EBITDA, which is a very reasonable ratio.

As further evidence, Activision Blizzard's debt was actually upgraded to investment grade by Moody's following the announcement last night.  Some very interesting comments below from Moody's in connection with the upgrade:

"Activision Blizzard's upgrade to a Baa3 senior unsecured rating reflects its leading position in the growing and fragmented gaming industry, strong diversification across multiple genres and gaming platforms, and strong track record of developing profitable and sustainable franchises with international appeal. The ratings and stable outlook take into account our expectation that management has the ability to make strategic investments to create new intellectual franchise properties to replace aging ones which face the potential risk of decline over time, and leveraging existing ones across various platforms."

The only other interesting point to note, is that unlike a typical transaction like this, there doesn't appear to be any kind of break-up fee built into the deal if the transaction doesn't close.  In the press release, they indicated that they expect the deal to close in Spring 2016 and they expect it to improve Activision Blizzard's earnings for 2016 by 30%.

So all indications are that this is a good deal for both companies.  It gives Blizzard access to a big player in mobile gaming as well as shfiting up their demographic a bit (King has a much larger percentage of female users than Blizzard, something both companies highlighted on the call).  For King, it gives them a partner than can hopefully help reignite their growth.

What will this mean for the average World of Warcraft player?  I'm sure there will be a lot of discussion on this in the coming months, but my initial reaction is probably not much.  They plan to continue to manage King Entertainment as a separate business unit, much as they do with Blizzard now.  While there is certainly some opportunities for cross promotion and increase mobile interfaces, that was something that Blizzard was working on anyway.  There isn't currently much of anything in terms of cross promotion between Activision and Blizzard, so not sure that aspect of how they operate will change adding one more party to the equation.  So while this is a great overall strategic move for Activision Blizzard as whole, it may not have much impact down in the trenches with individual titles.

One interesting data point that I ran this morning.  If you had chosen to invest 11 years worth of your subscription dollars in Activision Blizzard stock back in late 2008 / early 2009 after they acquired Blizzard from Vivendi, that $1,980 would be worth $8,400 today.  And things continue to look up for Activision Blizzard from here.

Loremaster Update

So I have managed to make a crazy amount of progress on Loremaster in the past week.  Part of this progress was actually a little bit of discovery and memory rather than actual questing, but there was a ton of that as well.

So first to the discovery and memory part.  After talking about my progress with some guildies, I was gently reminded that the overall zones achievements are in fact account wide, and that there was one character - my warrior - that I leveled AFTER Cataclysm.  I even talked about it here in this very blog:   Love That Warrior Blog Post

So not only had I leveled this character after the old world reboot, but I did it in Eastern Kingdoms.  (I fortuitously discovered this at the point that Joar was almost completely done with Kalimdor)  So perusing through the epic Joarmama's achievement list, I discovered he had made enormous progress on many many of the zones in Eastern Kingdoms.  By the way - Joarmama - great name for a goblin warrior, am I right?

In the meantime, I had been feverishly working through completing Kalimdor on my warlock and managed to get through all of that last week.  After that, I went back to the warrior and did the last few quests in each zone that he needed to finish them up.

So last week, I was sitting at 890 quests to go, with 397 in Kalimdor and 493 in Eastern Kingdoms (or so I thought, but not really as it turns out).

As of this morning, Kalimdor is done and I have a total of 97 quests to go in Eastern Kingdoms in the two Stranglethorn zones.  And that's not going to take me long at all.

The process itself has been a lot of fun.  Quite a few really cool quests that I hadn't done before and really enjoyed.  A couple of challenging spots as well - typically any quest that involves "weakening" an NPC and then capturing him doesn't work really well when you're one-shotting things immediately.  Main issue in Kalimdor was a quest in Feralas that involved capturing an Ogre-Mage.  The key, unfortunately seemed to be getting naked and giving myself rez sickness, and that seemed to do the trick.  That was only one quest out of hundred, but I would not have been able to complete that zone without it (I tried).

Oh, and Ghostland sucks.  Combine having to run with a serious of quests that don't seem to be well organized geographically, and it was probably my least favorite zone of all.  That one needs a revamp.

So that's it for this week.  Assuming I'm done in the next few days, I'll go back to leveling my alliance toons.  Mage is up next.  He's currently sitting at 78 or so.

Cheers,

Joar