Microtransactions and Blizzard: part of a larger picture?

My scope of “reading everything on the internets” is probably somewhat lacking, because one only has so many hours in the day for one’s hobby. However, amid all of the discussion that I’ve seen in recent days regarding the Elixir of Wisdom, the newly-announced transmog helms coming to the Pet Store (sic), and “the sky is falling”/”FTP is just over the next hill”, there seems to be a false reading of where this movement is coming from – and to my understanding, this misinterpretation goes to the root of just what Blizzard is.

For those not in the know, Blizzard is not simply “BLIZZARD, gods of video games and money, deciders of everything, the end.”

In fact, Blizzard, or “Activision Blizzard” – as they’re known to the general gaming community – isn’t even just Activision Blizzard, one of the largest (if not the largest) video game companies in the world. Rather, Activision Blizzard is one cog in an international mass media conglomerate called Vivendi, which owns a 61% stake (controlling interest) in Activision Blizzard.

Vivendi, based in France, has its hands in several telecommunications companies, music (Universal, which owns roughly 30% of the music industry market share), video games (Blizz), mobile service, and film. Activision Blizzard is therefore just a part, albeit an important one, of this massive company.

It’s funny what gets edited out of what’s front and center for us. Obviously, on the player level, the games themselves are most important, and then we’re often interested in the development, refinement, and evolution of those games. Finally, focus for gamers generally ends at the Blizzard-level, where our final judgments (“they made a great game!” or “they’re money-grubbing corporate tools!” etc.) are made. This is generally all that anyone needs to know – this is just gaming, right?

Well, for purposes of discussions regarding how much of our money Blizzard is looking to pocket and in what manner they will try to do so, I think it’s important not to forget about the Vivendi thing. Because the corporate ladder goes higher than you may think. Vivendi’s financial struggles, which seem to be akin to one man whose mission is to juggle ten elephants at once without ever letting one touch the ground, could have more to do with Blizzard’s (and Activision’s, for that matter) increased interest in making more digital booty available for your hard-earned cash than any other factor. From Game Informer (via Financial Times, via Reuters) from last Monday (July 8th):

According to the Financial Times (via Reuters), Vivendi will gain new managerial powers over Activision Blizzard tomorrow, the closing date of the 2007 Activision/Vivendi merger. The merger gave Vivendi a 61-percent stake in Activision.

Speaking with Joystiq, Wedbush Securities analyst Michael Pachter describes a potential scenario in which Vivendi can now take out a massive loan in Activision’s name and then pay itself an equally sizable dividend. “Borrowing of $5 billion would permit a dividend of $8.5 billion,” Pachter states. “As the holder of 61 percent of Activision’s common stock at March 31, 2013, we estimate Vivendi would receive approximately $5.2 billion in cash, easing its mounting debt concerns.” The move would leave Activision with a mountain of debt to overcome, while Vivendi uses the payoff to get its own finances in order.

(Click the link to the Game Informer article for some worrying analysis.)

I was at a wedding last weekend, and so I’ve been slowly working through my reader feeds while also raiding, working, and so on. As such, I just read this article yesterday, and it immediately dawned on me that perhaps the reason we’re seeing all of the datamining of these new microtransaction items isn’t because it’s simply a way to “give the fans an option they are asking for,” but might actually be the fastest way for Blizzard to contribute to a general buffering of what could possibly be a massive financial hardship imposed upon Activision Blizzard. Remember, Blizzard is a subsidiary of Vivendi – they don’t stand alone, or just stand with Activision. The economic reality is that they are part of a conglomerate that focuses on profit, and a quick Google search will show you that certain other sectors of Vivendi’s business – particularly the mobile business – are struggling in this regard for multiple reasons, and have been for a little while now.

Ultimately, as a gamer, you hope that the game you play can continue to be fun, and in a situation like WoW, the best way for Blizzard to make money has been the subscription to a great, ever-evolving game, the fees for character services, and so on. However, perhaps that isn’t (or won’t be, very soon) enough anymore. If this is indeed the situation, hopefully Activision Blizzard can weather the fallout and continue to produce interesting, challenging, entertaining games and expansions while remaining profitable, and doing so in a way that doesn’t affect the integrity of gameplay.

In light of this, I’ll be interested to see what the next few financial reports contain, not because subscription numbers specifically mean anything to me, but because I want to see if there is indeed any mention of Vivendi issues and their impact on Activision Blizzard’s financial situation.

Thanks for reading this post by Mushan at Mushan, Etc. Comments are welcome!

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