Saturday, March 3

Will They Get Free WoW Accounts?

News from Blizzard Entertainment isn't good today. They are laying off 600 employees, mostly from customer support and administrative positions, but about 10% of them are developers. (Source) Blizzard Entertainment is one half of Activision Blizzard, the U.S. holding company created when Activision merged with Vivendi Games, who owned Blizzard Entertainment at the time.

In 2011, Activision Blizzard had around 5000 employees worldwide. A layoff of 600 employees is therefore a 12% reduction in workforce, and a layoff of 600 strictly from Blizzard's side is even more significant. Whatever else we might make of this, you just don't fire 12% of your employees without it meaning something serious.

What this does NOT mean.

It does not mean that World of Warcraft is closing, or even losing money. The peak subscriber base during the Wrath of the Lich King expansion was reported at 12 million, while the most recent number reported following the Cataclysm expansion was 10.2 million. That's a loss of 1.8 million monthly subscriptions. If you assume that Blizzard makes around $12 per subscriber, given the variance in what people actually pay, that's a monthly gross income drop from $144 million dollars to $122.4 million dollars.

I am not sure how many employees you can afford for $21.6 million dollars, but I'm guessing the answer is "about 600." But those gamers who are now gloating over the imminent demise of Blizzard simply can't do math. Nearly $1.5 billion dollars in annual gross income from just one of their games means they are very comfortable, indeed. Don't forget that Diablo III will be released this year, and expectations are that it will set sales records for a PC video game when it finally launches.

What it probably DOES mean.

You aren't going to lose 1.8 million paying subscribers and not feel it. There will be cutbacks somewhere. Blizzard's big overhead, like any software company, is employee salaries and benefits. It is entirely normal and logical that there would be layoffs following a decline in revenue.

I believe it also means that a lot of jobs formerly handled by humans are now being automated. Recovering hacked and stolen accounts can now be handled online through their web site. In fact, a lot of what used to require a call to customer support can now be handled through their web site.

But I think what it means most of all is that even an incredibly popular game like World of Warcraft and an incredibly successful company like Blizzard Entertainment aren't immune to the laws governing the business world. Competition in the video game industry is at an all-time high. One study suggests that global video game sales would reach $68.3 billion dollars in 2012. That's a lot of real estate to fight over.

What you should do about this.

Nothing. That's right, nothing. If you like World of Warcraft, then keep playing it. The game isn't going to suddenly stop working because of these layoffs. In fact, I'll wager there will be no detectable difference to the players at all. I've never really understood the mentality of video gamers who only play a game if someone else makes it successful, first. If you apply that same reasoning to your romantic inclinations, your love life must be profoundly disappointing.

So if this entire thing is much ado about nothing, why am I bothering to write a blog post about it? For one thing, it's sort of my job. I cover video games for the Advanced Media Network and the Into Tomorrow show. I'm supposed to have an opinion about these things.

For another, I am a World of Warcraft subscriber, still. Even though I seem to spend most of my time these days playing Rift (a game from Trion Worlds, and a direct competitor to World of Warcraft), I am not ready to cut the cord on my five maximum-level characters and bid good-bye to Azeroth. Not yet, anyway.

But mostly, I'm just wondering whether the 600 laid-off employees get free World of Warcraft accounts as part of a severance. If they do, I wonder what Barrens Chat is going to look like now?

"Chuck Norris opened a ticket for a GM, and when they didn't respond instantly, he roundhouse-kicked 600 employees out the door!"

Yep. That'll be about right.