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Activision Blizzard announced their financial results for Q1 2023 and we have the highlights.
For the quarter ended March 31, 2023, Activision Blizzard's net bookings were $1.86 billion (up from $1.48 billion for Q1 2022). In-game net bookings were $1.29 billion (up from $1.01 billion for Q1 2022). Activision Blizzard generated $577 million in operating cash flow for the quarter (down from $642 for Q1 2022). Microsoft plans to acquire Activision Blizzard for $95 per share in an all-cash transaction, which has been approved by the board of directors of both Activision Blizzard and Microsoft and by Activision Blizzard's stockholders. Blizzard segment revenue increases 62% year-over-year in Q1, with each of Warcraft, Overwatch, and Diablo contributing to growth. Segment operating income was broadly stable year-over-year, reflecting development and marketing costs, including launch investments ahead of the Q2 Diablo 4 release. Following the November release of Dragonflight, the WoW team is delivering more content faster than ever before, and subscriber retention in the West is higher than at the equivalent stage of recent Modern expansions. Diablo Immortal contributed to Blizzard's Q12 net bookings growth with the game experiencing stable trends across engagement, retention, and player investments. Warcraft: Arclight Rumble continues to progress well through regional testing. Diablo 4 will launch on PC and console on June 6. Public testing of the game in March saw very high engagement and positive feedback, and strong pre-sales. This ambitious title will serve as the launch for a compelling live service, with regular seasons and story-driven expansions planned to drive engagements for many years to come. Blizzard monthly active users dropped by 40% (from 45 million in Q4 2022 to 27 million in Q1 2023). Source: Investor Activision
A Misunderstanding May Have Been the Cause of Activision Blizzard Games Not Being Available in ChinaBy Starym
The break in Activision Blizzard's partnership with NetEase in China which happened in January this year cost many Chinese players the ability to play Blizzard games, and today the New York Times may have some insight as to how the relationship between the two gaming giants might have gone wrong.
While tensions had been building for years before the final negotiations last year, ranging from NetEase's investment in Western studios Activision wasn't happy with (former Activision-owned studio Bungie being one), in the end the fate of Chinese players' Blizzard accounts may have come down to a misunderstanding. The Zoom call in question happened last October, between Activision Blizzard CEO Bobby Kotick and NetEase chief executive William Ding, and involved translators at certain points in the conversation.
As reported by the New York Times, based on accounts from 4 people familiar with the talks and a document they reviewed, the call was part of the standard re-negotiation of licensing rights between the two companies. The discussion arrived at the topic of the merger between Activision Blizzard and Microsoft and the scrutiny it had come under all around the world, but particularly in China. According to two people familiar with the call and the document reviewed by the New York Times, Activision executives recalled that at a certain point Mr. Ding said NetEase "could sway the [Chinese] government either to block or support that deal depending on the outcome of the licensing discussion." Reportedly the Activision executives felt that the statement was meant as a threat, but NetEase executives claim they did not intend to make any threat. They stated that they were just trying to be conciliatory towards Activision, meaning to simply point out that Microsoft would have the same issues Activision now had with the Chinese regulators, and that the new deal NetEase was proposing would help in both situations. A NetEase spokesman flatly denied that there were any threats as well, saying that Activision was continuing to "harass and taunt companies and regulators worldwide."
NetEase employees tearing down the Gorehowl statue in China.
Source: chaijingNDS on TikTok, via Dexerto.
After the call Activision reportedly made a completely different licensing offer, for approximately $500 million upfront, as opposed to the previous smaller payments throughout the course of the deal, which NetEase rejected. There was also a quite literal last ditch effort on the part of Activision later on, asking to extend the existing deal for 6 months as it looked for a new Chinese partner, but that was also rejected by NetEase. Finally, on January 23rd 2023, most of Activision Blizzard's games were shut down in China, with players not being able to access their characters, which some had spent over a decade and a half building. And while their data has been saved, it is still unclear when or even if they will be able to use those accounts and characters again.
The New York Times article has many more details about the two companies' dealings, so make sure to check it out over here, as it is very eye-opening.
As was was expected, the US Federal Trade Commission has now voted and filed a suit to block Microsoft's $69 billion acquisition of Activision Blizzard, saying the deal would harm competition. As reported by Bloomberg, the commission voted 3-1 on the matter and already filed the suit. The proceedings usually take from several months to a year to resolve, and here's what Holly Vedova, Director of the FTC’s Bureau of Competition had to say:
Microsoft has already shown that it can and will withhold content from its gaming rivals. Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets. Microsoft has been trying to address the exclusivity issues recently, offering 10 year Call of Duty availability deals to Steam, Nintendo and Sony, to assuage their concerns about Activision Blizzard titles becoming available on Microsoft platforms only, as the main focal point of the exclusivity discussion has been Activision's premiere FPS franchise.
This also isn't the only legislative opposition the merger faces, as both UK and EU organizations and legislative bodies are in the process of evaluating whether the deal can be approved. When it comes to the FTC, since Lina Khan was appointed to lead the agency in 2021, it has successfully blocked mergers between Lockheed Martin and Aerojet Rocketdyne Holdings as well as Nvidia ’s attempt to buy ARM.
Here's the full press release from the FTC:
FTC Seeks to Block Microsoft Corp.’s Acquisition of Activision Blizzard, Inc.
Agency alleges that maker of Xbox would gain control of top video game franchises, enabling it to harm competition in high-performance gaming consoles and subscription services by denying or degrading rivals’ access to its popular content December 8, 2022 The Federal Trade Commission is seeking to block technology giant Microsoft Corp. from acquiring leading video game developer Activision Blizzard, Inc. and its blockbuster gaming franchises such as Call of Duty, alleging that the $69 billion deal, Microsoft’s largest ever and the largest ever in the video gaming industry, would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.
In a complaint issued today, the FTC pointed to Microsoft’s record of acquiring and using valuable gaming content to suppress competition from rival consoles, including its acquisition of ZeniMax, parent company of Bethesda Softworks (a well-known game developer). Microsoft decided to make several of Bethesda's titles including Starfield and Redfall Microsoft exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles.
“Microsoft has already shown that it can and will withhold content from its gaming rivals,” said Holly Vedova, Director of the FTC’s Bureau of Competition. “Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”
Microsoft’s Xbox Series S and Series X are one of only two types of high performance video game consoles. Importantly, Microsoft also offers a leading video game content subscription service called Xbox Game Pass, as well as a cutting-edge cloud-based video game streaming service, according to the complaint.
Activision is one of only a very small number of top video game developers in the world that create and publish high-quality video games for multiple devices, including video game consoles, PCs, and mobile devices. It produces some of the most iconic and popular video game titles, including Call of Duty, World of Warcraft, Diablo, and Overwatch, and has a combined 154 million monthly active users around the world, according to the FTC’s complaint. Activision currently has a strategy of offering its games on many devices regardless of producer.
But that could change if the deal is allowed to proceed. With control over Activision’s blockbuster franchises, Microsoft would have both the means and motive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers.
The Commission vote to issue the complaint was 3-1, with Commissioner Christine S. Wilson voting no. A copy of the administrative complaint will be available shortly.
NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.
The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about how competition benefits consumers or file an antitrust complaint. For the latest news and resources, follow the FTC on social media, subscribe to press releases and read our blog.
US Federal Trade Commission "Likely to File Antitrust Lawsuit" to Block Microsoft Acquisition of Activision BlizzardBy Starym
Here's some potentially bad news for the sale of Activision Blizzard to Microsoft, as Politico is reporting that it is likely the US FTC will be filing a lawsuit to stop the acquisition - based on three sources "familiar with the matter". A lawsuit could postpone the deal's timing and even endanger it altogether, regardless of its result.
The acquisition deal has seen a lot of pressure and antitrust probes coming from many sides (including several other countries' regulating bodies and watchdog organizations), as it could constitute an unfair boost for Microsoft's side. The most vocal voice against the sale is Microsoft's chief console competitor, Sony, who argues that the sale would open the door to making many Activision Blizzard games (mostly focusing on Call of Duty) exclusive to Microsoft platforms. This, Sony argues, would significantly disadvantage Sony platforms and leave consumers with less choices for gaming.
A lawsuit challenging the deal is not guaranteed, and the FTC’s four commissioners have yet to vote out a complaint or meet with lawyers for the companies, two of the people said. However, the FTC staff reviewing the deal are skeptical of the companies’ arguments, those people said.
The investigation remains ongoing, but much of the heavy lifting is completed, including depositions of Microsoft chief executive Satya Nadella and Activision head Bobby Kotick, the people with knowledge of the investigation said. If the agency does move ahead with a case, it could come as soon as next month, said the people, all of whom were granted anonymity to discuss a confidential matter.
- Politico's Josh Sisco
Well known gaming industry journalist Jason Schreier also weighed in on the story as well:
You can read the full Politico article here, as it goes in to detail about both Microsoft and Sony's arguments so far, as well as Google and Epic's involvement.
A pretty big bombshell was dropped a couple of days ago, as Blizzard announced the end of their partnership with NetEase and a possible end of their games being available in China. We've seen the official posts and responses, but there's a lot of context missing there. Luckily for us, however, well known Chinese WoW community figure NasDa has jumped in to explain things and add some new information and even rumors.
There's actually quite a few new elements presented below, from a rumor of an (unlikely) potential new partner for Blizzard, an explanation on how exactly publishing and certification work in China and how long it takes, the potential Microsoft involvement, the fact that the last time Blizzard did something like this China got WotLK almost a year later, and more.
The below is from a TwitLonger by NasDa:
All the base knowlegde you need to know about this Blizzard-NetEase CATASTROPHE.
- Foreign game companies must work with a domestic game publisher who will operate the game in China. That's why you never see CN region on Blizzard's map when a new patch is about to hit the live servers. CN region is basically in another "parallel universe". It's like peeing in a dark rainy night, you know it's definitely there, but you can't really tell where.
- The publishing partner for Microsoft in China is NetEase, ironically.
- Chinese law requires all digital games to receive a license from the regulator to be published in China.
- In the past getting a game license is not an issue. Since last year it's been extremely difficult for any game, domestic or foreign, to receive a license, even more so for the latter. Last time a foreign title received a lisence was over 500 days ago. Popular ones like PUBG, Fortnite, Apex and Valorant still don't have their Chinese publishing licenses yet. All Tencent games.
- China has resumed issuing new game licenses since April, for dometic games.
- Changing a publishing partnership means re-applying for game licenses even if the games are already approved by the regulator and it could take months or even years.
- This is the second time Blizzard changes their Chinese publishing partner. 14 years ago, Blizzard ended the partnership with their first partner, The 9, and then started worked with NetEase. Combining the process of re-applying for new game license for TBC expansion due to changing the partnership from The 9 to NetEase and the difficulty of getting a game license for WotLK expansion, the original Burning Crusade exapanion in CN region lasted for a total of 1090 days. Chinese players were forced to play LK pre-patch for 19 months. Imaging playing TBC for 3 whole years.
NetEase launched WotLK expansion in CN region on 31/08/2010. Just giving you an idea of how late that was. Paragon killed Arthas on 26th of March 2010. LOL. This is one of the reasons why LK classics is so popular in China.
Now you can see why Blizz and NetEase's "divorce" is widely considered to be a BLOODY CATASTROPHE by the Chinese community.
- Potenital buyer or interesting parties:
miHoYo, the developer of Genshin Impact, has denies the rumors of licensing deal with Blizzard;
Tencent replied that there was no relevant news internally for the time being;
Perfect world is another hot candidate according to rumors;
My source told me(and it's a good source), ByteDance, the parent company of Tiktok will be the successor or at least in the lead.
"Does ByteDance have any experience of operating a game before?" Ye, that was my first question but I guess time will tell.
- NetEase has promised that they will be issuing refund for all the players that still have remaining blizzard bucks and active game time in their accounts.
- After 24th of Jan. all Blizzard services in China will be shutting down. I still don't know what to do after that and where to play wow yet.
Thanks a lot to NasDa for all this information and I really do hope something can be done before January 23rd, as I cannot even imagine simply losing your entire WoW account, not to mention other Blizzard games - even temporarily, and especially with the potential of it being permanently gone. There are so many Chinese players who are part of the WoW community it would truly be a tragedy to see them lose everything they worked, a decade+ of time invested into the game could simply disappear.