In 2007, the French video game company Vivendi transferred its Blizzard division to Activision Blizzard, Inc. (NASDAQ:ATVI) along with some cash in exchange for 52% of the resulting company, Activision Blizzard, Inc. (NASDAQ:ATVI). As time went on, Vivendi suffered with shares declining about 45% since the divestment. The new Activision Blizzard, Inc. (NASDAQ:ATVI), meanwhile, survived. Shares bumped along from 2009 through the beginning of 2013, but have risen 43% year to date.
Freedom fall
Along with the announcement, Activision Blizzard gave a small heads-up to investors regarding its quarterly earnings announcement, which will come on Aug. 2. The company announced that World of Warcraft, the massively multiplayer online game that has defined Blizzard for years, saw a 600,000 fall in subscriptions over the past four months. The game now boasts 7.7 million subscribers, which is still a huge contingent, but is also about what it had back in 2007.
Gamers were divided on what the fall meant for the future of Warcraft, with many seeing it as the end of the game’s highest highs, while some see it as a portent of more falls to come. The truth is probably closer to the prior. Warcraft may have become a massive cash sink for Blizzard, as gamers demand new updates and features even as subscriptions lag. Even if the company were to increase subscriptions, there’s no guarantee that the revenue would offset the cost by enough to make the effort worthwhile.
Instead, the company may be choosing to focus on newer titles, like Activision’s Skylanders collectibles game, which are currently dominating their niche. In an interview earlier this year, Kotick noted the problem that Activision Blizzard was facing with subscribers, and seemed eager to address it with additional content.
The future of Activision Blizzard
Kotick was, no doubt, hopeful that Warcraft could avoid the kind of about-face that Electronic Arts Inc. (NASDAQ:EA) was forced to take when its Star Wars: The Old Republic initially failed to take off. The company switched that game to a free-to-play model, which has brought in more free players, but subscriptions have leveled out around 500,000.
With Vivendi out of the picture, Activision Blizzard will likely have more room to invest without extraneous oversight. In addition to its newfound freedom, the company also now has a newly cemented friendship with Tencent. The Chinese Internet-based business has worked with EA, Activision, and others in the past, announcing a new deal with EA’s FIFA Online earlier this week. Tencent does not have an Activision Blizzard board seat or the right to nominate board members, according to Kotick.
Even if Warcraft continues to suffer, Activision Blizzard’s other titles should keep pulling new gamers in. The console launch of Diablo III at the end of the year, along with Call of Duty: Ghosts in November, and Bungie’s Destiny in 2014 should all provide good sales boosts.
The bottom line
The main point for investors is that Activision Blizzard now has more freedom to use its cash as it sees fit. For gamers, that could mean any number of things. Vivendi’s involvement was seen as meddling by many, but the details of the internal oversight and influence are all rumor. For now, it’s enough to know that Activision Blizzard is back in control of its own destiny, and now it might have enough cash to shape that destiny into a success.
The article Activision Blizzard Buys Stake Back From Vivendi as Subscriber Numbers Fall originally appeared on Fool.com.
Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard.
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