World of Warcraft: Guild Wars 2 Could Decrease Subscriptions by 25 Percent

By Jonathan Charles | Aug 07, 2012 10:06 AM EDT

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The highly-anticipated launch of ArenaNet's MMORPG, Guild Wars 2, is scheduled for the end of this month. ArenaNet has tweaked mainstay features of the genre to produce a fun and accessible game, and analysts say it could offer viable competition to Blizzard's giant MMORPG (massively multiplayer online role playing game), World of Warcraft. If Guild Wars 2 successfully lures subscribers away from World of Warcraft, that could mean financial trouble for Blizzard.

"What if strong competition were to come in the MMORPG space and take market share away from World of Warcraft?" Forbes asked in a recent report. It focused on the likelihood that Vivendi, the majority shareholder of Activision Blizzard, could look to sell. The majority of Activision's revenue comes from World of Warcraft.

The report, written by Lenoid Levitt and Derek Cheung of hedge fund Home Capital, estimated that World of Warcraft's 2010 subscriber revenue totaled $1.36 billion, with a $241 million outlay. Therefore, a dent in subscriber revenue means Activision could be in trouble.

"Subscription revenues from this game compromise a significant portion of our consolidated revenues. A number of software publishers have developed and commercialized, or are currently developing, online games for use by customers over the Internet which pose a threat to the popularity of World of Warcraft," Activision Blizzard said, referring to - though not explicitly citing - Guild Wars 2. It added that a dent in popularity could negatively impact the company's financial situation.

The Forbes report highlights the sans-subscription approach to Guild Wars 2, which requires only a $60 software purchase, while World of Warcraft requires a $60 copy of the game and a $15 monthly subscription. The report also said that the game could attract players in "limbo" after the failures of RIFT and Star Wars: The Old Republic to challenge World of Warcraft.

Levitt and Cheung analyzed the effects of a twenty-five percent drop in World of Warcraft subscriptions, based on the "significantly greater turnover than 25%" Star Wars: The Old Republic experienced during its first six months on sale. In that hypothetical situation, revenue could drop to $779 million from $1.12 billion, and software gross profit could drop to $75 million from $100 million, which would mean a drop of $336 million in gross profits over the first six months.

"If you were Vivendi, would you not sell a company that is losing massive percentages of market share to its competitors?" Levitt and Cheung asked, adding that other Activision franchises including Call of Duty and Diablo are not a considerable factor.

World of Warcraft has existed for 7 years and survived with and without competition. It is arguable that Guild Wars 2 is raising the bar for MMORPGs and offering a different, high-quality experience, but it is going to take a remarkable title to budge the ingrained World of Warcraft community - perhaps a remarkable title from Blizzard itself.