MMO Money: Mobile Revenue is Breaking Records

Quarterly report season, it’s exciting and a little bit brain melting. In between it all we’ve got other business news to talk about too including esports betting and more lootbox drama. We also get a real-world example of what can happen to a company’s stock when an embargo is broken and false information is released. There’s one theme that runs throughout this article, mobile revenue is breaking records all over the place. There’s a lot of information to digest in this week’s MMO Money so grab a drink, maybe a snack too and sit back for a wild ride. It all ends with more lootbox talk from Begium, Guild Wars 2’s game director, and everyone’s favorite…EA.

 

PUBG Mobile Revenue Only 1/3 Fornite iOS Revenue

Mobile Revenue is Breaking Records

While PUBG mobile and Fortnite iOS came onto the scene at roughly the same time back in March, PUBG has only started to monetize in the last week. The revenue for that first week isn’t amazing. In fact, it’s one third the revenue Fortnite got in its first week being on iOS only. For those who don’t know, PUBG is available on both Android and iOS. Fortnite generated 3.7 million dollars its first week on mobile compared to PUBG which comes in around $1 million.

The report from Sensor Tower also states that Fortnite beat out PUBG with fewer players, 3.7 million downloads vs 22 million. But it doesn’t show how many of those 22 million downloads since launch are still active PUBG players, so this isn’t really a fair comparison to make. The 3.7 million Fortnite players would have all been active at some point in that week simply because it was the very first week, and not a couple of months later. Randy Nelson, Head of Mobile Insights at Sensor Tower attributes the differences to the means of monetization. “There’s also the possibility that the way Epic Games has structured its purchases may be giving Fortnite a leg up on its biggest competitor,” he said. “It offers limited-time costumes and set daily items that players can purchase outright, as opposed PUBG Mobile’s primary use of loot boxes that produce random (and often duplicate) items when opened by players.”

 

Activision-Blizzard Q1

They’re winning all of the money. End of story.

Overwatch Retribution Event - McCree and Reaper

Kidding…well sort of. They really are winning all the money. Activision-Blizzard had a net revenue of $1.97 billion for Q1, that’s up from $1.73 billion for Q1 2017. Net revenue from digital channels were at an all-time quarterly record of $1.46 billion. In Q1, Activision Blizzard had 374 million monthly active users, 38 million of those coming from Blizzard games. Preorders for WoW’s Battle for Azeroth expansion are ahead of where they had originally forecast.

The Overwatch League has strong viewership globally, reaching millions of people every week. As a result of the league and the upcoming playoffs, this summer there is increased engagement with the franchise. This means more people are playing and watching for longer than previously.

On the mobile side of things, King has had its highest quarterly net bookings in history. That’s money made from merchandising, products sold, licensing fees, and so on. This quarter King also had 2 of the top 10 highest-grossing titles in US mobile app stores for the 18th quarter in a row.

Generally speaking, things are great for Activision-Blizzard, so much so that they’re raising their outlook for the full year.

 

German Mobile Game Revenue Seeing Explosive Growth

Thanks to the many articles we’ve done covering the 2017 games business scene we know that mobile is still growing in a massive way and is already really dominating the gaming industry. But there’s one market in particular that is seeing massive, unexpected growth: Germany.

The German Games Industry Association reported on data from market research company GfK that in 2017, mobile gaming revenue grew faster than all of the German gaming market. Mobile gaming sales rose 21% versus the overall market which saw only 15%. Most of the revenue came from in-app purchases which totaled €481 million ($569 million). Just to put all of this in perspective, in-app purchases have more than doubled since 2014. It also doesn’t look like things are going to slow down any time soon. What this does show is that Germans are a fantastic audience for mobile games, unlike most of Europe who seem to prefer to keep a tight hold on their wallets.

 

Want to learn more about the games industry in 2017 check out these articles:

2017 Online Games Financial Review
2017 Games Industry by the Numbers
2017 Games Industry Revenue

EA Celebrating Record Year

It’s good news for EA, despite all the very public lockbox drama they had throughout the last year. Game sales are actually down, but live services are picking up the slack and now make up 40% of the publisher’s income. For the full year, EA’s net revenue was up 6.2% to $5.15 billion. But the news that most people were really hoping to hear was about Anthem and EA did not disappoint, saying that Anthem is set to ship in the last month of the last quarter of the year, that gives it a launch date in March 2019. During the call, they also talked a bit about lockboxes, but we’ll go into more detail on that in the section dedicated to all things lootbox.

 

Dow Jones Reporting Problem

Dow Jones News Service broke embargo and false information was released ahead of Activision-Blizzard’s quarterly report call. This information caused Activision-Blizzard’s stock to tumble, as well as stock for EA and Take-Two. Activision-Blizzard suffered a 6.3% drop, but within a couple of hours the correct information was published and in the end, Activision-Blizzard closed down 2.3%. Afterward, Dow Jones issued a statement saying, “We regret our error as well as inadvertently breaking the embargo. We have issued a correction and are reviewing our processes.”

 

Tencent Q1

Have you had enough with all the good news yet? Well here’s some more for you. Tencent is reporting a 48% increase in revenue year on year. Most of this has been driven by mobile games and social platforms. Total revenue for the quarter was $11.69 billion with operating profit at $4.88 billion. Smartphone game revenue increased 68%. This includes both mobile games and social games on their social media platforms like QQ, which has 805.5 million active users. Facebook is at 2.2 billion, just in case you’re wondering.

On the PC gaming front, revenue remained fairly flat year on year. But with new titles expected in the coming months, Tencent has said this will change. The company also attributes the lack of significant revenue increase on more and more people making the transition to mobile gaming. Tencent is going to be responsible for releasing PUBG and Fortnite to China, assuming they get government approval. They’re also going to publish Ubisoft mobile and PC games in China. So, the future is looking bright for this monster of a company.

 

Boss Key Saga

By now you’ve almost certainly heard about the saga of Boss Key. The company shut down this week just a month after putting a new game up on Steam Early Access. If you haven’t heard all of the drama, or you haven’t seen the concept art from the games they never got to make there’s an entire article on the Boss Key saga.

 

Pearl Abyss Q1

Pearl Abyss had a record first quarter thanks to mobile games. Are you starting to see the same pattern we are? Net profits are up a massive 82.9% compared with the same period last year. Much of their success is thanks to releasing Black Desert Mobile in Korea. North America and Europe account for 56% of Black Desert Online’s game sales. Coming up, the company is working on MMOFPS Project K, casual mobile MMO Project V, and Black Desert Mobile is going to expand to more regions of the world. You can expect it to reach the West sometime next year.

 

Kakao IPO

Black Desert Online

Speaking of Black Desert Online’s performance, we need to talk about Kakao Games, the publisher of BDO in the west. They’re preparing an IPO on the KOSDAQ in Korea. If it passes the screening required, it will most likely go public by the end of this year. According to Samsung Securities, Kakao is worth an estimated $1.4 billion. In addition to BDO, they’re also responsible for publishing PUBG in Korea and developing mobile games.

 

NCSoft Q1

All of NCSoft’s games are down this quarter with the exception of Aion. Guild Wars 2, the company’s most popular game in the west saw a massive, though entirely expected drop. Q4 2017 is where all the revenue for the game’s last expansion Path of Fire was at, so while there was a 32% drop quarter on quarter, year on year there was actually a 66% increase.

During the investor call, NCSoft admitted that Blade & Soul II for mobile has been delayed until 2019 because it didn’t meet expectations. It has a new team and a redesign which is the same thing they did for Lineage Eternal.

 

Nexon Q1

Finally, we’re at the last quarterly report that has been released as of this moment, Nexon. Much like many of the companies already mentioned in this article, Nexon has a strong showing this quarter with $827 million in revenue. That’s up 21% year on year. One thing that really makes them stand out from other companies is that most of its business, 84% of it in fact, was on PC. The vast majority of Nexon’s earnings came from China (67%) and Korea (22%) while North America accounted for just 4%. Later on this year in the west we can expect to see Durango, Maplestory 2, Maplestory M, and Final Fantasy XI mobile.

 

Esports

You can expect to see esports betting blossom thanks to a ruling by the US Supreme Court. They effectively overturned the 1992 Professional and Amateur Sports Protection Act which banned sports betting in all but a few states. The Supreme Court ruled that PAPSA violated the Tenth Amendment. What does this mean for esports betting? It means we’re going to see it a whole lot more. DraftKings have already got plans to move into betting for sports and esports.

In other esports news Quarterback Inc. has raised 2.5 million dollars in its initial seed funding round. The funding will go towards continued development and growth of Quarterback’s esports gaming platform. The seed round was back by Bitkraft Esports, Crest Capital Ventures, Deep Space Ventures, and UpWest Labs.

 

Lootboxes

Finally, we end this article as we always do with a look at what has been going on around the lootbox controversy in the last two weeks. The biggest news has been that the Belgian Gaming Commission released their full report on the controversy. The report itself is 25 pages long and in English, if you want to give it a read, but the most important thing to take from it is that they recommend criminal prosecution being initiated. Another recommendation that they give is age verification and banning the sale of games featuring loot boxes to minors. Wow.

Gamasutra posted an interview with Guild Wars 2 game director Crystin Cox from GDC that touched on the lootbox controversy that is well worth a read as she had a lot to say. She had a hard time defining what an ethical, non-painful lootbox experience might be like and she also said she hopes the government doesn’t get involved in regulation. Guild Wars 2 was specifically mentioned in a recent article here on MMOGames talking about a site that explains microtransactions for games. Guild Wars 2 has frequently been called out by players for their lootbox practices.

Lastly, as promised there is EA news to talk about. EA is adamant that lootboxes aren’t gambling at all. Why? Well, according to EA CEO Andrew Wilson, it’s because players always get a specified number of items and there’s no way to cash the items out or sell them for currency, real or virtual. This argument is a bit like Santa promising you’ll get 5 things for Christmas and on Christmas morning finding out that 3 of them are lumps of coal, one is a gum wrapper, and the other is reindeer droppings. You still got something though!

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Activision Blizzard’s Record High In Q1 2018 Financials

‘Tis financial season and Activision Blizzard had a big one, widely driven by World of Warcraft, Overwatch, and Candy Crush. Reporting $2 billion in Q1 revenue and 374 million active users across all games, this is a record high for Activision Blizzard in the first quarter of the financial year.

Activision Blizzard's Record High In Q1 2018 Financials

More specifically, Activision made up $92 million of the company’s operating income, mainly on the strength of Call of Duty. Blizzard made up $122 million of the operating income driven by “in-game content” through all of their games, strong Battle for Azeroth pre-sales which are ahead of plans and likely driven by unlockable Allied Races in World of Warcraft, as well as the Overwatch League which has seen huge success this year with “strong and consistent” viewership every week. King then made up $191 million of the operating income, with Candy Crush particularly “reaching its highest net booking since Q4 2013.”

Battle Royale Likely Coming to Activision Blizzard Titles

During the earnings call, Activision Blizzard were asked about what they had learned from Fortnite and PUBG‘s success, to which Activision COO Coddy Johnson commended the battle royale genre’s “compelling survivor mechanics and large, in-game player pools” and how they have “brought tens of millions of completely new players into gaming both on traditional platforms like console and PC, but also on newer platforms for the genre like mobile.” CFO Spencer Neumann commented that the battle royale genre is “contributing to the innovation and expansion we’re seeing in the industry”, while CEO Bobby Kotick added, “When we see people innovate in an interesting and impactful way, we are very quick to figure out how to capture inspiration from innovation. When we see things that appeal to our audiences, we are very good at being inspired by those.”

We already know that Call of Duty: Black Ops 4 will come with a battle royale mode, but could there be more inspiration taken from this area within Activision’s vast library?

Destiny 2 Looking Glum But New Content Talked About

There was no denying from Activision Blizzard’s Q1 report or the earnings call that Destiny 2 has not reached the level of success expected of it. Johnson offered a view of where they plan to take the game in the future; “The three things we know we’re going to do and that the community is looking for is: make the player more powerful, provide rewards, and make the endgame more meaningful.”

Activision Blizzard's Record High

Overall, Activision wouldn’t reveal any definitive details on the current status of Destiny 2’s player numbers or profit margins, which doesn’t sound all too promising. However, that may be due to change with Warmind’s release next week, also Johnson did make sure to tease a fall expansion bringing many gameplay innovations including one game mode that “introduces a whole new style of play for first-person shooter gaming generally and certainly for the shooter space that Destiny created.” While we don’t have any concrete details on this game mode or the fall expansion for Destiny 2 itself just yet, we get expect to hear more on this during next month’s E3.

 

Our Thoughts

There’s always a lot to take in following this quarterly financial reports, but it seems fairly clear what Activision Blizzard’s record high in this first quarter means for their games. World of Warcraft is recovering nicely with promising sales for Battle for Azeroth, the Overwatch League has been a resounding success, people still spend too much on mobile games, battle royale continues to soar whether we like it or not, and Destiny 2 has some serious work to do if it wants to pull itself back to where it should have been from the beginning. Here’s hoping.

Source: Activision Blizzard Q1 2018 Presentation, GamesIndustry, VG247

 

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Battle for Azeroth at PAX East 2018

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