Will EA's Loss Be Activision's Gain?

The problem with Star Wars: The Old Republic is that there are too few Skywalkers and too many walkers.

Electronic Arts (Nasdaq: EA  ) is getting crushed today after reporting last night there were just 1.3 million active players by the end of March.

"Star Wars: The Old Republic is developing a committed community of players with more than 1.7 million active subscribers and growing," CEO John Riccitiello said back in February.

EA has poured a lot of money into that game. When you lose 400,000 players -- and all of your momentum -- in two months, you don't get that back.

Tell that to Activision Blizzard (Nasdaq: ATVI  ) . The world's largest video game company saw its World of Warcraft gamers peak at 12 million nearly two years ago. After relentless quarterly declines, the ranks of orcs, dwarves, and elves stand at 10.2 million by the end of December. We'll get a new tally when the company reports its quarterly results tomorrow.

Optimists argue that the defections decelerated in Activision Blizzard's most recent quarter. Just 100,000 net gamers bolted during the holiday quarter. However, the trend is still pointing in the wrong direction.

When EA raced to 1.7 million Star Wars fans during last year's debut of Star Wars: The Old Republic, many figured the players were coming at the expense of World of Warcraft. Now that EA's contender is slipping, could some of those 400,000 net defections be racing back to Activision Blizzard?

Don't bet on it.

There's a word to describe what's happening here -- and I'm about to coin it: Zynganization.

Zynga (Nasdaq: ZNGA  ) has taught gamers to be fickle. Just as FarmVille players swap their farmlands for urban living in CityVille, social games don't stay on top for too long. There may never be another seven-year run of greatness like World of Warcraft accomplished.

Software developers don't see it that way. They still believe they can plug in expansion packs to keep a title going, but gamers are no longer as committed. Even Zynga found this out the hard way when Mafia Wars players didn't jump on Mafia Wars 2.

So, yes, Zynganization.

Keep that word in mind when Activision Blizzard reports further shrinkage tomorrow. Have the word handy when EA shakes its head three months from now, befuddled at how Legacy and Allies couldn't stop its dearth mauling.

Zynganization. It'll grow on you over time -- because every other game won't.

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Activision Blizzard hasn't been as aggressive as smaller rival EA in the casual and social gaming arenas, and that's a shame. The next trillion dollar revolution will be in mobile, but the best investing play isn't necessarily EA or Activision Blizzard. If you want to cash in on the hot trend, a new report will get you up to speed. Yes, it's as free as this article, but it won't last forever, so check it out now.

The Fool owns shares of and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Activision Blizzard. Motley Fool newsletter services have recommended creating a synthetic long position in Activision Blizzard. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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  • Report this Comment On May 08, 2012, at 2:51 PM, Raylanw wrote:

    I still have a hard time believing that gamers can jump from SWTOR or WoW to Cityville and be satisfied. I'm not saying it can't happen, I'm just saying it's not logical from a consumer (i.e. gamer) standpoint. The depths of the games are just on different levels.

  • Report this Comment On May 08, 2012, at 9:36 PM, kdsudac wrote:

    I doubt many of those subscribers flock back to WoW immediately. Some will go back when Blizzard release's it's next WoW expansion pack.

    But, the real reason why this is Activision's gain: it highlights WoW's competitve moat. EA just sunk between $100-300 million into a game in an attempt to knock WoW off it's throne with little success.

    This should make other companies think twice before undetaking the huge investment necessary for a MMORP.

    This should remind investors of the ongoing strength of the WoW franchise (10 million subscribers after 8 years!).

  • Report this Comment On May 08, 2012, at 9:51 PM, tompiarulli wrote:

    I could be wrong but I have to doubt that you're a gamer based on this article. Comparing EA and Activision to Zynga is like comparing Apple to Facebook. They are similar in some ways but completely different in others. I don't know a single serious gamer who gives a damn about Zynga.

    Casual and hardcore gamers are two completely groups of consumers. The reason WoW subs have been dropping is because the game is so incredibly old and playing the same game can only be entertaining for so long. Since SWTOR followed a similar formula to WoW that period of time was much shorter because players were already tired of the formula. Zygna couldn't have less to do with it.

  • Report this Comment On May 08, 2012, at 10:52 PM, yonkmember wrote:

    I think the "Zynganization" idea only works when one is completely unaware of the gamer culture. "Zynganization" may occur for the social-media games, but these are a different crowd compared to the hard-core gamers. When I was a hard-core gamer, I didn't just jump ship because numerous titles were available. I enjoyed certain genres and certain narratives within the genres and I would devote many hours to these areas. For instance, I haven't purchased a video game in some time, but I will pay up for DIII because the experience of the first two was incredible, to me. I will neither play angry birds nor farmville. But I will likely test the "community market" or whatever of DIII because I like the game... do not discount quality over quantity.

    Some perspective is required when reading articles such as these. Zynga will not be the complete downfall of the traditional games because many people like the in-depth experience you can get. It is apples and oranges. Maybe ATVI and EA need to get into social gaming to increase profits. However, I hope they continue producing quality games too.

  • Report this Comment On May 08, 2012, at 11:21 PM, yonkmember wrote:

    I would also like to add that ATVI and EA would be better suited to avoid the players participating in "Zynganization."

  • Report this Comment On May 09, 2012, at 6:02 PM, tidalblade wrote:

    I bet this guy feels like a dink after today.

    I like how this garbage article was removed from the Google finance news alerts also, thank god, dummies like this have no place forecasting or making any type of comments about companies.

    He writes articles about stocks with the same substance zynga puts into its games.

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