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Activision Blizzard Buys Stake Back From Vivendi as Subscriber Numbers Fall

http://www.fool.com/investing/general/2013/07/26/activision-blizzard-buys-stake-back-from-vivendi-a.aspx

Andrew Marder
July 26, 2013

In 2007, the French video game company Vivendi transferred its Blizzard division to Activision along with some cash in exchange for 52% of the resulting company, Activision Blizzard (NASDAQ: ATVI). As time went on, Vivendi suffered with shares declining about 45% since the divestment. The new Activision Blizzard, meanwhile, survived. Shares bumped along from 2009 through the beginning of 2013, but have risen 43% year to date.

In its desperation, Vivendi started to push Activision Blizzard for a payout of some sort. After months of pressure, Vivendi got a payout. Activision Blizzard announced that it was buying most of Vivendi's shares back, through a combination of corporate and private money. As a result, Vivendi will be left with a 12% stake. A private investment group, which includes Activision Blizzard CEO Bobby Kotick and Internet giant Tencent, will own 24.9% of the business.

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 (NASDAQ: EA) was forced to take when its Star Wars: The Old Republic