After Destiny fell flat with investors, video game publisher Activision Blizzard (NASDAQ:ATVI) needed some good news. Even though Destiny generated more than $500 million in non-generally accepted accounting principles revenue last quarter, enough to become non-GAAP profitable relative to the $500 million Activision Blizzard spent developing and promoting the title, the hype surrounding the game entailed lofty expectations.
Beyond Destiny, Activision Blizzard has also been surprisingly quiet with any figures related to its released of Call of Duty: Advanced Warfare on Nov. 8. Most years, the company is quick to tout early sales figures, but has opted not to do so this time. That doesn't inspire a lot of confidence that the latest version of Call of Duty is selling very well.
Well, good news is precisely what Activision Blizzard just delivered for investors. The game maker announced that World of Warcraft's global subscriber base has jumped past 10 million following the release of the Warlords of Draenor expansion pack.
It has been two years since World of Warcraft's subscriber base has seen these levels.
Make no mistake, Warlords of Draenor is already a huge success.
There's more where that came from
Last quarter, Activision Blizzard added 600,000 global World of Warcraft subscribers globally, which management attributed to excitement for the expansion's release, which occurred a week after the company issues its latest earnings numbers. That was an encouraging uptick considering that World of Warcraft subscribers have been steadily trending down for years.
Blizzard Entertainment CEO Michael Morhaime said many of those subscribers were returning players as opposed to new users. The company has focused intensely on reducing friction that some players may experience with coming back to the popular MMORPG, such as the $60 character boost feature it announced earlier this year.
Activision Blizzard said 3.3 million copies of Warlords of Draenor were sold through within the first 24 hours of availability. That's important, because Destiny's $500 million launch was based on sell-in, which includes units sitting on shelves waiting to be purchased by consumers.
One month of access is included with the game, so the prompt spike in subscriber figures following launch is expected. The real test will be whether these players stick around and fork over monthly subscription fees, which comprise the majority of Activision Blizzard's total revenue (55% last quarter).
The figure being reported is as of Nov. 13, and Warlords of Draenor just launched in several Asian countries, so World of Warcraft's subscriber base should enjoy another tailwind.
World of Warcraft matters
World of Warcraft has long been critical to Activision Blizzard's fortunes as one of its biggest franchises and a generator of recurring revenue from monthly subscription fees. The game is now in its 10th year, but Activision Blizzard has periodically reinvigorated the business with expansion packs. In between big releases, the global subscriber base sometimes languishes, and Warlords of Draenor is the fifth expansion pack.
While Activision Blizzard officially introduced microtransactions in World of Warcraft last year, management confirmed that it has no intention of transitioning the overall business model to a freemium model. Activision Blizzard is testing its feet in the freemium waters with Hearthstone, the Warcraft-based trading card game released in March that now has 20 million registered users.
There's no reason to make bold changes to this cash cow, especially with over 10 million paying players.
Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.