Blizzard Entertainment and their stock value plummeting

This case was written by Nikolay Petkov Spasov under the direction of Prof. Juan Barguno,
European University, Center for Management Studies (Barcelona). It was compiled from
published sources and is intended to be used as a basis for class discussion rather than to illustrate
either effective or ineffective handling of a management situation.

European University, Ganduxer, 70 E-08021 Barcelona

www. euruni. edu
Table of contents

Executive summary…………………………………………………..3
Introduction……………………………………………………………4
Background……………………………………………………………5
The Environment…………………………………………………......5
The company………………………………………………………….8
Data analysis…………………………………………………...…....10
Competitor analysis………………………………………………....11
SWOT…………………………………………………………………12
Conclusion……………………………………………………………12
Exhibits………………………………………………………………..12
References……………………………………………………………13

2
Executive summary:

Blizzard Entertainment is a premier developer and publisher of

entertainment software. After establishing the Blizzard Entertainment label in 1994, the
company quickly became one of the most popular and well-respected makers of
computer games. By focusing on creating well-designed, highly enjoyable entertainment
experiences, Blizzard Entertainment has maintained an unparalleled reputation for
quality since its inception.
After years of huge success and amassing all-around great profits and becoming
one of the leading companies in the area of the gaming industry, Blizzard Entertainment
started falling on a downward slope in the last few years. After most of their games
achieved relatively high success in the past, a lot of the titles started struggling to keep
up with the present trends in gaming
Most of the games that Blizzard own have slowly fallen out of the flavor of
nowadays gamer enthusiasts. Titles such as WoW, Starcraft and Heroes of the Storm
have lost their initial popularity, some because of competitors, others because of
gaming trends. Even the current flagship carrier of Blizzard, the fast-paced popular
shooter Overwatch, is slowly dropping in popularity because of its largest competitor at
the moment, the Battle royale genre, and the lack of one in the game itself. The largest
marketing mistake however, was misguiding the fans about one of the most beloved
and played Blizzard titles - the RPG series Diablo. At the latest annual BlizzCon, which
is a convention on Blizzard organized by the company itself for the fans and general
public, they made a controversial reveal that they are planning on creating a new game
of the much loved Diablo series, but a mobile version, not a PC one as everyone
expected. A PC game turned into a mobile one just for the cash grab in the growing
Chinese market, where mobile games are extremely profitable and popular, has caused
the share value of Blizzard to go down due to public outrage.
In result to these issues, Blizzard need to find a way to satisfy consumer needs
through delivering what they want and invest into new titles in order to follow-up
competitors.

3
Introduction:

Blizzard Entertainment, one of the most prominent and well-known pioneers and
leaders in the gaming industry, have been on a steady decline during the last few
months. This decline has consisted of both a loss in sales, in interest and in share value
over the course of the last calendar year. Even though they have consistently launched
successful and critically well-received gaming titles, such as the legendary RPG (Role
Playing Game) World of Warcraft, the interactive fantasy card game Hearthstone, their
most recent hit, the 2016 massively successful multiplayer shooter Overwatch, and a
title which will be included in one of the main problems of this case study, the hack and
slash RPG game Diablo, which is also one of the most beloved series in the history of
gaming entertainment.

Recent changes in trends and points of interest in the gaming community have
put Blizzard in a tough state at the current moment. They are struggling to find their
place between the ongoing BR (Battle Royale) craze and the ongoing huge
development of the mobile game industry. This current situation in the industry has led
Blizzard Entertainment to a series of crucial marketing mistakes which has in return cost
them dramatically in loses, both in terms of sales as well as in terms of value and
interest in the company as a whole.

One of those mistakes was the misleading advertising and reveal of a new game
in the Diablo series at one of the annual conventions organized by Blizzard, the so-
called BlizzCon 2018. In that convention, the company revealed a controversial move
by announcing to the previously hyped-up audience that they would be releasing a new
Diablo game for mobile platforms. This was immediately met with boos from the crowd,
and fans asking explanation to why they would do that and if the game would be coming
to the preferred system, the PC (Personal Computer). They were met with negative
answers from the hosts, and later on, angry fans gathered around the opinion that this

4
was just a desperate cash-grab move by Blizzard looking to build profits upon the
ongoing mobile gaming craze happening in the Asian market, most notably China. This
broke fans’ hearts all across the world and thus, a drop in interest and value of stock
occurred in the following months after the controversy happened.

In summary, this case study will provide the reader with sufficient information
about the current trends in gaming, the current place of Blizzard Entertainment in it,
their mistakes that led to this economic drop, and how they can recover through it based
on well-thought on and data-backed solutions.

Background:

The environment

Currently Blizzard are operating as a global brand. They are available online in
almost all countries in the world, with some small exceptions. However, the vast
majority of purchases in their non-mobile games are in more developed world markets,
such as North America, Europe and Australia. That is also where the majority of their
player base and fan base are located. Certainly, those are areas with a higher economic
standard than the rest of the world, and have no problems regarding the sales of the
company. Meanwhile, they also have the largest power regarding the determination of
the sales, the value of stock and how Blizzard should be shaping and adjusting their
business strategy around.

All of this was taken for granted until recently, when the smartphone era started.
Naturally, this brought on the idea of being able to play your favourite game on a mobile
device, rather than being only able to do so on a larger device, such as a stationary PC,
a laptop, or a console. Currently, by using data from the gaming research website
Newzoo, we can see that mobile games are the current leader in the industry with an
estimated revenue of $70.3Bn which accounts to 51% of the total market share. While
isn’t as much of a case as it is in the Western world, where people still prefer traditional

5
gaming means, such as the ones mentioned previously, it has been a huge success in
the recently-booming Chinese economy and market. It is estimated that China holds
around 25% of the current gaming market share, and that number is still growing daily
as well as exponentially to China’s economy. This current trend and wave of ongoing
supply and demand for such a huge market has led Blizzard Entertainment to potentially
join in and amass profits from themselves by using their already well-established brand
image and recognition. They wanted to opt their shot at the mobile market, and that
profit-orientated mind-set led them to the development of their up and coming mobile
game titled Diablo Immortal.

Another important topic regarding the current downsize situation at Blizzard

Entertainment is the other side of the gaming market share. For their Western market,
where we previously said that most of their concurrent player and fan base are located,
the current and most-wanted type of game is the so-called Battle Royale shooter.
Essentially, what a BR is, is a type of game genre where usually a group of around 100
players join a match and fight to death on a limited space with limited supplies and timer
that forces that to move and engage to battle. The winner is the last one standing alive
after the match has begun. How this genre became so prominently popular can be
traced back to the cores of games such as H1Z1 and DayZ several years ago, but the
true craze began in 2017, when the original creator of the gaming genre, Brendon
“Player Unknown” Green, teamed up with Korean game developers Bluehole in order to
create the perfect Battle Royale game. That year, they released a game called PUBG,
which stands for PLAYERUNKOWN’S BATTLEGROUNDS, and the game immediately
became a huge hit, becoming the number one most played game on Steam (the world’s
largest video game distribution platform) where it still holds on to that title. However, as
time went on, the game started losing players to another competitor, the already world-
famous game developed by Epic Games studios called Fortnite Battle Royale. The
reason behind this was first in the price difference – PUBG had an average cost of 30$
(with occasional sales), whereas Fortnite was free to play and download. Another factor
was the optimization for the game, PUBG had frequent bugs, lag-spikes, FPS (Frames

6
Per Second) issues and lack of new and creative content, whereas Fortnite ran much
smoother, had weekly new content, less bugs and was overall better optimized for all
kinds of gaming set-ups. And finally, what made Fortnite the giant that it is today is the
fact that a lot of celebrities actively and collaterally participated in marketing the game
through posting content online about how they play and enjoy the game. Figures such
as Drake, Neymar Jr, several NFL players and many others participated and teamed up
with famous Twitch streamers, such as Ninja. That helped Fortnite establish itself as the
leading gaming title in the year 2018 and the flagship carrier of the BR genre. However,
another company that was doing similarly bad in terms of sales and stock value as
Blizzard, the infamous Electronic Arts, jumped in at the perfect moment with the
arguably most impressive launch of a game in years. They embarked on the journey
with a BR title of their own called Apex Legends. It was released in early February 2019,
and has already amassed around 10 million active players, which is even more than
Fortnite had at their peak (around 8.6 million worldwide). What grabbed players by the
storm and what differentiates Apex from Fortnite are mostly the characters – each team
can choose from a variety of characters with different guns, abilities and appearances.
They all have a name and are different from each other, creating a sense of actual
important teamwork. The characters in Fortnite are nameless and all the same, it just
depends on what you manage to gather for them in the actual game. This sort of
personalization is highly important to video game fans, and EA made the perfect choice
by creating characters to this type of game. The other factors of success are also there
– the game is free; it is well optimized and graphically polished; the graphics are more
realistic and less cartoonish than Fortnite’s; it is available on one of the biggest gaming
platforms called Origin. The game is still early at launch at is still growing and only time
will tell how it will do in the near future.

This previous information leads us to the issue regarding Blizzard – currently,

they do NOT have a Battle Royale title. The closes thing they have to one is the shooter
Overwatch, but that game has been on a downward spiral since its launch and peak in
2016. Further on in the case study, we will discuss possible outcomes and solutions for
this problem and point-out what Blizzard can do in order to make use of this situation,
because right now they have all the necessary to achieve success – huge brand name,

7
recognizable characters from their games, the necessary technological level and skill, a
huge following etc.

The company

Blizzard Entertainment was founded on February 8, 1991 under the name Silicon
and Synapse. They first started off as a company creating game ports for other studios,
but they began developing their own games, such as The Lost Vikings. In 1994 they
changed their name to what they are known as currently – Blizzard Entertainment and
shortly after released their first commercial success – the first game in the Warcraft
series titled Warcraft: Orcs & Humans. In 1997, they released the action role-playing
game Diablo along with their own online gaming service which is still to this day one of
the largest in the world – Battle.net. Being a company which has always been able to
follow up trends and release huge mainstream successes, over the years they released
iconic and truly ground-breaking titles such as the ones mentioned in the following list:

- Warcraft – a strategy game revolved around creating and destroying bases

- StarCraft – a Real-Time Strategy game similar to Warcraft, but with different
characters and worlds; inspired by popular movies such as Alien and Star Wars
- World of Warcraft – the most successful MMORPG (Multiplayer role playing
game) of all time, with a peak of 12 million subscribers (the game works on a
monthly subscription fee) and for its time, the most played game in the world
- Diablo – a hack and slash RPG game, one of the most beloved games in the
franchise, currently has 3 titles and a newly announced mobile platform called
Diablo Immortal
- Hearthstone – a card game based in the Warcraft world, similar to the popular
anime Yu-Gi-Oh
- Overwatch – their latest title and success, a fast-paced shooter with unique
characters and abilities, usually in a 5v5 matchups, similar to Team Fortress

With all of these successful titles, they managed to become the largest gaming
company in the world when they merged with Activision in July 25, 2013, with annual

8
revenues of $52Bn at the time. They also host a regular annual gaming convention
called BlizzCon. The place where this convention takes place is in Anaheim, California,
and it attracts an average of 40,000 loyal fans on average. Blizzard uses this convention
to promote new titles, changes and upgrades in their major titles. They also feature all
kinds of different entertainment sections, costume contests, playable versions of games,
Q&A panels etc.

The 2018 BlizzCon will go down in history as one of the most controversial ones.
Along some typical announcements, such as a new Warcraft expansion, a
release of a new hero for Overwatch, a new expansion for Hearthstone etc.,
Blizzard had also announced news regarding the Diablo series. However, even
though everyone attending the convention was expecting a new game for PC,
possibly even Diablo 4 (there are three Diablo games, all of which are
numerically titled), what was revealed to them was a game called Diablo
Immortal – a game for mobile platforms (Android and iOS). The fans were
shocked and disappointed, and a lot of them left the stage insulted. The
controversial reveal led to a number of online criticism both from angry fans as
well as online critics, who blamed the company for just being greedy and turning
onto the ongoing Chinese mobile craze. The livestream reveal on YouTube
received very negative feedback and dislikes. While traditional fans of gaming in
general tend to express a lot of negativity and scepticism around the release of
diluted mobile versions of already well-established franchises, the Blizzard fan
base, and specifically that of Diablo were very discontent because they were
anticipating a larger announcement. Subsequently, fans from the public openly
asked the developers if this was “an out of season April Fool’s joke” and if there
would be a possibility for a PC release, to which the answer was negative,
leading the crowd to start booing and exiting the stage in protest. Shortly after
this announcement, Blizzard’s stock fell down by 7% on the first working
weekday of trading. According to Barrons, stock in Activision Blizzard dropped by
almost 7 percent and closed at $64.34 on Monday, which is a significant change
from Sunday's market value which was $68.99. This was all linked to the
controversial announcement of Diablo Immortal.

9
Data analysis

When talking about the previously mentioned chain of events, which left its
own mark on the Blizzard Activision company, we now have to look into the
statistical and evidential numbers in order to support the fact that the company
has been on a downward spiral recently.

As we can see in exhibit 1, Blizzard’s stock value was already plummeting

down from early October, when the value was at around 83.39$, but following the
appearance and the rise of popularity in titles such as Fortnite Battle Royale, the
stock value started dropping rapidly, especially after the before mentioned
Blizzcon November 2018 disaster with Diablo Mobile, where the stock value had
a massive drop from 65.09$ to 51.60$ in just 7 days! That is a truly massive drop
for any company conducting a successful business over such a long period of
years, let alone one of the hugest companies in the video gaming industry. The
lowest point for the company regarding their stock value was in February when it
hit 40.11$ and has remained at a similar value until the end of March.

Such drops in stock value and in the earnings per share is a very
dangerous and potentially harmful circumstance, since many of the numerous
shareholders may decide to sell their shares and move on to invest in their many
competitors, such as EA, Epic Games, Bluehole etc. Also, attracting new
investors might prove even more difficult, since the company is with a dropping
value stock, a recent negative PR and fan base backlash and not a potentially
profitable PC gaming title in site.

The other issue that Blizzard have to tackle is the lack of a BR game
mode. As said, before this is currently the number one trend in the industry, and
the lack of one is harming Blizzard’s concurrent player base and users. As we
can see on exhibit 2, the BR genre has an estimated 20.1$ billion dollar revenue
for 2019 as opposed to 12.6$ billion the year before, as well as being the most

10
played genre of choice on the platforms, regardless if they are on mobile, on a
PC, on a console or any other device that supports such games. On exhibit 3, we
can see that 36% of all BR players ascend from other shooter games, of which a
lot are Overwatch players. Players from other genres such as action, role playing
games and others also try out BR games, and Blizzard has titles from those
genres, meaning that they are losing players this way.

Another important fact to consider is the average viewership on the

streaming service Twitch.tv. The website is a platform on which amateurs,
enthusiasts, professionals and even pro-tournaments can be streamed on the
internet. Most of the users on the website are people who indulge in video game
experiences themselves, and the platform is arguably an accurate representation
of a certain video-game titles overall interest amongst the world. As seen on
exhibit 4, based on information from the twitch.tv’s statistical website
twitchmetrics.net, Overwatch has had an average of around 49,000 viewers in
May across all channels, whereas the popular BR titles of Fortnite and Apex
Legends have amassed 160,000 and 135,000 respectively.

Competitors for BR

Currently, Blizzard have two main competitors for their Battle Royale
market and potential new product.

1. Epic games and Fortnite, the massively successful shooter which grabbed
the world by storm in early 2018. Features of the game previously described
in “The Environment”.

2. EA games and Apex Legends, the latest huge success by the American
video game giant EA games. The game was released in 2019 and used the
well-established formula of a Battle Royale success, while also adding
character and depth to it – something that is highly achievable in the Blizzard

11
 fantasy world. Features of game also previously described in “The
Environment”

SWOT

Here is a SWOT analysis based on Blizzard Entertainment as a company

in nowadays market and a brief competitor analysis just to narrow down the
competition for the upcoming recommendations that will be given.

Strengths – Strong brand image; huge player base; worldwide global

presence; gaming products for all platforms; a strong reputation for being an
ethical company; great advertising in mass media; a pioneer in online gaming

Weaknesses – Some controversies regarding patents and copyright

infringements; the current BlizzCon 2018 controversy; failure to adapt to BR
market

Opportunities – A never-ending growth and demand for online titles; the

mobile gaming market; the BR market

Conclusions

As part of our final thoughts regarding the whole situation, we can safely
summarize the important parts into just a couple of sentences. Blizzard Entertainment, a
giant in the video game industry, have been struggling with bad PR moves and a lack of
direction regarding the newest trends in gaming, such as the already discussed Battle
Royale craze. They have been hit both economically and in terms of fan base/consumer

12
numbers. In order to escape this difficult situation, Blizzard are going to have to take a
step in the right direction, such as satisfying consumer needs and opening out to new
possibilities.

Exhibits

Exhibit 1

13
Exhibit 2

14
Exhibit 3

Exhibit 4

15
Exhibit 5

16
 Exhibit 6

Exhibit 7

Market share of gaming devices

17
 Exhibit 8

Expected rise of revenues in the gaming industry

Exhibit 9

Blizzard quarterly income statement for 2017-2018

18
References:

Arts, E. (2019). Apex Legends - The Next Evolution of Battle Royale - Free on PS4,
Xbox One, and PC. [online] Available at: https://www.ea.com/games/apex-legends
[Accessed 15 May 2019].

Blizzard.com. (2019). Blizzard Entertainment:About Blizzard Entertainment. [online]

Available at: https://www.blizzard.com/en-us/company/about/ [Accessed 15 May 2019].

Eurogamer.net. (2019). Blizzard faces hellish backlash after BlizzCon Diablo mobile
reveal. [online] Available at: https://www.eurogamer.net/articles/2018-11-03-blizzard-
faces-backlash-after-blizzcon-diablo-mobile-announcement [Accessed 15 May 2019].

Finstead.com. (2019). Activision Blizzard (ATVI) earnings: expect -11% revenue

decline. [online] Available at: https://www.finstead.com/bite/ATVI-earnings-expectations-
May-02-2019 [Accessed 15 May 2019].

Forbes.com. (2019). 'Diablo Immortal' BlizzCon Backlash Leads To Activision Stock

Slide. [online] Available at: https://www.forbes.com/sites/insertcoin/2018/11/06/diablo-
immortal-blizzcon-backlash-leads-to-activision-stock-slide/#44ea60771b88 [Accessed
15 May 2019].

MarketWatch. (2019). Activision Blizzard Inc.. [online] Available at:

https://www.marketwatch.com/investing/stock/atvi [Accessed 15 May 2019].

Richter, F. (2019). Infographic: Battle Royale: A Billion-Dollar Gaming Trend. [online]

Statista Infographics. Available at: https://www.statista.com/chart/14793/battle-royale-
revenue/ [Accessed 15 May 2019].

Superdataresearch.com. (2019). SuperData Research | Games data and market

research » Battle Royale. [online] Available at:

19
https://www.superdataresearch.com/reports/battle-royale-report/ [Accessed 15 May
2019].

Twitchmetrics.net. (2019). Twitchmetrics - Streamers, Teams, & Games. [online]

Available at: https://www.twitchmetrics.net/ [Accessed 15 May 2019].

WIRE, B. (2019). Activision Blizzard Announces Transformative Purchase of Shares

from Vivendi and New Capital Structure. [online] Businesswire.com. Available at:
https://www.businesswire.com/news/home/20130725006767/en/Activision-Blizzard-
Announces-Transformative-Purchase-Shares-Vivendi [Accessed 15 May 2019].

20