Specialist
Former President & COO at Activision Blizzard Inc
Agenda
- Activision Blizzard's (NASDAQ: ATVI) operating environment – normalised post-coronavirus growth prospects
- Key franchises overview – CoD (Call of Duty), Diablo, Candy Crush, WoW (World of Warcraft), Overwatch, etc
- Replicability of extrapolating IP similar to the CoD franchise – sizing incrementality of franchise lifetime value
- Outlook for H2 2021 and beyond – e-sports and associated betting prospects, impact of cloud gaming and M&A themes
Questions
1.
What key headwinds or tailwinds will Activision Blizzard face over the next year or two?
2.
Free-to-play is predominantly cross-platform. The Activision Blizzard operating business structure is still siloed, whether it’s big department heads being individual and even franchise leaders being siloed. What do you think about mobile and free-to-play driving a more centralised model? Is that necessary in light of your points about execution?
3.
To what extent do you think doubling down on the smaller and arguably more talented developer base improved turnover relative to industry averages? Presumably video game developers are in high demand. I’m not sure if they’re driven more by brand or game loyalty so much as quality of work, style so much as salary. Is there much that can be done to bring Activision Blizzard’s average turnover down relative to peers, or is this a challenge that the industry faces inherently?
4.
There has been a changing of the guard at Blizzard with Co-leaders Jen Oneal, Mike Ybarra and Blizzard co-founder Allen Adham stepping back in given cultural issues. How likely do you think they are to come up to task? Do you have anything to say around their management styles and operating expertise?
5.
Considering the balance of power for the broader video gaming industry, there are publishers, developers and game engines. Are publishers losing any leverage relative to the other two? What is their continued moat as independent developers and game engines are continuously on the rise?
6.
Coronavirus drove a lot of engagement tailwinds for the video gaming industry. Where do you expect the largest retrenchments, whether in user churn, time spent or dollars spent across Activision Blizzard’s key franchises? What factors will drive certain franchises to maintain engagement levels and where do you expect the biggest reversals?
7.
Why should we understand CoD [Call of Duty] as an augury of things to come around having a AAA, a free- to-play and a mobile game without material cannibalisation? Could franchises such as Diablo, Overwatch and WoW [World of Warcraft] have some cannibalisation risks as they extend the game formats?
8.
Considering that engagement builds engagement, presumably the best users are coming console-native to mobile. There might be some threshold of design quality on the mobile version of a CoD game and the mobile versions of games to come. How much did that drive the choice to go with Tencent for the CoD mobile design? NetEase is doing WoW in China and Diablo mobile so much as utilising King. Given your points around King being good at A/B testing, you’d think that it would prioritise the internal capabilities, but Crash Bandicoot was a bit of a flop as the first effort to convert Activision IP into something mobile. How should we calibrate a lesser preference towards Tencent and NetEase and anything outsourced, so much as the internal capabilities King can provide to Activision Blizzard longer term?
9.
Is it inherently too difficult for a predominantly match-three type of mobile developer to develop a very high-quality role-playing game? Could Activision Blizzard acquire a new mobile developer rather than internally developing the capabilities?
10.
Free-to-play games are always on, you need to be constantly re-engaging your users to avoid any drop-off. How competitive will it be for Warzone over a multi-year horizon? Fortnite has been very popular, and it’s to be determined whether Apex is a fad or will remain at scale long term. How could Activision Blizzard maintain constant engagement and a large user base for Warzone over several years?
11.
Do you think Battlefield 2042 will cause a crowded slate for Vanguard, or do you not consider that a risk? It was a flop last roll-out with Battlefield V, but do you think this version of the Battlefield franchise will be more competitive?
12.
Are you concerned about Blizzard studio’s pipeline content management? Diablo IV moved from H2 2021 to H1 2022 and Overwatch 2 may not be out until 2023?
13.
Do you think extrapolating the IP in the Blizzard studio is enough to not only reverse the MAU declines that occurred over the last year or two, but also get Blizzard up to some sort of parity with Activision? How might you measure success from a MAU standpoint for success in free-to-play and mobile across Overwatch, WoW and Diablo?
14.
You mentioned King starting to grow the base again. How much does that have to do with changing the monetisation system to reduce the reliance on what has driven Candy Crush, namely over-reliance on the big payer user base? Do you think King can spread monetisation across more users on average without greatly reducing concentration and churn risk?
15.
The industry buzzword is the metaverse. There was a 2015 memo from Facebook CEO Mark Zuckerberg and there were a lot of moving pieces within that, apps and experiences, platform services, hardware systems. Gaming fits into the mould of maybe being the next virtual or augmented reality. How seriously would you say Activision Blizzard and AAA publishers generally are thinking about the opportunity to monetise through brands to augment reality and drive advertising as a much larger piece of the business longer term?
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