Activision Blizzard, Inc. has been among the best video game companies in the world. The video game developing company has developed some of the most popular video games in the world since the 21st century. Some of the most popular video games that are owned by the company include; Call of Duty series, World of Warcraft and destiny. The video games developed by the company have been of high quality, and this has seen the company games become popular and tremendously increase its revenue (Ray, 2020). The individual games have earned a substantially high number of subscribers and resultant high income. However, over the past few years, the company has realized a decline in revenue, and this is due to various problems it is currently facing (Tassi, 2019). The key issues faced by the company include lack of replacement for the World of Warcraft, slow decline of Call of Duty, unrealistic expectations and possible problems anticipated by destiny.
Lack of replacement for the world of Warcraft
World of Warcraft became one of the most popular video game that the company developed. At its peak, 2011, the game had about 12 million subscribers and exceeded the 100 million annual revenue expectations. In addition, the game has collected over 20 million registered players, an indication that many gamers across the world found the game enjoyable. However, since 2011, the game has been displaying a steady decline in both revenues, and the subscribers have drastically dropped from 12 million to almost six million by 2015. The decline is not showing any sign of stopping, and it is predicted that the number of subscribed gamers will reduce to less than 4.5 million by 2023 (Green, 2014). The only company's attempt to find a replacement for the popular game was the Titan, but it was cancelled following its decision to withdraw and go in a new direction. With the decline of the game, there is a big void, and without proper replacement, the company is under crisis.
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The slow decline of call of duty
Call of duty series is another game developed by the company that attracted a massive audience. There are several games in the series, including modern warfare 1, 2 and 3, the world at war, and black Ops, among others, the company has made remarkable sales, tuning to hundreds of millions. The series' most sold game was Modern warfare III, which had a unit sale of almost 30 million (Huang, 2019). However, since the release of Modern warfare III, the series has been recording a decline in unit sales for the successive episodes, and the latest episode, Ghosts, had less than 25 million sales. This is raising concerns about the next episode, Advanced Warfare, as it is not definite whether the sales will be substantial or the decline will continue. Since the call of duty welcomes a significant portion of the company's revenue every year, the slow decline is posing a threat that the company's revenue will fall to decline, and the company will be no longer receiving huge profits.
Possible problem with destiny
The company recently released another game, destiny, to be played by the millions of gamers and company customers worldwide. The company's investment in the game was massive $500 million, and it was anticipated to become the company's dollar billion franchise. Within the first five days of its availability to the games, the game fetched over $325 million, which was a great indication that the company would fetch, just as much as it anticipated on the game. However, the anticipated 1billion dollar revenue from the franchise might not be reached following the numerous negative reviews that customers give on the product . The negative reviews make the company's dream of $1 billion in sales a challenge, as some customers who have not purchased the game might decide to change their minds and avoid the game.
The faster-rising cost of playing
Unlike the competitor lie Electronic Arts, Activision Blizzard has been realizing a fast-rising cost of play as it is developing new games to attract the customers (Stevens, 2019). This is significantly increasing the expenses on game development, and as a result, the high costs are transferred to the users and the sub-makers, and this is proving to be unaffordable to many users (Hoium, 2019). As a result, the company's games are becoming less popular among the users, and this is making the company less competitive as their key competitors have retained the low costs. Therefore, the company's expectations are much higher than the actual sales they can make with the high costs due to reduced scale.
Unrealistic expectations
This is another huge problem that Activision Blizzard is currently facing. The company, alongside the shareholders, are having ballooned expectations of the games created and the annual sales (Blizzard. 2019). There is a substantial difference in the company's expectations of the games and its actual sales. This is creating great pressure as the company cannot achieve its anticipated goals on the games developed.
Formal Problem Statement
Activision Blizzard's key problem is the poor management which hinders attainment of its goals. Firstly, the shareholder's expectations are due to misleading by the management of the developed games. The government has not been able to get the actual figures of expectation, which creates the company's void to develop unrealistic expectations (Ahlstedt, 2019). Also, the management has not been able to come up with better ways of game development, and this is the reason for the high costs of production. In the past ten years, the cost of production for the company has risen by 105% compared to its closest competitor’s which is 0.78% . Also, the company's management has not been able to find the solution to declining sales on the company's major revenue fetching games. This resulted to a decline of call of duty from 30 million subscribers at its peak to less than 25 million today.
References
Ahlstedt, K. (2019, February 1). Activision Blizzard's secret weapon (NASDAQ:ATVI) . Seeking Alpha. https://seekingalpha.com/article/4237543-activision-blizzards-secret-weapon
Blizzard. (2019, February 13). Activision and their unrealistic expectations . World of Warcraft Forums. https://us.forums.blizzard.com/en/wow/t/activision-and-their-unrealistic-expectations/99866
Green, T. (2014, October 9). 3 big problems facing Activision Blizzard . The Motley Fool. https://www.fool.com/investing/general/2014/10/09/3-big-problems-facing-activision-blizzard.aspx
Hoium, T. (2019, February 28). Activision Blizzard's challenge in the New World of video games . The Motley Fool. https://www.fool.com/investing/2019/02/28/activision-blizzards-rock-and-its-hard-place.aspx
Huang, E. (2019, February 19). 'Fortnite' is not the only problem that major video game firms are facing, analysts say . CNBC. https://www.cnbc.com/2019/02/18/fortnite-impact-on-video-game-firms-ea-activision-blizzard-take-two.html
Ray, M. (2020). Activision Blizzard, Inc . Encyclopedia Britannica. https://www.britannica.com/topic/Activision-Blizzard-Inc
Stevens, P. (2019, February 7). Activision Blizzard has lost half its value in 4 months, but traders are betting big ahead of earnings next week . CNBC. https://www.cnbc.com/2019/02/07/activision-blizzard-has-lost-half-its-value-but-traders-positive-before-earnings.html
Tassi, P. (2019, January 5). In 2019, the state of Activision-Blizzard is not strong . Forbes. https://www.forbes.com/sites/insertcoin/2019/01/04/in-2019-the-state-of-activision-blizzard-is-not-strong/#105cbebe3039
