{"id":10552,"date":"2020-02-11T09:49:53","date_gmt":"2020-02-11T14:49:53","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/a-storm-is-coming-for-blizzard-entertainment\/"},"modified":"2020-02-11T09:49:53","modified_gmt":"2020-02-11T14:49:53","slug":"a-storm-is-coming-for-blizzard-entertainment","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/a-storm-is-coming-for-blizzard-entertainment\/","title":{"rendered":"A Storm is Coming for Blizzard Entertainment"},"content":{"rendered":"

The Gaming Industry<\/em><\/strong><\/p>\n

The video game industry has been valued at over $120 billion and climbing with digital innovation in computing graphics and cloud based streaming solutions at the epicenter of its growth[i]<\/a>. Recently Google and Apple have begun competing in the space, each vying for a piece of the pie from legacy gaming incumbents like Nintendo and Valve. However, another incumbent, Activision Blizzard, is not positioned to succeed in this increasingly competitive and rapidly changing market. As improved technology, like AR\/VR, and 4K streaming solutions continue to be developed, Blizzard has become too slow and too comfortable to successfully innovate and will likely be left behind over the next few years.<\/p>\n

Blizzard\u2019s Successes and Downfalls<\/em><\/strong><\/p>\n

Blizzard Entertainment was founded in 1994 and has been around for over 25 years with several extremely popular flagship games like World of Warcraft (WoW), Diablo, StarCraft, and Overwatch.[ii]<\/a> World of Warcraft, which is based on a flat monthly subscription pricing model, is estimated to have produced approximately $2.1 billon in revenue per year during its peak, making WoW one of the most successful video game franchises of all time.<\/p>\n

Yet, since 2002, Blizzard developed only one original game, Overwatch[iii]<\/a>. Over the past two decades, Blizzard has captured value for their shareholders by harvesting their impressive but decreasing revenues from their old legacy game franchises through subscriptions or microtransactions (Exhibit 1).<\/strong> In 2016, Activision Blizzard employed an innovation by acquisition model by acquiring King, the famed mobile gaming company that created Candy Crush. This acquisition fits perfectly Blizzard\u2019s model of highly addictive and worn-out games.<\/p>\n

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Exhibit 1 \u2013 Active users decreased by over 25% in the past three years while segment revenue has also decreased.<\/figcaption><\/figure>\n

Fast forward to present day, where Blizzard\u2019s latest game release was \u2013 you guessed it \u2013 another iteration of an old franchise favorite, Warcraft III: Reforged. Released on January 28, 2020, Reforged broke records for negative reviews from users. On Metacritic, the rotten tomatoes of video games, users gave Reforged a 0.5 out of 10 (Exhibit 2)[iv]<\/a>. The poor reception of a new Warcraft iteration illustrates that not only is the loyal fan base diminishing, but also the quality of Blizzard games is now in question. Many of the poor reviews come from bugs in the game that make it almost unplayable. As a gaming veteran of over 25 years, this is detrimental to their brand perception of producing high quality game. Blizzard\u2019s strategy of riding on the laurels of their stale digital innovations is quickly becoming irrelevant.<\/p>\n

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Exhibit 2 \u2013 Metacritic user reviews for Reforged gave it a 0.5 out of 100 (n=28,318), the worst score for a game ever recorded on Metacritic .<\/figcaption><\/figure>\n

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The Competition Raises the Bar<\/em><\/strong><\/p>\n

Blizzard should be most concerned about the innovations that their fellow gaming incumbents have been making over the years.\u00a0 Large players like Nintendo, Valve, Sony, and Microsoft have reacted in three different ways to recent industry trends:<\/p>\n