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WoW must be giving it away…

I was reading a “d’uh, that’s obvious” article today regarding how the massively multiplayer online game (MMOG) industry needs to stop looking for the next WoW killer. And I came across this particular bit of text that, well, just doesn’t add up.

By his [Michael Cai] estimation, WoW accounted for half of the $860 million in revenues that MMOs generated in the U.S. in 2008.    

The emphasis above is mine. Let’s take a look at this figure.

Half of $860 million is $430 million. This figure is described as revenue: not net income, not profit, not anything else: the only way to interpret this is gross or top line revenue, that is total incoming dollars, ignoring costs. Now consider the other available figures:

  • Blizzard claims 11 million subscribers for World of Warcraft, and
  • a subscription to WoW costs $13.99 per month, or $12.99 per month if you commit to an entire year

Assume that 100% of the user base is subscribing using the reduced rate annual contract fee of $12.99, and the numbers look like this:

  • (11,000,000 x $12.99 per month) x 12 months per year = $1,714,680,000

That is $1.7 billion dollars per year, which is a lot different than $430 million. And this is purely accounting for subscription revenues: Blizzard released an expansion this year, sold to several million of those subscribers at $40 per copy. There are three possibilities that occur to me here:

  1. Blizzard’s 11 million subscriber figure is not actual “active”, paying subscribers, or is otherwise totally bogus, and Michael Cai has some special insight into the reality
  2. Michael Cai didn’t really mean revenue: perhaps he means profit, or something else, is being misquoted/misunderstood, and the writer of the article I quoted didn’t spend thirty seconds to verify the facts
  3. Michael Cai is pulling numbers out of his ass and didn’t spend thirty seconds to verify them

If I were a reporter rather than a blogger, I’d contact Michael Cai and ask him to explain what he really meant. Maybe that’s something Mary Jane Irwin, the author of the post I quote above, could look into. Or maybe I’ll just leave it up to you, the reader, to generate your own half-baked theories regarding the strange numbers that get quoted in some articles.

UPDATE- The reporter *should* have checked: per Michael (see attached), the numbers quoted, and specifically the $430 million per year figure for WoW’s annual revenues, were U.S. figures only.

3 comments to WoW must be giving it away…

  • Michael

    Thanks for the rant Kelly. Some friends sent a link to me. It’s hilarious. The reporter forgot that I told her the numbers are all U.S. I know exactly how much WOW is making in revenue. Your way of total revenue calculation is problematic since almost half of the subscribers are in Asia, where the average monthly ARPU is less than $5 as compared to $15 or so here…

  • Thanks for dropping by to comment, Michael! If these numbers are purely US revenues/subscribers, that makes more sense. It suggests something like 3 million of WoW’s 11 million subscribers are in the U.S., meaning about 80% of their audience is overseas. To me, that is as interesting a fact as the revenue figure

    Obviously the kind of napkin calculations I’m performing are utterly flawed, but that’s the information a “normal joe” has available to validate what is being reported. And with a technical audience, it is almost a given that someone will be running the data to see how the figures add up.

    I come from a business environment where my audience often is recalculating and validating my numbers as I talk about them, so I know how frustrating (and easy!) it is to have things taken out of context. It would be nice if the reporters got enough detail to at least make it clear where the discrepancies come from.

  • Michael

    Cool. So you see I pulled the numbers out of some better places.

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