In a new analyst note, Mike Hickey from Janco Partners has been examining Blizzard's World Of Warcraft success in light of the Activision/Blizzard merger, suggesting average monthly WoW revenue in "the low teens" per user, and a churn rate as low as 4-5% per month.
In his note, in which the financial analyst raised Activision's share price target from $20 to $35 in advance of the merger, Hickey particularly noted: "We expect the Company’s WoW franchise will provide a strong source of continued growth. However, with a multitude of competitive MMOs positioned to enter the channel, potential subscriber fatigue and competitive options could undermine subscriber growth projections."
However, he continued: "That said, with only 4 years in the market, World Of Warcraft continues to attract subscribers at an amazing rate, with churn reported to be below other well performing subscriber based business models (we are thinking below a 4 to 5% per month.)" Churn rate refers to the number of subscribers who leave the service during the month.
Hickey also notes: "WoW controlled 5.6 and 8.1 million subscribers in ’05 and ’06 respectively, up 45%. Through 09/30/07, WoW controlled 9.3 million subscribers, up a respectable 15% before the seasonally hot Q4 period. The average revenue per unit (ARPU) is estimated to be in the low teens, which includes the dampening impacts of their 22% royalty agreement with [Chinese partner] The9."
The 'low teens' comment from Hickey refers to the average monthly fee in dollars for each World Of Warcraft user. The fee in North America is $14.99 per month to play the MMO, but lower Asian and Chinese fees and variations elsewhere in the world obviously affect totals.
The analyst concludes: "Management anticipates ample opportunity to grow both their WoW subscriber base and ARPU, which seems achievable. Importantly, Vivendi’s determination to own a large majority of the newly created Activision Blizzard suggests to us they remain exceedingly confident in the growth of their WoW franchise."