11.05.18 | A note on Activision Blizzard (and net neutrality).

By Jessica Sier 11 May 2018 3 min read

Newsletter: Published Thursday, 11 May 2018

  1. Activision Blizzard and Fortnite;
  2. Net neutrality isn't quite dead.


Activision and the Fortnite niggle

Activision Blizzard is the most valuable video game company in the world.

It owns World of Warcraft, Overwatch, Starcraft, Call of Duty, Candy Crush and a swag more well-known games.

But this giant company has a small problem in the form of Fortnite - a free game you can play on mobile devices, PCs or consoles.

It's basically a bright, brash mass online brawl and field research has revealed this game is actually quite fun.

The problem (for Activision) is that people are (still) absolutely losing their minds over Fortnite.

And despite being free, in the United States alone, people are spending more than $10 million every day in the app.

The players can upgrade and evolve using an in-game currency, resulting in millions and millions of micro transactions every day.

The Fortnite game developers - the Tencent backed Epic Games - basically hit the jackpot.

People spent more than 128 million hours on Twitch just watching other people play Fortnite.

Activision shares have lost some of their lustre in recent months as investors worry gamers might abandon the likes of Call of Duty and Candy Crush for Fortnite.

And the executive team were quick to acknowledge this threat in their company update last week.

“Gaming is constantly evolving and innovating, which often expands the marketplace, and the success of Fortnite is no exception," said Bobby Kotick, the chief executive.

That said, Activision is hardly floundering. The company announced net revenues were up 14% to $US1.97 billion, far outstripping what analysts expected.

The company’s operating cash flow was a record of $529 million for an increase of 29% year-over-year.

Activision Blizzard is shifting to a games-as-a-service model; where players pay continuous fees to keep playing, just like software as a service businesses.

With gaming, you can also monetise video games after their initial sale through in-game purchases or support a free-to-play model.

Activision is leading the video game company pack by moving to games-as-a-service.

But the rise of Fortnite has seen monthly active user metrics taking a beating - company-wide users for the quarter were down 3% quarter-over-quarter and 13% year-over-year to 374 million.

The rapid rise of Fortnite and its "battle royale" concept (the online brawl part) has fans hooked and has taken a swipe at the major players.

But as Activision Blizzard's bosses pointed out, it wouldn't be difficult to introduce a similar multiplayer way of battling into their existing franchises.

This is a fantastic example of severe competition forcing major players to innovate and improve their products.

Spaceship has exposure to Activision Blizzard through its superannuation fund.

💡 Also on a slightly related esports note - shout out to the Australian esports team that made it through to the Overwatch World Cup in August.


Net neutrality battle rages

Elsewhere in our world, there is an ongoing battle over the freedom of the internet.

Net neutrality is the idea that internet service providers, including cable companies like Time Warner, and wireless providers, should treat all internet traffic equally.

They were prohibited from slowing down or blocking access to certain websites or services, nor could they charge differing prices for different access.

They also couldn't break the internet into segments (i.e. where video streaming would cost an extra $19.95 a month, email another $9.95 a month, gaming another $14.95 a month, social media another $12.95 a month).

Well, they used to not be able to do that, but now they can.

Last year, the FCC voted to dismantle Obama-era rules that prohibited internet service providers from treating traffic unevenly.

The Republican position is largely that the laws were too onerous for the internet providers. It was anti-competitive and meant that businesses were struggling.

That dismantle was mostly completed this month.


Now US senators have forced a new discharge petition into the White House, under the Congressional Review Act, setting the stage for a full congressional vote to restore net neutrality.

Senators expect a vote on a new resolution to restore the 2015 Open Internet Order next week.

So if you see these Red Alert banners across Reddit, Pornhub, Tumblr, Etsy and a swag of other internet businesses today, they're showing their support

Just one of those internet things worth keeping an eye on. You know, if you value the free flow of information.
Elsewhere in our world, there is an ongoing battle over the freedom of the internet.

Words by
Jessica Sier Right Chevron

Jessica Sier is a financial journalist. Prior to that she led content at Spaceship and was a reporter at the AFR where she discovered that breaking down financial jargon was a public good.

11.05.18 | A note on Activision Blizzard (and net neutrality).