Blizzcon 2010 was devoid of any major announcement versus our expectation around announcement about Diablo III launch and the next expansion pack of Starcraft 2. The show, even bigger than last year with about 40K attendees (versus 25K at Blizzcon 2009) from all over the world despite a tough economic environment reflects on a strong and passionate community of Blizzard gamers, in our opinion and generally makes us positive for upcoming Blizzard games.
We spoke with a number of attendees at the conference and many of those believe that there was not much do in World of Warcraft or WOW nowadays (these gamers have 5-10 characters each within WOW, all leveled to the max level 80). Some of the players had discontinued playing WOW and are waiting for Cataclysm launch when they plan to re-subscribe to WOW service, which confirms our view that the Cataclysm launch could bring back some old users and drive up revenue performance.
The company seems to have completed development for Cataclysm for Chinese markets as well (and likely in accordance with the Chinese government guidelines as per the feedback on the previous expansion pack Wrath of Lich King). Given the company's stable partnership with NetEase and given our view of improving regulatory environment in China, we would expect to see Cataclysm launch in China within a year of the U.S. launch (versus 23 months delay from the U.S. launch for Wrath of Lich King and 8 months delay for The Burning Crusade launch in China) The company showed off a few community-created Starcraft 2 mods (i.e. mini games built within Starcraft 2) - Left 2 Die, DoTA, Aiur Chef, and Star Jeweled, which seemed to be well received by audience and reflects on the potential of Battle.net to emerge as a credible online games platform for the publishing third party games.
Despite being hardcore Blizzard fans, many of the users that we spoke to are now playing free-to-play games as well (in particular, many users highlighted Riot Games' League of Legends or LoL), which reflects on the increasing popularity of the virtual goods model in the West, in our opinion. Interestingly, gamers highlighted that they are spending $25-150/month on LoL (versus $15 per month for WOW), and for them, the attraction of playing a virtual goods model game was the gameplay experience rather than accessibility (we believe that lower accessibility may be more compelling for the mass audience).
Recall that Riot Games is a portfolio company of Tencent and that Tencent is working on launching League of Legends in China as well.
