Blizzard Hits First $1 Billion Net Booking Quarter And Activision Revenue Soars As Microsoft Merger Deadline Is Extended, Esports Division Sees Layoffs

As has been the case for the last few quarterly financial reports from Activision Blizzard, today's Q2-2023 results were released with nothing more than a press release and an official posting on the company's site. We haven't had a call where Bobby Kotick had to actually take questions from shareholders in quite some time due to the ongoing merger with Microsoft.

That said, today's release was probably one Kotick would have loved to talk about on a call...well, at least in most categories.

First, revenue is soaring. This probably isn't all that surprising given the launch of Diablo IV from Blizzard and some increases in the Call of Duty franchise on the Activision side. Net revenues overall came in at $2.21 billion ($1.64 billion in last year's second quarter), operating cash flow came in at $590 million ($198 million in the same quarter last year), and Blizzard itself hit their first ever $1 billion net bookings quarter mainly due to Diablo IV. (Here's to hoping that record numbers don't lead to layoffs like they have in the past.)

The boards of both Activision and Microsoft have also agreed to extend the deadline (originally yesterday) for the companies to merge following favorable outcomes in the FTC hearings and perceived progress in negotiations with the CMA in UK. The new deadline to close the deal is October 18th, with shareholders getting a little "up to $0.99 per share" payout to sweeten the deal and the termination fees being increased to $4.5 billion should the deal be cancelled after September 15th for some reason.

On a piece-by-piece basis, Activision is raking in the cash on Call of Duty with the franchise pulling in over an 80% increase in operating income year-over-year. Blizzard's World of Warcraft's subscriber retention in the West "remains higher than at the equivalent stage of recent Modern expansions."

Overwatch 2, on the other hand, saw a drop in player engagement and "player investment" (i.e. spending) but the company hopes this will rebound when the "PvE" content is added...as disappointing as that may end up being after the cancellation of much of the promised content.

Speaking of Overwatch, the Overwatch League has a few issues of its own with amendments having been made to the operating agreement between the company and the league's teams. If that new agreement isn't voted on successfully at the end of the current season, a termination fee of $6 million will be paid to each team. With Overwatch League revenues accounting for less than 1% of the company's consolidated net revenues, expect big changes soon. Some changes may already be underway with The Verge reporting that layoffs in the esports departments have already started.

Across the board, since the company stopped reporting on a per-game basis a while ago, Monthly Average Users (MAUs) continues to slide. 356 million MAUs in Q2 is the lowest count in years and Blizzard by itself hit 26 million MAUs, on par with where it was in 2021 and down from a high of 45 million in Q4 2022, the quarter Overwatch 2 and Dragonflight spilled out into the world.

Again, though, MAUs is a deceptive number as it obfuscates which games may or may not be doing well and is likely double counting users who play multiple ABK titles... so take the number for what it's worth.

Finally, Activision reiterated its focus on "setting a new standard for workplace excellence and transparency." Their May 2023 Transparency Report was again provided showing the breakdown of the company's recruitment and retention practices. The demographic is predictably still skewed in largely in favor of staff identifying as "white" and "man". The report also dives into perception of management by staff and how long investigations take when issues are raised and the outcomes of those investigations.