...a Wall St. perspective

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I’ve worked for a couple bulge bracket wall street firms as well as a few large asset managers (let’s also call them the “shareholders”). One of the things we often hear about, whether from youtubers, streamers or other media is that when a game starts going into the dumpster, shareholders are to be blamed because they only care about profits.

This is a horrible lie.

The blame should be placed squarely on executive management for trying to play Wall Street’s game. I’ll start by explaining briefly what Wall Street does, how management plays into this and why “shareholders” are for the MOST part, completely aligned with players/customers.

Equity Analysts on Wall Street or the “sell-side” build fancy models for companies in order to try to estimate sales, margins, earnings and sometimes even estimate a company’s valuation. The average of all estimates for all the sell-side firms covering a particular company, like ActiBlizz, would then be “consensus” or “expectations”. These are the “expectations” that business media refer to when they say a “company beat expectations”. Without going too deep into the theory, when a company beats quarterly expectations, the stock price movement is generally positive. But the key thing to remember is that this is ONLY in the short term.

Weak management teams are obsessed about beating estimates. As such, they will make subpar decisions that will hurt the long term viability of a business in order to achieve short term targets. Familiar examples would include: cutting staff, cutting R&D spending, and/or pushing out unfinished titles to juice sales in a particular quarter.

Shareholders care more about the long-term viability of a business. In other words, they would prefer a company that invests in creating long-term sustainable profits. Shareholders are not stupid people - they can clearly see that when a game developer cuts key staff , it will hurt long term sustainable earnings (and consequently, their stock price) even though short term “consensus beats” may momentarily cause a surge. Short-term wins don’t really matter. In this regard, as far as game publishers go, shareholders and players are mostly aligned. They want a company to put out titles that have longevity and interest (e.g. WoW circa 2004/05) vs. short term FOTM titles (e.g. mobile p2w games).

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While I find your post interesting and informational, I challenge this statement.

For one example, let’s look at Black Ops 4 from a few months ago. Sold incredibly well, yet it managed to disappoint investors. Around the time BO4 launched, there we other releases with similar stories (that I am too lazy to pull right now.)

I don’t doubt incompetent management, that’s expected, at this point - but I’m not willing to totally ignore investors/shareholders expecting too much.

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It’s simple logic really, everybody wants profit, what’s the surest way to gain profit? Make a good game that satisfy the players. Blizzard, it’s shareholders, and us quite literally want the same thing.

The ability to deliver it however, might be up to debate.

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This is a good point and I didn’t really want to go in depth explaining that it’s Wall Street and not investors, that set the expectations. Investors may definitely have their own internal expectations but generally speaking, if a company is not destroying capital (e.g. investing $1 in R&D and only getting 10 cents out of it), that is good enough.

Wall Street definitely has its flaws but alas, it serves a purpose in the financial industry. The best management teams I’ve seen, simply ignore Wall Street analysts altogether.

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I think Shareholders shouldn’t be allowed to have an opinion unless they can show they have great knowledge of the company and it’s IPs in question.

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They can have an opinion but it should be disregarded if it’s bunk. Anyone can become a shareholder in a publicly traded company, if you don’t like how things are going, pull out and invest elsewhere. The idea they can possibly be as well informed as their portfolios are diversified is hard to believe. Most shareholders should sit back, shut up and enjoy the ride unless serious mismanagement or outright criminality is going on

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This is a very interesting thread. OP, what prompted you to make this?

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Wow you just described my (fortunately) ex-Boss.
Nd I might add sometimes its mid-management ( those between top and operative ppl) that fail to understand Top long term strategy and return correct Feedback from what operative people (those with major customer/market contact) is receiving. As said majorly from an interest to comply with short term objectives than a sincere interest for business health.

Not to mention the biggest variable of all, estimates or not; human behavior. Can’t predict what will become a blatant success ( Vanilla wow sales) or will provoke customer’s absolute contempt.

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Real talk. Most stocks are owned for less than five minutes before being sold again. By and large the long-term shareholders ARE the executives, either at Acti-Blizz itself, or at large investment banks. And what they want is money money money, now now now. In five years? The industry might collapse and they need their golden parachute.

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It’s 100% truth, but i don’t think they will believe on you.
I have been investing in stock and commodities market plus venture capital for years now and a lot of the time when things go wrong is because managers wanna do my job which is taking the risk and setting the vision. Somehow and for some reason they believe that short term goals are interesting to anyone but rentists, which do not care very much about the company.

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Just a couple of days ago they were blaming pet battles for wow being bad.

The player base lashes out and anything and everything these days.

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I think the whole industry has a cultural problem now. Ten years of playing the wall street game has left the wrong people in charge from top to bottom.

The two things I see that are really troubling are warfronts and all the cinematics.

Warfronts because that was completely predictable. They’re just the scripted can’t lose multi stage encounters from the beginning of the last few expansions. They knew those were so painful to do over and over again they have ways to skip most of them on alts.

All the pointless cinematics like the ones for trash that interrupt game play in instances… That really smells like bureaucratic budget turfing. They’re there to justify a department budget, not to make the game better.

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Yup I’ve seen this too, it really irritates me when companies make obvious PR blunders.

Reminds me of the time that, in the midst of an impending Hurricane about to reach their area, a Home Depot refused a delivery of Wood-sheets (primarily) that would be used to help board up windows and whatnot. The Delivery truck driver was left without options, and so he sat in his truck, until some hours later, an Off-Duty Police Officer knocked on his door, and asked him if he happened to have lumber on board (there was none available elsewhere, for purchase or otherwise; Home Depot had likewise refused the Delivery as it had arrived slightly too late, and therefore a lot of people would be without the ability to cover up their houses before the storm hits), seeing no other option, he agreed, and provided the lumber to the Officer (and the various persons that lived in the town).

Rather than delivering a bill to the town for payment (which they most likely would have paid out of gratitude at that point), or simply sharing in the credit by means of loudly applauding the actions of their driver (and perhaps footing the bill themselves), they fired the driver, and received a LOT of blowback as a result. That company ended up being blacklisted by quite a few local businesses, and suffered a massive PR setback.

I see a lot of Blizzard’s actions here, first “Don’t you have phones”, “All of our best developers are on Mobile Games”, and the surprise “Heroes of the Storm will be immediately moved to maintenance mode, and we’re firing all of our professional streamers and gamers. Oh yeah this is a notice to you developers and streamers too, some of you developers will be moved to Mobile Gaming.”, the list goes on and on.

Really bothers me that Blizz seems to have shortsighted management, due to the intrinsic nature of the model for WoW (Subscription based) if you have QUALITY content, you will make money. When you have bad content, you will need to begin subsidizing it via Store Mounts, Store Pets, Level Boosts, and selling In-Game Cash.

Honestly, nothing rubs me as wrong as the last two, and it directly, as well as negatively, impacts the end-game content. Ever since those were introduced, I’ve noticed a sharp decline in the quality of players at max level (on average). Used to be that we all had a heck of a ride to get there, and while certainly not the best (when I first started, even at max level I was quite bad), compared to the people that took 5 minutes to get there now, seems to be a lot worse (at least I wasn’t backpedaling by the time I hit max level).

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As I’ve considered it more, they should plan for 3 ‘dead months’ a year of no ‘content’ being released, where subscriptions are expected to dip

This splits the year into 3 segments of four months each (content release schedule), and content should be paced so that it is fun and engaging, with as few arbitrary time gates as possible.

Dead-Months would be expected to be the final month of each patch (referred to as such as they would likely be split between having the most players inactive / least active, and then ramping up from there into the next month for anticipation of the imminent drop of new content), and to mitigate the loss in Players, they should have something crazy, or special, planned.

Timewalking Dungeons, Weekly Affixes (Bonus WQ Rep, BGs, Arenas / Skirmishes, etc.), all serve towards this purpose in large part, but more things could / should be added to sweeten the pot.

An example of this would be bringing back a transmog set for each Class (or type of class in some indications; i.e. Generic Plate for some very old sets), which is no longer available, or even adding in a token / essence system that can ONLY be gained during that time period (2-4 weeks ideally), but which can be exchanged with a ton of vendors that appear for the event, which is used to purchase no longer obtainable sets, or transmog versions of existing sets.

I.e. bad luck protection, doing content (modern or old) gives up to a maximum number of tokens a week, and each transmog, perhaps toy, pet, or mount even, has a varying cost.

Completely unavailable appearances might even make a return here, i.e. Corrupted Ashbringer, Elite PvP sets (though likely should require 1800 in a season to purchase; i.e. hit 1800 on that character at some point in your past / current, spend a stupid amount of coins, purchase an elite set), or things like Atiesh’s appearance, etc. The idea is that a LOT of assets which are no longer used, or which are desired by a LOT of people but no longer attainable, may be done so (even if at a lot of work). Alternatively, for say Elite Sets, you could offer the ability to grind out tokens for them via hitting 1800 in a season, and then each week while above 1800, your Chest contains a token (scaling values; i.e. a 2500 player could buy the set in 2 weeks, an 1800 player might take half a season or longer), etc.

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I frequent a lot of media sources (e.g. reddit, industry news videos etc.) that follow the AAA gaming industry. Often, shareholders are blamed for poor managerial decisions that the player base despises.

Essentially, there are 4 participants: Wall Street, Management teams, Investors/shareholders and players/customers. I just wanted people to know that the investors/shareholders are more aligned with players/customers than the media portrays.

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As an ATVI investor, nothing disappoints me more than when Activision Blizzard makes decisions that are obviously meant to cater to traders instead of investors. Traders are just seeking short-term quarterly growth and are extremely aversive to short term loss. Usually traders are emotional and have a poor stomach for volatility. Investors are thinking about where the company will be 5, 10, even 20 years from now. We literally don’t care whether the company found a way to milk just that extra bit of revenue off of the playerbase this quarter to meet expectations. We care whether that playerbase will want to stay with us many years down the road and bring their friends. That’s how we make money.

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The pump-and-dump “shareholders” that are in and out for five minutes are not really shareholders. They’re more like speculators that care about gains for those five minutes. But this proves my point that it is the executive management teams at fault if they are catering to this subset.

Most long term shareholders are not investment banks or management teams. Rather, they are pension or mutual fund managers.

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Or if you are wealthy enough and have the capital for the margin, are not risk averse, and really want to disrupt the business sell short far below the floor. If you sell it short enough long enough fast enough the share price tanks, your shorts come into the money you buy to cover owning enough shares to make a bundle when you reconcile then settle at the new lower price, and the company is hurt in the bargain by not being able to devote as much cash to R&D as before your little spree.

Do that often enough and you make bank while driving them into bankruptcy.

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