- Google documents Iraqi museum treasures
- EU drops Qualcomm antitrust probe
- Barnes & Noble reports 2Q loss, cuts guidance
- Nokia to ax 220 R&D jobs in Japan
- Fox CEO wants US to join France on Internet piracy
- Newspaper circulation may be worse than it looks
- GE, Vivendi talks over NBC Universal stretch on
- B&N Nook sells out, too late for holiday orders
TECHNOLOGY NEWS FROM NYTIMES.COM
- Google Chief Announces Plan in Baghdad to Put Iraqi Artifacts Online
- Practical Traveler: Apps for the iPhone: A Traveler’s Companion, Pocket Size
- Video Game Review | Borderlands: The Thrill’s in the Gunplay, With Lots of Guns to Play With
- Seeking Deals, Holiday Fliers Get Early Start
- Group of Magazine Publishers Is Said to Be Building an Online Newsstand
MOST SHARED
- The Executive Job Search
- S&P Stocks Trading at New 52-Week Highs
- Where Do Pardoned Turkeys Go?
- Salvation Army's Kettles Now Credit Card-Ready
- Activision Prepares to Double Dip on ‘Modern Warfare 2’
- Chinese Overcapacity is Worsening, EU Chamber Warns
- US Mint to Suspend American Eagle Gold 1-Ounce Coins
- Foreign Demand Boosts US 7-Year Treasury Sale
- The 'Real' Jobless Rate: 17.5% Of Workers Are Unemployed
- Black Friday to Avoid Red Ink; Greenback Gets the Blues
- Bankruptcies Jump, Hitting Highest Level in Four Years
- AIG, Ex-CEO Greenberg Reach Pact to Settle Disputes
- Bank of America CEO Search May Extend Into 2010
- Steepest Black Friday Discounts, Revealed
- Fed to Counsel Moviegoers on How to Use Credit Cards
- 'Cancer of Fraud' Permeates Health Care System: Critics
- Where Do Pardoned Turkeys Go?
- US Mint to Suspend American Eagle Gold 1-Ounce Coins
Text Size 
Special to CNBC.com
On the surface, a video game opening a virtual pet store doesn’t sound like something investors should care too much about. But when that game is “World of Warcraft,” the stakes change.
 |
Blizzard Software World of Warcraft 'pet.' |
They’re a dedicated bunch, too—some might say obsessively so. Players are willing to spend $700 and more on eBay [EBAY
Loading...
()
] for an in-game item that allows their character to ride a digital translucent tiger.
Actions like that make the players easy to write off as kooks, but also underscore their dedication to the game. And that’s what makes the pet store so interesting.
With its launch, Activision-Blizzard [ATVI
Loading...
()
] is now tapping directly into that mania. For the first time, players will be able to buy in-game content directly from the company. Two ‘pets’ will initially be offered at $10 each. They do nothing to enhance the player’s character or offer any in-game benefits. They’re purely cosmetic.
They could also be the beginning of an additional significant source of revenue for the company.
“While it is impossible to know how popular these initial pets will be, offering digital in-game items may be the beginning of a meaningful new revenue stream for Blizzard,” says Broadpoint AmTech analyst Ben Schachter. “At $10 per pet (and assuming these are virtually all margin), the EBIT contribution could be meaningful even if just a relatively small percentage of WoW's subscribers opt to purchase in-game content.”
To be clear, the WoW pet store won’t have a noticeable impact on Activision’s earnings anytime soon, but if it catches on with players, it opens the door for other sorts of micro-transactions, which would also be pure profit plays for the company.
The developers at Blizzard, meanwhile, are on the verge of completing “Starcraft II,” which could be one of the biggest games of 2010. The team is also hard at work on “Diablo III,” which is expected in late 2011 (though subject to change) and another, undisclosed massively multiplayer online game.
 |
Blizzard Software Another 'Warcraft' pet. |
While games like “Guitar Hero” command more of the spotlight, “World of Warcraft” is the real cash machine for Activision. Revenues from the game represented 37 percent of non-GAAP revenues in the third quarter and “WoW” continues to see its subscriber levels increase, despite the fact that the game was released five years ago.
Competitors, especially Electronic Arts [ERTS
Loading...
()
] and Sony [SNE
Loading...
()
], have tried to launch a game that could match “WoW’s” performance or dislodge it from its dominance of the genre, but haven’t come close.
The only entity that has been able to make a dent in the game’s player base, in fact, has been the Chinese government, where bureaucratic in-fighting has temporarily resulted in a ban on the game.
Part of the key to Blizzard’s success has been a good understanding of its customer base. The developer has cancelled several titles that were far along in the development process for not living up to their high standards—and it embraces players, hosting an annual event where it gives out gift bags and hosts a free concert for attendees.
Fans appreciate the respect and, as a result, tend to welcome changes like downloadable content rather than protest them as cash grabs, as they might with other developers.
“The Blizzard consumer is unique,” says Schachter.
- For nearly three decades, these on-call experts have been dishing advice on how to – and not to – cook turkey.
- Eric Schmidt pledges to create a virtual copy of the Iraq National Museum at Google’s expense.
- Bill Griffeth is taking a leave of absence from CNBC and Power Lunch for a year. Here's a message from Bill.
- More shoppers than ever plan to comparison-shop this season. Who will benefit?
- It may be the most unusual guide to business you'll read.
- How can you get out of debt and back on the road to recovery? Follow these ten steps.
Data is a real-time snapshot *Data is delayed at least 15 minutes