Activision Blizzard's First-Quarter Financials Indicate the Goliath May be Toppling

For its first fiscal quarter ended March 31, 2012, Activision Blizzard reported net income of $384 million compared to net income of $503 million in the same quarter the previous year. Despite the much lower number, that's still a significant profit under most circumstances. The problem comes when you look at the company's GAAP Net Revenues by platform and segment.

Net revenues from Xbox 360 games dropped $61 million to $335 million and net revenues from PlayStation 3 games dropped $42 million to $300 million. That's a significant problem, but easily explained given the uneven release cycles of games.

The problem is that Net revenues from "Online Subscriptions" dropped by $139 million to $256 million. Since that category is almost entirely World of Warcraft, it says that the goliath of massively multiplayer online games is stumbling. Activision Blizzard's cozy position has been maintained thanks to the cash cow that is World of Warcraft providing a buffer from the turmoils of the real world. If you want a second data point, the segment that is Blizzard also reported net revenues dropping $106 million to $251 million.

Diablo III is releasing next week, but that's not a subscription related game, and the Diablo III cash items sales would have to be impressively absurd to make up for the drop in World of Warcraft revenues. Likewise, the Mists of Pandaria expansion should drop for World of Warcraft later this year, but that won't entirely stem an exodus of this size.