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Activision-Blizzard September results reveals box sales paradigm

Activision-Blizzard released September quarter results yesterday. Most of the document is pretty dry and won't mean much to the majority of their devoted fans. They reaffirm the 11 million subscriber base of World of Warcraft and remind us that Guitar Hero's doing pretty well. Yeah, and they have an expansion coming up.

There is an interesting gem, however, to be found in their discussion of Wrath box sales:

"Revenues related to the sale of World of Warcraft boxed software, including the sale of expansion packs and other ancillary revenues will continue to be deferred and recognized ratably over the estimated customer life beginning upon activation of the software and delivery of the services."

That's a pretty packed statement. In summary, it means that the money Blizzard makes from selling the game box isn't immediately counted in their performance metrics at the time of sale. (There's no December "bump" to revenue directly from the 50ish dollars you pay for an expansion.)

Instead, they count the revenue gains throughout your customer lifetime. Doesn't sound like a big deal, does it? Let's talk about why that's such a significant notion.

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Filed under: Analysis / Opinion, Blizzard, News items

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