In 2016, the users of Blizzard Entertainment spent almost 5 million years playing their
games.
As the developers of some of the most popular video game franchises in history, it should
be no surprise that they have been extremely successful.
That’s why, in this week’s episode we’ll be exploring the history of Blizzard Entertainment.
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Established in California in 1991, Silicon & Synapse was the first incarnation of Blizzard.
It was created by three friends: Allen Adham, Michael Morhaime, and Frank Pearce, who got
their early business by working as developers on third party games for a variety of systems,
from the Sega Genesis and the Super Nintendo to the Mac and PC.
They would take games that already existed and would adapt them for other systems, a
process that’s known as porting.
After getting to work on original titles like Rock n Roll Racing and The Lost Vikings, they
were bought in early 1994 by an educational software company called Davidson & Associates.
They ditched the name Silicon & Synapse, initially for Chaos Studios and finally Blizzard Entertainment.
Shortly thereafter, they released Warcraft: Orcs & Humans in November 1994.
It was a sensation, because it tapped into the growing appeal of strategy games and the
enduring popularity of the tabletop game Dungeons and Dragons, which itself falls back to earlier
fantasy works like Tolkien’s The Hobbit and Lord of the Rings.
But while Blizzard was riding this newfound wave of popularity, the company itself became
involved in some kind of corporate takeover or sale practically every year.
Here’s a brief timeline of what happened: Davidson & Associates and another company,
Sierra Online, were bought by CUC International, an early e-commerce company, in 1996.
CUC merged with a hotel, real estate and car rental franchise called HFS Corporation , to
form Cendant in 1997.
The next year, it turned out that CUC had committed serious accounting fraud over the
years, which became a pretty big scandal.
Cendant stock obviously crashed so they sold their software operation, Sierra Online, which
now contained Blizzard, all to a French advertising and PR company called Havas.
Havas were then bought by a bigger French media company called Vivendi, all in 1998.
Somewhat surprisingly, all of these corporate acquisitions didn’t have much of an impact
on the day to day operations of Blizzard, even though they did lose some good people
along the way.
Nevertheless in 1995 they released a sequel to the original Warcraft game, which attracted
an even bigger following that put Blizzard firmly at the top of the RTS genre.
They also acquired a company on their own; a developer called Condor Games who had been
working with them on an upcoming title: Diablo, which was the beginning of Blizzard’s second
major franchise.
One of the big contributors to the success of Warcraft 2 and Diablo was Blizzard’s
decision to invest in building an online platform called Battle.net.
Online multiplayer had mostly been a very small niche at that point because you really
needed some level of technical competence to be able to set it up correctly.
What’s more, you often had to rent server space from CompuServe or America Online and
this could cost as much as $30 an hour.
Some fans of the first Warcraft had battled online, but we’re talking about the most
hardcore fans, not your average player.
Blizzard realized how much potential there was for online multiplayer in the RTS genre,
so they shifted the established model towards users paying a fixed fee for unlimited gameplay
within a certain period, like a week or a month.
So in 1998, when Blizzard released Starcraft with full integration with Battle.net, the
platform’s users grew by over 800% that year.
The game outshined anything they’d ever done so far and is now considered the holy
grail of RTS gaming.
Even today, two decades and 10 million copies later, the game still has an active esports
scene and a fervent playerbase who are refusing to let it die.
So it’s an understatement to say that Blizzard chose to invest their time wisely.
Instead of rushing to release new franchises, they continued developing their existing properties
and to reap the benefits of the boom in online gaming.
Warcraft 3 and Diablo 2 were huge market victories, with Diablo 2 breaking the world record for
fastest selling game at the time, selling a million copies in 2 weeks.
Warcraft 3 presented a new level of depth to storytelling at Blizzard, a trait which
they’ve continued to improve over the years.
The game’s ultimate legacy, of course, is the creation of the MOBA genre.
Today, Multiplayer Online Battle Arenas are the most popular games in the world, but it
all started from an innocent mod of Warcraft 3.
Despite all of that, however, even Blizzard were not prepared for the enormous success
of World of Warcraft.
Released in 2004, WoW became the best-selling PC game of 2005 and 2006.
The game redefined the MMORPG genre and combined it with the rich history it had built up from
the previous Warcraft games.
By the start of 2008 WoW had 10 million users, over half being from Asia.
Unlike Blizzard’s previous titles though, WoW was a massive cash cow because players
had to pay a monthly subscription in addition to buying the game itself.
Subscription prices varied considerably, from the equivalent of $5 per month in China to
$15 in the US.
Speaking of Asia, MMORPGs like WoW became a true cultural phenomenon there, particularly
China and South Korea.
Now, if you consider the lowest possible price level of $5 a month and the fact that WoW
has never had less than 5 million monthly users, you’ll see that for any month WoW
has brought in a minimum of $25 million of revenue.
And keep in mind that it’s been running for over a decade, with new expansions keeping
the game alive way past its initial expectations.
In 2008, Blizzard’s parent company, Vivendi, merged with Activision to create the current
company, Activision Blizzard.
Together they also run hugely successful titles like Call of Duty and Candy Crush, which they
acquired by purchasing King Digital Entertainment for $5.9 billion in 2015.
The very next year, Activision Blizzard posted revenues of $6.6 billion and over half of
that was from in-game purchases.
Players buy pets in WoW, supply drops in Call of Duty, extra lives in Candy Crush, and loot
boxes in Overwatch.
And yes, this conveniently brings us to Blizzard’s latest major endeavor, Overwatch.
It launched in May 2016 and by the first quarter of 2017, it had already brought in a billion
dollars in revenue.
A big chunk of the audience comes from what Koreans call PC Bangs, which are essentially
gaming centers where people pay per hour to play games.
Groups of friends, and by that I mean mostly young guys, go to these places to play games
liked Overwatch and League of Legends for hours at a time.
The South Korean government became so concerned about gaming addiction that they enacted laws
to prevent kids under 16 from playing excessively.
Blizzard’s original founders, by the way, are all still there.
Allen Adham went off into the world of hedge funds for a while, but now he’s back and
his return actually shows just how far Blizzard has come.
When Adham left in 2004, Blizzard had 400 employees who were either working either on
World of Warcraft or on Starcraft 2.
But when he came back in 2016, there were ten times as many employees working on a wide
range of projects, as well as a production arm to expand on the somewhat disappointing
Warcraft movie and to potentially create a Call of Duty TV series.
As of late Blizzard has also been making successful entries into other video game genres, like
the Hearthstone online card game and the Heroes of the Storm MOBA.
Just last year, Blizzard’s revenue alone was $2.4 billion so it’s safe to say that
they have many years of game making ahead of them.
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