Drop in ‘World of Warcraft’ subscribers hits Activision stock

Despite turning in a second quarter that outshone Wall Street’s expectations, investors pushed shares of Activision Blizzard down more than 5% after the company said its “World of Warcraft” online game lost more than a million subscribers in the second quarter.

The world’s largest video game company said Thursday that the number of “World of Warcraft” players fell to 9.1 million in the quarter ended June 30, down from 10.2 million at the end of the first quarter. The game commanded 12 million players at its peak in October 2010.

The news drove Activision shares down 5.2% to $11.16 in after-hours trading immediately after the announcement. The stock had closed at $11.77, down 5 cents.

It also calls into question the future of multiplayer online games that charge players monthly fees at a time when there are so many free alternatives on the Web. On Wednesday, another game company, Electronic Arts, said it would throw open much of its multiplayer online game, “Star Wars: The Old Republic” to players for free -- instead charging money for virtual items and extra content.

“The availability of free multiplayer online games is definitely cannibalizing subscription games,” said Michael Pachter, an analyst with Wedbush Securities, who added that the market for multiplayer online games isn’t dying. “There are still 20 [million] to 25 million people worldwide who will play these games. It’s just not a growth industry.”

In a conference call with analysts, Michael Morhaime, president of Blizzard Entertainment, the Activision-owned studio that publishes “Warcraft,” said most of the decline came from a drop-off of players in Asia.

He also said many “Warcraft” players “took a break” from the game to play “Diablo III,” a Blizzard title that sold 10 million units since its release on May 15. He predicted that “Warcraft” will regain players once Blizzard releases its latest content for the game, an expansion pack entitled “Mists of Pandaria,” on Sept. 15.

Activision chief executive, Bobby Kotick, said in an interview that he remained bullish on “Warcraft.”

“It’s a unique experience,” Kotick said. “The numbers that shift up and down in terms of subscribers are not reflective of the franchise. The franchise is enduring, and it has a unique audience.”

The decline in “Warcraft” players marred an otherwise positive quarter for the Santa Monica company.

Activision posted $185 million in net income on $1.08 billion in revenue for the quarter ended June 30. Although that was lower than the $335 million in net income and $1.15 billion in revenue in the same quarter a year earlier, it was nevertheless higher than Wall Street’s expectations for the company.

Analysts polled by Thomson Financial on average had anticipated $137.5 million in net income and $835 million in revenue.

“The ‘Warcraft’ numbers were the only negative thing in the report,” Pachter said.

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Twitter: @AlexPham