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Activision Rolling the Dice With New ‘World of Warcraft’

Plugged In

It takes guts to radically alter a game that has 12 million paying subscribers—but when the company doing the tinkering is Blizzard Entertainment, you generally won't hear a lot of complaints.

"World of Warcraft: Cataclysm" hits store shelves Tuesday and, as you might guess by the name, it will turn the world of Azeroth on its ear. At the same time, it could make the most popular online game in the industry's history even bigger—and prove to be a significant revenue boost for Activision-Blizzard.

Technically an expansion, "Cataclysm" is in some ways a relaunch of the massively multiplayer online game, which charges players a $13-$15 monthly fee to play. (Warning: Plot points ahead that will sound awfully geeky and make little sense to non-players.)

The dragon Deathwing the Destroyer, last seen in the single-player game "Warcraft II," returns in the game, tearing the world asunder and reshaping the lands players have explored for the past six years.

In real world terms, that means new areas to explore, new enemies to fight and the chance for players to create more powerful characters.

It's a risky move, but stepping out onto a limb like that is part of what has made Blizzard so successful.

"That's the reason they've been so viable for so long," says Billy Pidgeon, a senior analyst at M2 Research. "Sometimes you do need to radically retool to give people the best experience."

Blizzard, for its part, says the decision to revamp so much of the game was to bring it up to par with the expansion packs that have come out since its initial release.

"The content [in the original version of the game] was created years and years ago, before we really knew how to create the best content for the game," says Frank Pearce, executive vice president of product development at Blizzard. "The level 1-60 experience really doesn't have the best content. It's not putting our best foot forward. This lets us do that for new players."

"Cataclysm" is the second release for Blizzard Entertainment this year—an incredibly rare occurrence from the studio that has a reputation for not releasing games until they have met the company's strict quality standards. The first, "Starcraft II," sold 3 million copies in its first month and is expected to sell 6.5 million by the end of the year.

Because "Cataclysm," like "Starcraft II," is a PC release, Activision will see higher profits on it than it does on console titles. Publishers must make a $9 royalty payment to Microsoft and Sony for each console game sold on those companies' respective systems. On PC games though, Activision pockets the entire wholesale cost—and makes even more money when it sells a digital copy of the game, since it still charges the full $50 price, but pockets the 20 percent usually claimed by retailers.

Digital sales have been increasingly important in the PC world. "Cataclysm" is the first time the company has simultaneously released the game online and at retail.

More importantly, though, executives at Activision hope "Cataclysm" will lure back lapsed "World of Warcraft" players—as well as entice new ones. Analysts acknowledge the game's power and the impact expansions can have—this will be the first in two years—but also note that in a game as old as "World of Warcraft," attracting new players might be challenging.

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The first online and retail store release.

"It remains to be seen whether this is going to be a strong acquisition tool," says Pidgeon. "I would classify it as a retention tool—and I think that's what they need to do."

Blizzard, though, says history has proven that expansion packs are proven draws for players.

"When we release an expansion, we always see a lot of people return to the game," says Pearce.

"World of Warcraft" is one of Activision's most lucrative franchises—and Blizzard is, by far, it's most widely admired studios. Revenues at the division were up 68 percent year over year in the third quarter, due to the release of "Starcraft II" and the release of a previous "World of Warcraft" expansion pack in China, which has an active player base.

Meanwhile, Blizzard is not slowing down. "Diablo III," the long awaited next installment in another of the company's most loved franchises, is expected late next year. And the company is already at work on an unannounced massively multiplayer online game that it hopes will follow in the shoes of "World of Warcraft" and become the company's next billion-dollar baby.

© 2010 CNBC.com

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