You know, there are crackpot theories, and then there are crackpot theories.

Here are five of mine about the revamped Scrolls of Resurrection.

1. The Scrolls are for the Q1 Earnings call. Offering it right at the beginning of March will mean that everyone who comes back for it will count as an active subscriber during the important part of the quarter – the end. Timing is vitally important here.

2. The Scrolls are to counter Mass Effect 3 and SW:TOR. This isn’t rocket surgery, people. Bioware launches a game in late 2011 which zips up to 2 million subscribers; Blizzard counters with 4.3, perhaps the most fun patch of Cataclysm. Bioware launches a new game this week; a day later, Blizzard offers players a level 80 toon to revive their account for 30 days.

Striking while wallets are already open is a good move by Blizzard.

3. The Subscriber Loss is becoming a big deal. Subscriber decline is more of a PR problem than a financial one, but it’s still a big problem, and becoming a bigger one in light of the 2012 expectations placed on Blizzard. During the last earnings call, Thomas Tippi, the Activision/Blizzard COO/CFO, said:

Specifically, this year, we expect growth from Blizzard.

This is a very strong statement that the analysts took note of. While a contraction of subscribers may be acceptable while profits rise, it is a black mark on a company balance sheet which relies upon “the high-margin Blizzard product slate.” A subscriber loss indicates that growth has stalled on a product. That product will generate a fixed revenue, and cannot be counted upon to increase revenue without somehow increasing ARPU through raising prices on existing services, offering additional services, or lowering operating costs. Wall Street sees a product that has hit maximum market penetration; Blizzard has to show that it’s at least a stable subscriber base, if not actually increasing.

There is also the following statement:

Blizzard revenues are also expected to be down in the quarter [Q1 2012] due to tough comps, as last year they benefited from a higher subscriber base and the strong holiday launch of Cataclysm.

Cushioning statements like this, cautioning that subscribers will be down from a year ago in March, are trying to avoid uncomfortable comparisons with previous expansion launches. No matter the truth behind it, analysts think that SW:ToR has hurt Warcraft’s subscription numbers.

Further decline in the subs will be terrible press.

4. The Scrolls are a high-ROI subscriber boost. This should be obvious – for the cost of two pieces of digital artwork, updates to the SoR program administration, and customer service time, Blizzard nets a few tens of thousands of subscribers. Maybe it’s a few hundred thousand. That’s a pretty good investment with high margins. You have to watch the little things in Blizzard’s earning calls, like another quote from Tippi:

In addition, we continue to undertake productivity improvement initiatives across key areas of operating expenses.

If you don’t speak corporate-ese, this means that Blizzard is going to be trying to do more with less, or at a minimum with the same as what they have now. There is a huge stress on the Blizzard’s high margins in the earnings call, and that means costs will be slashed across the board. Blizzcon was an inevitable tragedy in hindsight – too much money without direct ROI. The February 2012 layoff of 600 employees is likely related to this – corporations often eliminate positions to reduce salary costs while revenues remain at their current level.

The Scrolls will provide a cheap way to boost subs that does not require much marketing on Blizzard’s part. They’ve even opened up a thread on the New Player Forum – a place where recruiting has been forbidden for several years – to allow strangers to SoR each other.

With apologies to my friends on that forum, my first reaction to that was “that’s a really cheap way for Blizzard to make money.” There wasn’t an official place for people to do that before, so they put it on the forums. No need to build a special site, or set up a service – just allow a thread on the forums and point interested players to it.

It’s pretty smart if you’re trying to maximize your margins.

5. Non-subscribers need incentives to subscribe – that’s why they’re not current subscribers. This sounds trite, but it’s worth mentioning, given that current subscribers aren’t getting showered with gifts. People who have left the game are, by definition, not satisfied with the product as it is (or was). Offering them an incentive to return is necessary if Blizzard wants to increase revenue.

This isn’t unique to Blizzard and World of Warcraft, of course. Back in the days when long distance telephone costs mattered, your optimal strategy was switching every few months when a new offer came out from the other companies. If you didn’t want to switch, you could still call up your current provider and tell them MCI was offering X deal and you were thinking of taking it. The problem here is that there isn’t competition per se within Warcraft, though there certainly is within the broader category of leisure time.

The counter to all of this is that regular subscribers feel slighted by being loyal customers. This is why phone companies discount phones (and even rate plans) for long-term customers, why they have retention departments. This is why airline and hotel loyalty programs exist, and to be very frank it’s a god damn travesty that Blizzard hasn’t come up with something like this. This is a big mistake, something contributing to long-term subscriber decline, and once they get past the Q1 earnings call I hope that they realize this.

Long-term subscriber retention requires planning and work up front, but it prevents you from having to blast out Scrolls of Resurrection every 3 months between content patches.