When it comes to making cool video games, Activision Blizzard aims to be sub-zero. The leading global video game publisher (especially in console and handheld games in the US) is best known for industry-dominating franchises such as World of Warcraft from Blizzard Entertainment, and Call of Duty through Activision. The latter division also makes games based on licensed properties from Marvel (Spider-Man and X-Men), DreamWorks Animation (Shrek), MGM and the UK's EON Productions (James Bond), Hasbro (Transformers). Other popular franchises include Diablo III and the children's hit Skylanders. Its games are produced for Sony's PlayStation, Nintendos' Wii, and Microsoft's Xbox, as well as for PC and mobile phones and tablets. The company boosted its mobile gaming presence with a $5.9 billion bid to buy King Digital Entertainment, maker of Candy Crush and other mobile games.
Activision is the company's biggest segment, accounting for 56% of revenue, followed by Blizzard, 36%, and Distribution, 8%,
An international company, Activision Blizzard has more than 50 offices in about 20 countries across the Americas, Asia, and Europe. North America accounts for about half of all sales, while European gamers make up 41% and Asia accounts for the remaining 9%.
Like many major video game publishers, Activision Blizzard also maintains a distribution business that provides warehousing, logistical, and distribution services for its own games as well as for third-party publishers. The company's distribution operations are concentrated in Europe.
Sales and Marketing
The company’s games are sold internationally on a direct-to-retail basis, through third-party distribution and licensing arrangements, and through its wholly-owned European distribution subsidiaries: Centresoft in the UK and NBG in Germany.
North American customers include GameStop, Amazon, Best Buy, Target, Toys R Us, and Wal-Mart. Wal-Mart accounted for 11% of the company's gross receivables in 2014.
Activision Blizzard recorded its second straight of lower revenue and profit in 2014. Sales slid 3.8% to $4.4 billion from $4.6 billion in 2013. Profit tumbled 17% to $835 million in 2015 from $1.01 billion in 2013. Activision revenue dropped 7.2% with the Call of Duty and Skylanders franchises posting lower sales. Blizzard revenue rose 36% and distribution revenue was up 8%. But the company took a hit when it had to take into account deferral of net revenue and related cost of sales. That struck $405 million from its revenue in 2015 and was a 268% drop from 2013.
The lower net income followed the revenue decline and was affected by increases in software royalties and amortization expenses. Cash flow from operations was $1.3 billion in 2014, up from $1.26 billion in 2013.
Activision Blizzard continues to shift towards digital delivery of content and develop deeper relationships with the people who play its games. In digital delivery, the company offers free-to-play games, but charges for some in-game microtransactions. It also is increasing its presence in mobile devices such as smartphones and tablets.
Borrowing from Hollywood's playbook, Activision Blizzard is publishing fewer, more focused blockbuster titles, as fewer titles dominate more of both the company's and total industry sales.
In 2015, the company offered the World of Warcraft Token System, which enables the game's players to exchange game-time Tokens. In an effort to increase sales in China, Activision in 2015 entered open beta for Call of Duty Online, a free-to-play game available in China, and Blizzard began open beta for the action role-playing game Diablo III: Reaper of Souls in China.
Mergers and Acquisitions
With its $5.9 billion purchase of King Digital Entertainment, Activision Blizzard is putting its money where people play games: on mobile devices. King developed the popular Candy Crush game, but other efforts such as Farm Heroes and Pet Rescue haven't been as successful. Mobile games are growing faster than console or PC-based games and some, such as Candy Crush, reach a female demographic. Competitors waiting for Activision Blizzard in the mobile game arena include Zynga, maker of Farmville, and Rovio, the creator of Angry Birds. The deal, which has been approved by both companies, is expected to close in spring 2016.