About Activision Blizzard, Inc.

Activision Blizzard answers the Call of Duty to make video games that millions of users play for billions of hours. The company is the biggest producer of video games including some of the most durable franchises: World of Warcraft, Guitar Hero, Candy Crush, and, of course, Call of Duty. Newer blockbuster titles are Overwatch and Skylanders. Users play Activision Blizzard's games on PCs, game consoles, and mobile devices. The company also creates games based on licensed properties from Marvel, DreamWorks Animation, and EON Production. Activision Blizzard is expanding its theater of operations to games, products, and service for TV, movies, toys, and a professional esports league.

Operations

Activision Blizzard operates in three segments: Activision, Blizzard, and King.

Activision, which accounts for about a third of revenue, produces the company's signature Call of Duty franchise, a first-person shooter game for console and PCs; Destiny, an online shared-world shooter game, for console; and Skylanders, a children's-oriented game primarily for consoles. The segment has more than 50 million monthly active users.

Blizzard, about 40% of revenue, produces another high-profile game, World of Warcraft, a subscription-based massive multi-player online role-playing game (MMORPG) for the PC as well as StarCraft, a real-time strategy game for the PC, and Overwatch, a team-based first-person shooter game PC and console platforms. Blizzard's monthly active user count exceeds 40 million

King, about a quarter of revenue, develops PC and mobile games that include Candy Crush, Farm Heroes, Pet Rescue, and Bubble Witch. The segment rules the company's roost for monthly active users with 355 million.

Activision Blizzard's other operations are Major League Gaming, the company's esports business; Activision Blizzard Studios, which develops film and TV programming based on the company's games; Activision Blizzard Distribution, which are operations in Europe that provide warehousing, logistics, and sales distribution services.

Geographic Reach

Activision Blizzard gets more than half of its revenue from the Americas, about a third from Europe, and the rest from the Asia/Pacific region. The company has about 100 offices in some 20 countries around the world. Overall, the company has players in about every country. The company notes that Candy Crush is played on all continents, including Antarctica.

Sales and Marketing

Activision Blizzard markets its games on multiple platforms including social media such as Facebook, Twitter, and YouTube, online advertising, print and broadcast advertising, direct response, and product sampling. The company delivers content through retail channels or digital downloads, including subscriptions, full-game sales, and in-game purchases, as well as licenses of software to third-party or related-party companies that distribute Blizzard products. Advertising expenses have risen in recent years.

Financial Performance

Activision Blizzard's revenue jumped more than 40% in 2016 to $6.6 billion (a company record) from 2015 thanks to its acquisition of King Digital Media and its online games such Candy Crush. In recent years, its revenue has ranged from $4.2 billion to $4.8 billion. The company's revenue can be cyclical depending on the timing of releases of new games and sequels.

In 2016 Candy Crush sales helped drive revenue higher as did sales from Overwatch, a new team-based first-person shooter game released in May 2016, and Call of Duty: Black Ops III, which was released in late 2015. Games that posted lower sales for the year were Destiny, Skylanders Imaginators (released in late 2016), and the Diablo franchise. The biggest surge in revenue came from digital in-game sales, which more than doubled to $3.8 billion year-to-year thanks King's mobile games as well as Overwatch and World of Warcraft. In-game purchases accounted for more than half of Activision Blizzard's revenue.

Activision Blizzard posted a $966 million profit in 2016, an 8% increase from 2015. Most of the company's costs rose in 2016 as a result of the King acquisition. Expenses ate up about 80% of revenue for the year, up from about 70% in 2015.

Cash generated by operations jumped to $2.2 billion in 2016 compared to $1.2 billion in 2015. The stronger cash flow resulted from higher net income in 2016, adjustments to net income for non-cash charges associated with the amortization of the acquired intangibles in the King deal, higher stock compensation expense due to converted awards for King employees, and other costs related to debt-related activities.

Strategy

Part of Activision Blizzard's strategy is the same as it ever was: Develop blockbuster games and issue sequels that people play for hours and hours. The Call of Duty and World of Warcraft franchises have produced steady streams of income for the company. The acquisition of King Digital has already proved lucrative with the King games providing billions of dollars of in-game sales to Activision Blizzard. The acquisition also significantly increased the company's presence on mobile devices and social media platforms. The added revenue also put Activision Blizzard on the Fortune 500 at No. 406.

Games produce a lot of revenue, but Activision Blizzard sees opportunities for more sales in game-related ventures. The company's biggest move comes in esports, where users play each other while spectators watch. Activision Blizzard organizes and broadcasts tournaments for players of Call of Duty, Hearthstone, StarCraft, and Heroes of the Storm. In order to show these games, the company bought Major League Gaming (MLG), a team-based esports venture, in 2015.

Activision Blizzard is going a step further and organizing a league for its Overwatch game, one of the company's fastest growing properties. It reached 30 million players and $1 billion in revenue within a year of its release. The league is one of several emerging organizations based on video games as a spectator sport. The Overwatch league has attracted high-profile investors such as Robert Kraft, owner of the New England Patriots who has put money into the Boston franchise. Activision Blizzard has ambitions to create professional a esports league that rivals the NFL and professional sports leagues.

In other beyond-game activity, a movie based on Call of Duty is due out by 2018. On the small screen, ABC viewers could watch live-action Candy Crush competition in the summer of 2017, and Skylandershas spawned an animated series on Netflix and a line of toys.

In another revenue-producing initiative, Activision Blizzard is proceeding with selling advertising within the King digital games. After testing the concept in 2016, the company reported that users play more rounds of a game, spend more time in the game, and report a better game experience with advertising. Early advertisers have included Nestle, Visa, and Fox Entertainment. After more testing in 2017, the company plans to roll out a full-scale advertising program in 2018.

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 in the mobile game arena include Zynga, maker of Farmville, and Rovio, the creator of Angry Birds.

In December 2015 Activision Blizzard got into the live gaming business with its acquisition of Major League Gaming (MLG) for $46 million. MLG stream game competitions that it organizes as they happen.

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Activision Blizzard, Inc.

3100 Ocean Park Blvd
Santa Monica, CA 90405-3032
Phone: 1 (310) 255-2000
Fax: 1 (310) 255-2100

Stats

  • Employer Type: Public
  • Stock Symbol: ATVI
  • Stock Exchange: NASDAQ
  • CEO: Robert A. Kotick
  • CEO: Robert A. Kotick
  • Vice Chairman: Thomas Tippl
  • 2016 Employees: 9,600

Major Office Locations

  • Santa Monica, CA

Other Locations

  • Foster City, CA
  • Fresno, CA
  • Irvine, CA
  • Los Angeles, CA
  • Novato, CA
  • Red Bank, NJ
  • Dallas, TX
  • Mississauga, Canada
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