Activision Blizzard, Inc. operates as global developer and publisher of interactive entertainment content and services.
The company develops and distributes content and services on video game consoles, personal computers (PCs), and mobile devices. The company also operates esports leagues and offers digital advertising within some of its content.
The company derives a substantial portion of its revenues from the sale of products for play on video game consoles manufactured by third parties, su...
Activision Blizzard, Inc. operates as global developer and publisher of interactive entertainment content and services.
The company develops and distributes content and services on video game consoles, personal computers (PCs), and mobile devices. The company also operates esports leagues and offers digital advertising within some of its content.
The company derives a substantial portion of its revenues from the sale of products for play on video game consoles manufactured by third parties, such as Sony’s PS4 and PS5, Microsoft’s Xbox One and Series X, and Nintendo’s Switch.
Segments
The company operates through three segments: Activision Publishing, Inc. (Activision); Blizzard Entertainment, Inc. (Blizzard); and King Digital Entertainment (King).
Activision
Activision delivers content through both premium and free-to-play offerings and primarily generates revenue from full-game and in-game sales, as well as by licensing software to third-party or related-party companies that distribute Activision products. Activision’s key product offerings include titles and content for Call of Duty, a first-person action franchise. Activision also includes the activities of the Call of Duty League, a global professional esports league.
Blizzard
Blizzard delivers content through both premium and free-to-play offerings and primarily generates revenue from full-game and in-game sales, subscriptions, and by licensing software to third-party or related-party companies that distribute Blizzard products. Blizzard also maintains a proprietary online gaming platform, Battle.net, which facilitates digital distribution of Blizzard content and selected Activision content, online social connectivity, and the creation of user-generated content. Blizzard’s key product offerings include titles and content for: the Warcraft franchise, which includes World of Warcraft, a subscription-based massive multi-player online role-playing game, and Hearthstone, an online collectible card game based in the Warcraft universe; Diablo in the action role-playing genre; and Overwatch in the team-based first-person action genre. Blizzard also includes the activities of the Overwatch League, a global professional esports league. The co-development and publishing of Diablo Immortal is covered by a separate agreement with NetEase, Inc. (NetEase), which remains in place. In addition, Call of Duty: Mobile is governed by agreements with another third party that are unaffected.
King
King delivers content through free-to-play offerings and primarily generates revenue from in-game sales and in-game advertising on mobile platforms. King’s key product offerings include titles and content for Candy Crush, a ‘match three’ franchise.
Other
The company also engages in other businesses that do not represent reportable segments, including its Activision Blizzard Distribution (Distribution) business, which consists of operations in Europe that provide warehousing, logistics, and sales distribution services to third-party publishers of interactive entertainment software, its own publishing operations, and manufacturers of interactive entertainment hardware.
Products
The company develops interactive entertainment content and services, principally for console, PC, and mobile devices. It markets and sells its games primarily through digital distribution channels. The company’s products span various genres, including first- and third-person action/adventure, role-playing, strategy, and ‘match three,’ among others.
The company primarily offers the following products and services, including premium full-games, which typically provide access to main game content after purchase; free-to-play offerings, which allow players to download the game and engage with the associated content for free; in-game content for purchase to enhance gameplay (i.e., microtransactions and downloadable content) available within both its premium full-games and free-to-play offerings; subscriptions for players in World of Warcraft that provide for ongoing access to the game content; and advertising services for third-party companies to reach and engage with its players, primarily within its free-to-play offerings.
Providing additional content and experiences within franchises has increased opportunities for player investment outside of premium full-game purchases. This has allowed the company to shift from its historical seasonality to a more consistently recurring and year-round revenue model. In addition, if executed properly, it allows the company to increase player engagement with its games and content.
Product Development and Support
The company focuses on developing wholly-owned intellectual properties backed by well-designed, high-quality games with regular content updates. It is the company’s experience that established intellectual properties then serve as the basis for related new products and content that can be released over an extended period of time.
The company develops and produces its titles using a model in which individual game studios have primary responsibility for the development and production process, including the supervision and coordination of internal and, where appropriate, external resources. While most of the company’s content is developed by its internal studios, it also engages independent third-party developers to create content on its behalf. From time to time, the company also acquires the license rights to publish and/or distribute software products that are, or will be, independently created by third-party developers.
The company provides various forms of support to its game studios when developing a product. To support the company’s content, it provides 24-hour game support to players, primarily online.
Strategy
The key elements of the company’s strategy include expanding audience reach; deepening consumer engagement; and increasing player investment.
Marketing, Sales, and Distribution
Many of the company’s products contain software that enables it to connect with its gamers directly. This allows the company to communicate and market directly to its customers, including through customized advertising and in-game messaging based on customer preferences and trends. The company’s marketing efforts also include activities on online social networks; other online advertising; public relations activities; print and broadcast advertising; coordinated in-store and industry promotions (including merchandising and point of purchase displays); participation in cooperative advertising programs; direct response vehicles; and product sampling. From time to time, the company also receives marketing support from hardware manufacturers, producers of consumer products related to a game, and retailers in connection with their own promotional efforts, as well as co-marketing from promotional partners.
The company’s game products and content are generally available in a digital format, which allows consumers to purchase and download the content at their convenience directly to their console, PC, or mobile device through its platform partners, including Apple Inc. (Apple); Facebook, Inc. (Facebook); Google Inc. (Google); Microsoft; Sony Interactive Entertainment Inc. (Sony); and Valve Corporation (Valve). Blizzard utilizes its proprietary online gaming platform, Battle.net, to distribute most of Blizzard’s content and selected Activision content directly to PC consumers.
In addition to serving as a distribution platform, Battle.net offers players communications features, social networking, player matching, and digital content delivery and is designed to allow people to connect regardless of which of the company’s games on Battle.net they are playing.
The company’s physical products are available for sale in outlets around the world. These products are sold primarily on a direct basis to mass-market retailers, consumer electronics stores, discount warehouses, game specialty stores, and other stores, or through third-party distribution and licensing arrangements.
Manufacturing
With respect to products for consoles, such as for Microsoft and Sony, the company’s disk duplication, packaging, printing, manufacturing, warehousing, assembly, and shipping are performed by third-party subcontractors or distribution facilities owned by it.
Microsoft and Sony generally specify or control the manufacturing and assembly of finished products and license their hardware technologies to the company.
Customers
While the company does sell directly to end consumers in certain instances, such as sales through Battle.net, in other instances the company’s content is distributed to end consumers via platform providers, such as Facebook, Microsoft Corporation (Microsoft) and Valve, or retailers, such as Best Buy, GameStop, Target, and Walmart.
As of December 31, 2022, the company’s customers and platform providers exceeding 10% or more of its consolidated net revenues included Apple Inc. (20%); Google Inc. (18%); and Sony Interactive Entertainment Inc. (13%).
Franchises
For the year ended December 31, 2022, the company’s three franchises—Call of Duty, Warcraft, and Candy Crush—collectively accounted for 79% of its net revenues.
Competition
In addition to third-party software competitors, integrated video game console hardware and software companies, such as Microsoft, Sony, and Nintendo, compete directly with the company in the development of software titles for their respective platforms.
Intellectual Property
The company develops a majority of its products based on wholly-owned intellectual properties, such as Call of Duty, Warcraft, and Candy Crush.
