Activision Blizzard (ATVI) is a global entertainment holding company that develops and publishes interactive video content and services. It's best known for franchises such as World of Warcraft, Call of Duty, StarCraft, and Bubble Witch. Founded in 2008 from the merger of Activision and Vivendi Games, the company develops and distributes its video games and services on game consoles, personal computers (PCs), and mobile devices. Activision Blizzard also operates eSports leagues and sells digital advertising.
On Jan. 18, 2022, Microsoft announced plans to acquire video game developer Activision Blizzard for $68.7 billion. The acquisition, Microsoft's largest, represents a substantial investment in gaming and the metaverse.
The company faces competition from other interactive entertainment companies, as well as competitors that provide other forms of entertainment, including film, television, social networking, music, and other types of consumer entertainment. Some of Activision Blizzard's biggest competitors within the gaming industry include Sony (SNE) and Nintendo (7974).
Key Takeaways
- Activision Blizzard develops and publishes interactive entertainment for use on video game consoles, PCs, and mobile devices, and also operates eSports leagues.
- The company's business is conducted through three major business segments, which include Activision, Blizzard, and King.
- The Activision segment, which develops and sells video games, is the company's biggest revenue and profit generator.
- Activision Blizzard recently announced it was suspending new game and in-game sales within Russia amid Russia's recent invasion of Ukraine.
- In January 2022, Microsoft announced plans to acquire Activision Blizzard for $68.7 billion in a deal that is expected to close in FY 2023.
Activision Blizzard’s Financials
Activision Blizzard announced in early February financial results for Q4 of its 2021 fiscal year (FY), the three-month period ended Dec. 31, 2021. The company posted a net income of $564 million, up 11.0% compared to the year-ago quarter. Revenue fell 10.4% year over year (YOY) to $2.2 billion. Operating income, which Activision Blizzard uses as a profitability metric for its individual business segments, rose 14.8% YOY to $682 million.
Activision Blizzard generates revenue from three main distribution channels. These include content distributed via digital online channels (82% of revenue), retail channels (6%), and other sources (12%). The company also provides a revenue breakdown for separate gaming platforms: content for video game consoles (27% of revenue); PC-related content (23%); mobile and ancillary, which includes non-platform specific game-related revenues (39%); and other sources (12%) (percentage amounts add up to more than 100% due to rounding).
Activision Blizzard’s Business Segments
The company conducts its business through the following three segments and provides a breakdown of revenue and operating income for each: Activision Publishing Inc. ("Activision"), Blizzard Entertainment Inc. ("Blizzard"), and King Digital Entertainment ("King").
Activision
Activision develops and publishes interactive software products and entertainment content, which it delivers through both premium and free-to-play offerings. It generates revenue from full-game and in-game sales as well as from subscriptions and licensing software to third-party or related-party companies that distribute its products.
Activision's key product franchise is Call of Duty. The business also generates revenue from its Call of Duty League, a global professional eSports league.
Revenue for the Activision segment was $1.2 billion in Q4 FY 2021, down 30.2% compared to the year-ago quarter. The segment accounted for nearly 52% of companywide revenue. Operating income fell 20.8% YOY to $618 million, comprising about 53% of the total for the quarter.
Blizzard
Blizzard develops and publishes interactive software products and entertainment content, which it delivers through both premium and free-to-play offerings. It generates revenue from full-game and in-game sales, subscriptions, and licensing software to third-party or related-party companies that distribute its products. The business also maintains a proprietary online gaming service, Blizzard Battle.net.
Blizzard's key product franchises include World of Warcraft, Hearthstone, Diablo, and Overwatch. Blizzard also includes activities related to the Overwatch League, a global professional eSports league.
Revenue for the Blizzard segment fell 27.0% in Q4 FY 2021 compared to the year-ago quarter. At $387 million, the segment accounted for more than 17% of the company's total revenue. Operating income rose 0.6% YOY to $161 million, comprising about 14% of the total for the quarter.
King
King develops and publishes interactive entertainment content and services, particularly for the mobile platform. It delivers content mostly through free-to-play offerings and generates revenue primarily from in-game sales and in-game advertising. Its key product franchise is Candy Crush.
Revenue for the King segment was $684 million in Q4 FY 2021, up 18.5% compared to the year-ago quarter. The segment accounted for nearly 31% of companywide revenue. Operating income rose 59.1% YOY to $385 million, comprising about 33% of the total for the quarter.
A note to readers that Activision Blizzard also generates some revenue and operating income from its distribution business, which is not represented as a reportable segment and falls under the company's "Other" category.
Activision Blizzard’s Recent Developments
On March 4, 2022 Activision Blizzard's President and Chief Operating Officer (COO) Daniel Alegre shared a memo with the company's employees concerning the company's response to Russia's recent invasion of Ukraine. The memo stated that the company would be suspending new sales of its games and in-game sales within Russia until the conflict is over.
On Jan. 18, 2022, Activision Blizzard issued a press release in which it stated that technology giant Microsoft had announced plans to acquire Activision Blizzard for $68.7 billion. The transaction is expected to close in FY 2023.
How Activision Blizzard Reports Diversity and Inclusiveness
As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Activision Blizzard and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Activision Blizzard releases. It shows Activision Blizzard does not disclose any data about the diversity of its board of directors, C-Suite, general management, and employees overall. It also shows Activision Blizzard does not reveal the diversity of itself by race, gender, ability, veteran status, or LGBTQ+ identity.
