ActiVision | Blizzard™

Company Background

ACTIVISION, INC.

Activision Blizzard, Inc. is a worldwide online, personal computer, console, handheld, and mobile game publisher of interactive entertainment.

Activision, Inc. was originally incorporated in California in 1979 and was reincorporated in Delaware in December 1992. On July 9, 2008, a business by and among Activision, Inc., Sego Merger Corporation, a wholly owned subsidiary of Activision, Inc., Vivendi S.A., VGAC LLC, a wholly-owned subsidiary of Vivendi, and Vivendi Games, Inc., a wholly-owned subsidiary of VGAC LLC was consummated. As a result of the consummation of the Business Combination, Activision, Inc. was renamed Activision Blizzard, Inc. The common stock of Activision Blizzard is traded on The NASDAQ Stock Market under the ticker symbol "ATVI."

Based upon our current organizational structure, we operate three operating segments as follows: Activision Publishing, Inc., Blizzard Entertainment, Inc., and Activision Blizzard distribution.
  • Through Activision Publishing, Inc., we are a leading international publisher of interactive software products and content. Activision develops and publishes video games on various consoles, handheld platforms and the PC platform through internally developed franchises and license agreements.
  • Through Blizzard Entertainment, Inc., we are the leader in terms of subscriber base and revenues generated in the subscription-based massively multiplayer online role-playing game category. Blizzard internally develops and publishes PC-based computer games and maintains its proprietary online-game related service, Battle.net.
  • Our distribution business consists of operations in Europe that provide warehousing, logistical, and sales distribution services to third-party publishers of interactive entertainment software, our own publishing operations, and manufacturers of interactive entertainment hardware.

Our Strategy:

Our objective is to continue to be a worldwide leader in the development, publishing, and distribution of quality interactive entertainment software, online content and services that deliver a highly satisfying entertainment experience.

Continue to Improve Profitability. We continually strive to manage risk and increase our operating leverage and efficiency with the goal of increased profitability. We believe the key factors affecting our future profitability will be the success of our core properties, proven franchises and genres, cost discipline, and our ability to leverage the continued growth of online and digital revenue opportunities.

Create Shareholder Value. We continue to focus on enhancing shareholder return through growing operating margin, maintaining a strong balance sheet and generating strong cash flows. As a result, we expect to continue to achieve long-term growth and have been able to provide value to our shareholders through stock repurchase programs and cash dividends.

Grow Through Continued Strategic Acquisitions and Alliances. We intend to continue to evaluate the expansion of our resources and intellectual properties library through acquisitions, strategic relationships, and key license transactions. We will also continue to evaluate opportunities to increase our proven development expertise through the acquisition of, or investment in, selected experienced software development firms.

Focus on Delivery of Digital Content and Online Services. We continue to shift towards digital delivery of content and to establish and develop direct and long-term relationships with our gamers. We will also continue to support, maintain and enhance World of Warcraft and Call of Duty online communities. We believe that focusing our efforts on online product innovations, such as additional online content, services and social connectivity provides lasting value enhancement to our global communities of players.

ACTIVISION PUBLISING, INC.
Activision Publishing, Inc. is a leading international publisher of interactive entertainment software products and content. Our Activision business involves the development, marketing, and sale of products through retail channels or digital downloads, by license, or from our affiliate label program with certain third-party publishers.

Activision is focusing its efforts in the areas we believe have the most opportunity for growth and higher profitability, and we have reduced investments in areas we believe have less profit potential and limited growth opportunities. Investments are being focused on proven intellectual properties to develop deep, high-quality content that offers engaging online multiplayer gaming experiences.

The company's target customer base ranges from casual players to game enthusiasts, children to adults, and mass-market consumers to value buyers. Activision currently offers games that operate on the Sony Computer Entertainment, Inc. PlayStation 3, Nintendo Co. Ltd. Wii, and Microsoft Corporation Xbox 360 console systems; the Nintendo Dual Screen and Nintendo DSi handheld devices; the PC; the Apple iPhone, the Apple iPad and other mobile devices.

In recent years, Activision has been best known for its success in the first-person action category from the Call of Duty original intellectual property, including the latest release, Call of Duty: Black Ops, which continues to set sell through records with over $650 million of retail sales during the first five days from launch in November 2010, according to our internal estimates. We plan on continuing to develop this franchise. Call of Duty has achieved approximately $4.2 billion life-to-date revenue and has an active global community of millions of players. Call of Duty: Black Ops , released in the fourth quarter of 2010, is also setting online usage records that illustrate the game has become one of the leading global entertainment experiences of all time. Activision also develops products spanning other genres, including first person action, action/adventure, role-playing, simulation and strategy.

In 2011, we expect to continue to build on the success of our Call of Duty franchise through the release of Call of Duty: Modern Warfare 3. Activision is also focused on the delivery of new digital content and online services for the Call of Duty franchise through Call of Duty Elite. Activision’s 2011 releases also include Skylanders Spyro's Adventure, an innovative new game that will enable players to transport real-world toys into the virtual worlds of a video game through the use of "smart toys", Cabela's Big Game Hunter 2012 and Wipeout 2.

Going forward, we expect to release several other titles including two movie-based titles ( X-Men: First Class and Transformers: Dark of the Moon) and games based on the best-selling Spider-Man franchise, the toy Bakugan and top-rated TV shows like Family Guy. While focusing on our proven intellectual properties, we are also making strategic investments to develop new intellectual property. We have established a long-term alliance with Bungie, the developer of game franchises including Halo, Myth and Marathon, to bring Bungie's next big action game universe to market.

Strategy:

Create, Acquire, and Maintain Strong Franchises. Activision focuses on development and publishing activities principally for products and content that are, or have the potential to become, franchises with sustainable mass consumer appeal and recognition. It is our experience that these products and content can then serve as the basis for sequels, prequels, and related new products and content that can be released over an extended period of time. We believe that the publishing and distribution of products and content based on proven franchises enhances predictability of revenues and the probability of high unit volume sales and operating profits. We own the highly successful intellectual property Call of Duty and intend to continue development of owned franchises in the future. We have entered into a series of strategic relationships with the owners of intellectual properties pursuant to which we have acquired the rights to publish products based on franchises such as, Hasbro Properties Group ("Hasbro"), MGM Interactive and EON Productions Ltd. ("MGM & EON"), Mattel, Inc. ("Mattel"), and Marvel Entertainment, Inc. ("Marvel"). We also have an exclusive 10-year alliance with Bungie, a developer of successful game franchises, to bring Bungie's next big action game universe to market.

Execute Disciplined Product Selection and Development Processes. The success of our publishing business depends, in significant part, on our ability to develop high quality games that will generate high unit volume sales. Our publishing units have implemented a formal control process for the selection, development, production, and quality assurance of our products. We apply this process, which we refer to as the "Greenlight Process," to all of our products, whether externally or internally developed. The Greenlight Process includes in-depth reviews of each project at several important stages of development by a team that includes many of our highest-ranking operating managers and coordination among our sales, marketing and development staff at each step in the process.

We develop our products using a combination of our internal development resources and external development resources acting under contract with us. We typically select our external developers based on their track records and expertise in producing products in the same category. One developer will often produce the same game for multiple platforms and will produce sequels to the original game. We believe that selecting and using development resources in this manner allows us to leverage the particular expertise of our internal and external development resources, which we believe enhances the quality of our products and timing of releases.

Focused Product Offerings, Diversity in Platforms and Geographies. We believe Activision has aligned its product offerings and cost structure to position the business for long term growth. Through our online-enabled products and content, we believe we are best positioned to take advantage of retail and digital distribution channels that allow us to deliver content to a diversity of gamers ranging from children to adults and from core gamers and mass-market consumers to "value" buyers, who seek budget-priced software, in a variety of geographies. Presently, the majority of products that we develop, publish, and distribute operate on the PS3, Xbox 360, and Wii console systems, NDS, DSi, the iPhone, iPad, and the PC. The emerging and rapidly growing online-enabled platforms, in which we will support in-game integration and bring together online experience and gameplay, will continue to be our focus. We typically offer our products for use on multiple platforms to reduce the risks associated with any single platform, leverage our costs over a larger installed hardware base, and increase unit sales. We intend to continue to offer both online and packaged software and games with localized content in different geographies.

BLIZZARD, INC.
Blizzard is a leading company in the subscription-based MMORPG category, best known as the creator of World of Warcraft and the multiple award winning Diablo, StarCraft, and World of Warcraft franchises. Blizzard distributes its products and generates revenues worldwide through various means, including: subscriptions (which consist of fees from individuals playing World of Warcraft, including sales of prepaid-cards and other value-added service revenues such as realm transfers, faction changes, and other character customizations within World of Warcraft gameplay); retail sales of physical "boxed" products; online download sales of PC products; and licensing of software to third-party or related party companies that distribute World of Warcraft and StarCraft II.

Initially launched in November 2004, World of Warcraft is now available in various languages based on the regions in which it is played and has earned awards and praise from publications around the world. As of December 31, 2010, more than 12 million gamers worldwide were subscribed to play Blizzard's World of Warcraft.

Blizzard launched an expansion pack to World of Warcraft, World of Warcraft: The Burning Crusade, in January 2007 in North America, Europe, Australia, New Zealand, Singapore, Malaysia, and Thailand; in South Korea in February 2007; in Taiwan, Hong Kong, and Macau in April 2007; and in China in September 2007. Blizzard launched the second World of Warcraft expansion pack, World of Warcraft: Wrath of the Lich King, in November 2008 in all territories except China, where it launched in August 2010. On December 7, 2010, Blizzard launched the third World of Warcraft expansion pack, World of Warcraft: Cataclysm, in all regions in which the game is supported, other than China. Revenues associated with the World of Warcraft franchises accounted for 89%, 98%, and 97% of Blizzard's consolidated net revenues for the years ended December 31, 2010, 2009, and 2008, respectively.

Additionally, in July 2010, Blizzard launched the sequel to StarCraft, StarCraft II: Wings of Liberty simultaneously around the world, including in North America, Europe (including Russia), Southeast Asia, Korea, Australia, New Zealand, Chile, Brazil, Argentina, and the regions of Taiwan, Hong Kong and Macau. In conjunction with the release of StarCraft II: Wings of Liberty, Blizzard launched a new version of its 24/7 online gaming service, Battle.net, providing user generated content, digital distribution and online social connectivity amongst the World of Warcraft and StarCraft players. Blizzard is currently developing a sequel in the Diablo franchise, StarCraft II 's first expansion pack, Heart of the Swarm, and a new MMO game.

Strategy:

Maintain and Build upon Our Leadership Position in the MMORPG Category and PC Online Categories. Blizzard plans to maintain and build upon our leadership position in the MMORPG genre by regularly providing new content, game features and online services to further solidify the loyalty of our subscriber base, as well as to expand our global game footprint to new geographies.

We believe that the PC online platform will remain a growing category throughout the world. The large and growing PC installed base in all regions and the continuing development of broadband connectivity facilitates online games and community experiences while creating access to new potential customers. Given the success of World of Warcraft and StarCraft in Asia, we expect to continue to be well positioned to capture the growing consumer demand in this region. Blizzard is among the few companies with video game franchises created and developed in the U.S. that have gained and retained success in Asia with World of Warcraft and StarCraft. Titles in those series have been among the most played games in the region for many years. During 2009, Blizzard entered into licensing arrangements for World of Warcraft, StarCraft II , Battle.net and Warcraft III with an affiliated company of NetEase.com, Inc. in China. Further, as World of Warcraft is a server-based game, only playable online, Blizzard is one of the few companies that can target markets that have been dominated by piracy and monetize former illegitimate players as well as expand in markets that have not been penetrated by consoles, but offer a large PC installed base.
Activision's headquarters is located in Santa Monica, California 90405. Blizzard’s headquarters is located in Irvine, California 92612. Activision Blizzard maintains operations in 19 countries including the U.S., Canada, the United Kingdom, France, Germany, Italy, Japan, Australia, Sweden, Spain, the Netherlands and South Korea. More information about Activision Blizzard and its products can be found on the company's World Wide Web site, which is located at www.activision.com.
 
Shareholder Tools

STOCK PRICE
Date: Nov 28, 2014
Time: 1:00 PM ET
Price: $21.65
Change: - 0.17

2013 Annual Report
2012 Annual Report

2014 Proxy Statement