Blizzard 2009 Annual Report Download - page 14

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2
handheldplatformsandthePCplatformthroughinternallydevelopedfranchisesandlicenseagreements.
ActivisioncurrentlyoffersgamesthatoperateontheSonyComputerEntertainmentInc.(“Sony”)
PlayStation2(“PS2”),SonyPlayStation3(“PS3”),NintendoCo.Ltd.(“Nintendo”)Wii(“Wii”),and
MicrosoftCorporation(“Microsoft”)Xbox360(“Xbox360”)consolesystems;theSonyPlayStation
Portable(“PSP”)andNintendoDualScreen(“NDS”)handhelddevices;thePC;theiPhone;andthenew
handheldgamesystemNintendoDSi.OurActivisionbusinessinvolvesthedevelopment,marketing,and
saleofproductsdirectly,bylicense,andthroughouraffiliatelabelprogramwithcertainthirdparty
publishers.Activision’sproductscoverdiversegamegenresincludingaction/adventure,actionsports,
racing,roleplaying,simulation,firstpersonaction,music,andstrategy.Activision’stargetcustomerbase
rangesfromcasualplayerstocoregamers,andchildrentoadults.
BlizzardEntertainment,Inc.
BlizzardEntertainment,Inc.(“Blizzard”)isaleaderintermsofsubscriberbaseandrevenues
generatedinthesubscriptionbasedmassivelymultiplayeronlineroleplayinggame(“MMORPG”)
category.BlizzardinternallydevelopsandpublishesPCbasedcomputergamesandmaintainsits
proprietaryonlinegamerelatedservice,Battle.net.OurBlizzardbusinessinvolvesthedevelopment,
marketing,salesandsupportofroleplayingactionandstrategygames.Blizzardalsodevelops,hosts,and
supportsitsonlinesubscriptionbasedgamesintheMMORPGcategory.Blizzardisthedevelopmentstudio
andpublisher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,prepaidcardsandothervalueaddedservices,suchastheabilitytochange“factions”,
theabilitytotransfer“realms”andtheabilitytopurchaseavirtualpet),retailsalesofphysical“boxed”
products,electronicdownloadsalesofPCproducts,andlicensingofsoftwaretothirdparty,orrelated
partycompaniesthatdistributeWorldofWarcraftinRussia,China,andTaiwan.
ActivisionBlizzardDistribution
ActivisionBlizzardDistribution(“Distribution”)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.
BusinessCombination
OnJuly9,2008,abusinesscombination(the“BusinessCombination”)byandamong
Activision,Inc.,SegoMergerCorporation,awhollyownedsubsidiaryofActivision,Inc.,VivendiS.A.
(“Vivendi”),VGACLLC,awhollyownedsubsidiaryofVivendi,andVivendiGames,Inc.(“Vivendi
Games”),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.Foraccounting
purposes,theBusinessCombinationistreatedasa“reverseacquisition,”withVivendiGamesdeemedto
betheacquirer.ThehistoricalfinancialstatementsofActivisionBlizzard,Inc.priortoJuly10,2008are
thoseofVivendiGames.
ActivisionBlizzard’sNonCoreExitOperations
ActivisionBlizzard’snoncoreexitoperations(“Other”or“NonCore”)representlegacyVivendi
Games’divisionsorbusinessunitsthatwehaveexited,divested,orwounddownaspartofour
restructuringandintegrationeffortsasaresultoftheBusinessCombination,butthatdonotmeetthe
criteriaforseparatereportingofdiscontinuedoperations.PriortoJuly1,2009,NonCoreactivitieswere
managedasastandaloneoperatingsegment;however,inlightoftheminimalactivitiesandinsignificance
ofNonCoreactivities,asofthatdateweceasedtheirmanagementasaseparateoperatingsegmentand
consequentlywearenolongerprovidingseparateoperatingsegmentdisclosureandhavereclassifiedour
priorperiods’segmentpresentationsothatitconformstothecurrentperiods’presentation.
KeyMarketConditionsandBusinessResults
Marketconditionswerechallengingin2009withtotalretailsoftwaresalesintheU.S.andEurope
down10%fromtheprioryear,accordingtoTheNPDGroup,Charttrack,andGfk.Withtheweakened