Blizzard 2009 Annual Report Download - page 28
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• Agrowinginstalledbaseforthecurrentgenerationhardwareplatforms(inparticular,theWii,
PS3,andXbox360)andincreasednumberoftitlesandskusavailablefromActivisionas
comparedtothetitlesandskusreleasedbyVivendiGames.
CostsandExpenses
CostofSales
Thefollowingtabledetailsthecomponentsofcostofsalesindollarsandasapercentageoftotal
consolidatednetrevenuesfortheyearsendedDecember31,2009,2008,and2007(amountsinmillions):
Year
ended
December31,
2009
%of
total
consolidated
netrevs.
Year
ended
December31,
2008
%of
total
consolidated
netrevs.
Year
ended
December31,
2007
%of
total
consolidated
netrevs.
Increase/
(decrease)
2009v
2008
Increase/
(decrease)
2008v
2007
Productcosts...................
$1,432
33%
$1,160
38%
$171
13%
$272
$989
Softwareroyalties
andamortization.........
348
8
267
9
52
4
81
215
Intellectual
propertylicenses.........
315
7
219
7
9
1
96
210
MMORPG......................
212
5
193
7
204
15
19
(11)
FortheyearendedDecember31,2009,costofsalesincreasedascomparedto2008primarilydue
to:
• PostBusinessCombinationproductcostsof$530million,softwareroyaltiesandamortization
of$151million,andintellectualpropertylicensesof$112millionfrombusinessespreviously
operatedbyActivision,Inc.,forthesixmonthperiodendedJune30,2009wereincludedin
2009,butnotin2008;and
• IncrementalinvestmentsmadebyBlizzardforcustomerservice.
Thesefactorswerepartiallyoffsetbyachangeinbusinessmixwithlowercostofsalesresulting
fromourshifttosellingmoresoftwareversushardware,andsellingmoreofourownedfranchiseandtitles
versusaffiliatedtitles.
FortheyearendedDecember31,2008,costofsalesincreasedascomparedto2007primarilydue
to:
• TheconsummationoftheBusinessCombination,whichresultedincostofsalesfrom
Activision,Inc.ofapproximately$1,416millionbeingincludedfromthedateoftheBusiness
Combination,butnotin2007;
• ThepriceofoilincreasedsharplybeforeproductionofthehardwareperipheralsforGuitar
Hero.ThisresultedinhigherrawmaterialandlogisticcostsfortheproductionofGuitar
Hero:WorldTourbandbundleproductsconsistingofapackageofguitar,drum,microphone,
andsoftware;
• WritedownofourremaininginventoryofGibsonguitarsresultingfromtheexpirationofour
licensingagreementonJanuary31,2009;
• Amortizationofintangibleassetsandotherpurchasepriceaccountingrelatedadjustmentsof
$15million,$95million,and$140millionincludedincostofsales—productcosts,costof
sales—softwareroyaltiesandamortization,andcostofsales—intellectualpropertylicenses,
respectively;
• HigherproductcostsduetoanincreaseinbusinessmixfromaffiliatedLucasArtstitleStar
Wars:TheForceUnleashedinEuropeandAsiaPacificinthefourthquarterof2008andthe
catalogtitle,Lego:IndianaJonestheOriginalAdventures;