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ACTIVISIONBLIZZARD,INC.ANDSUBSIDIARIES
NotestoConsolidatedFinancialStatements
1.BusinessandBusinessCombination
Business
ActivisionBlizzard,Inc.isaworldwideonline,personalcomputer(“PC”),consoleandhandheld
gamepublisher.Theterms“ActivisionBlizzard,”the“Company,”“we,”“us,”and“our”areusedtorefer
collectivelytoActivisionBlizzard,Inc.anditssubsidiaries.Baseduponourcurrentorganizational
structure,weoperatethreeoperatingsegmentsasfollows:
(i)ActivisionPublishing,Inc.
ActivisionPublishing,Inc.(“Activision”)isaleadinginternationalpublisherofinteractive
softwareproductsandperipherals.Activisiondevelopsandpublishesvideogamesonvariousconsoles,
handheldplatformsandthePCplatformthroughinternallydevelopedfranchisesandlicenseagreements.
ActivisioncurrentlyoffersgamesthatoperateontheSonyComputerEntertainment,Inc.(“Sony”)
PlayStation2(“PS2”),SonyPlayStation3(“PS3”),NintendoCo.Ltd.(“Nintendo”)Wii(“Wii”),and
MicrosoftCorporation(“Microsoft”)Xbox360(“Xbox360”)consolesystems;theSonyPlayStation
Portable(“PSP”)andNintendoDualScreen(“NDS”)handhelddevices;thePC;theAppleiPhone;andthe
newhandheldgamesystemNintendoDSi.OurActivisionbusinessinvolvesthedevelopment,marketing,
andsaleofproductsdirectly,bylicense,orthroughouraffiliatelabelprogramwithcertainthirdparty
publishers.Activision’sproductscoverdiversegamecategoriesincludingaction/adventure,actionsports,
racing,roleplaying,simulation,firstpersonaction,music,andstrategy.Activision’stargetcustomerbase
rangesfromcasualplayerstocoregamers,andchildrentoadults.
(ii)BlizzardEntertainment,Inc.
BlizzardEntertainment,Inc.(“Blizzard”)isaleaderintermsofsubscriberbaseandrevenues
generatedinthesubscriptionbasedmassivelymultiplayeronlineroleplayinggame(“MMORPG”)
category.BlizzardinternallydevelopsandpublishesPCbasedcomputergamesandmaintainsits
proprietaryonlinegamerelatedservice,Battle.net.OurBlizzardbusinessinvolvesthedevelopment,
marketing,salesandsupportofroleplayingactionandstrategygames.Blizzardalsodevelops,hosts,and
supportsitsonlinesubscriptionbasedgamesintheMMORPGcategory.Blizzardisthedevelopmentstudio
andpublisherbestknownasthecreatorofWorldofWarcraftandthemultipleawardwinningDiablo,
StarCraft,andWorldofWarcraftfranchises.Blizzarddistributesitsproductsandgeneratesrevenues
worldwidethroughvariousmeans,including:subscriptionrevenues(whichconsistoffeesfromindividuals
playingWorldofWarcraft,prepaidcardsandothervalueaddedservicerevenues);retailsalesofphysical
“boxed”products;electronicdownloadsalesofPCproducts;andlicensingofsoftwaretothirdparty,or
relatedpartycompaniesthatdistributeWorldofWarcraftinRussia,China,andTaiwan.
(iii)ActivisionBlizzardDistribution
ActivisionBlizzardDistribution(“Distribution”)consistsofoperationsinEuropethatprovide
warehousing,logistical,andsalesdistributionservicestothirdpartypublishersofinteractiveentertainment
software,ourownpublishingoperations,andmanufacturersofinteractiveentertainmenthardware.
BusinessCombination
OnJuly9,2008,abusinesscombination(the“BusinessCombination”)byandamong
Activision,Inc.,SegoMergerCorporation,awhollyownedsubsidiaryofActivision,Inc.,VivendiS.A.
(“Vivendi”),VGACLLC,awhollyownedsubsidiaryofVivendi,andVivendiGames,Inc.(“Vivendi
Games”),awhollyownedsubsidiaryofVGACLLC,wasconsummated.Asaresultoftheconsummation
oftheBusinessCombination,Activision,Inc.wasrenamedActivisionBlizzard,Inc.(“Activision
Blizzard”).Foraccountingpurposes,theBusinessCombinationwastreatedasa“reverseacquisition,”with