Blizzard 2011 Annual Report Download - page 18

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Business Overview
Activision Blizzard, Inc. is a worldwide online, personal computer (“PC”), console, handheld, and mobile game
publisher. The terms “Activision Blizzard,” the “Company,” “we,” “us,” and “our” are used to refer collectively to Activision
Blizzard, Inc. and its subsidiaries. Based upon our organizational structure, we conduct our business through three operating
segments as follows:
Activision Publishing, Inc.
Activision Publishing, Inc. (“Activision”) is a leading international developer and publisher of interactive software
products and content. Activision develops games based on both internally-developed and licensed intellectual property.
Activision markets and sells games it develops and, through our affiliate label program, games developed by certain third-party
publishers. We sell games both through retail channels and by digital download. Activision currently offers games that operate
on the Sony Computer Entertainment, Inc. (“Sony”) PlayStation 3 (“PS3”), Nintendo Co. Ltd. (“Nintendo”) Wii (“Wii”), and
Microsoft Corporation (“Microsoft”) Xbox 360 (“Xbox 360”) console systems; the Nintendo Dual Screen handheld game
systems; the PC; Apple iOS devices and other handheld and mobile devices.
Blizzard Entertainment, Inc.
Blizzard Entertainment, Inc. (“Blizzard”) is the leader in the subscription- based massively multi-player online role-
playing game (“MMORPG”) category in terms of both subscriber base and revenues generated through its World of Warcraft
franchise, which it develops, supports, and hosts. Blizzard also develops, markets and sells role-playing action and strategy PC-
based computer games, including games in the multiple-award winning Diablo® and StarCraft® franchises. Blizzard also
maintains a proprietary online-game related service, Battle.net®. 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 service revenues such as realm transfers, faction changes, and other character
customizations within the 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.
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 Results and Highlights
In 2011, Activision Blizzard’s consolidated net revenues were $4.8 billion and consolidated net income was
$1.1 billion, resulting in diluted earnings per common share of $0.92. The Company grew net revenues, operating income, and
earnings per share as compared to 2010. We also generated $952 million in cash from operating activities in 2011. Net revenues
from digital online channels (as defined later in this filing) increased 14% year-over-year to $1.6 billion, accounting for 34% of
the Company’s total consolidated net revenues.
Also, according to The NPD Group with respect to North America, Charttrack and Gfk with respect to Europe, and
Microsoft, Sony and Activision Blizzard internal estimates, during 2011:
• Activision Publishing was the #1 console and handheld publisher in the U.S. and Europe for the fourth quarter
of 2011 and the #1 console and handheld publisher in the U.S. for the calendar year.
• For the calendar year, in aggregate across all platforms in North America and Europe, Activision Publishing’s
Call of Duty®: Modern Warfare 3® was the #1 best-selling title in dollars, and Call of Duty: Black Ops® was the
#5 best-selling title in dollars.
• In North America and Europe, including accessory packs and figures, Skylanders Spyro’s Adventure™ was the
#8 best-selling game in dollars for the fourth quarter of 2011 and the #1 selling kids’ title in dollars for the
calendar year. Additionally, in North America, including accessory packs and figures, Skylanders Spyro’s
Adventure was the #10 best-selling title in dollars for the calendar year.