Blizzard 2011 Annual Report Download - page 26

Download and view the complete annual report

Please find page 26 of the 2011 Blizzard annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 94

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94

• The successful launch of World of Warcraft: Wrath of the Lich King in China in August 2010.
Distribution
Distribution’s net revenues increased in 2011 as compared to 2010, primarily due to additional customer sales
opportunities in the U.K. and benefits from foreign exchange as compared to prior year.
Distribution’s net revenues decreased in 2010 as compared to 2009, primarily due to the weakness in the interactive
software industry in the U.K., resulting in lower sales from U.K. independent retailers and warehousing services.
Segment Income from Operations
Activision
Activision’s operating income increased in 2011 as compared to 2010, primarily due to:
• A more focused release of products that delivered higher operating margins;
• Increased digital sales of Call of Duty’s digital content, resulting in high operating margins; and
• Reduction of operating expenses resulting from the restructuring activities implemented in 2011.
These positive impacts on operating income were partially offset by:
• An increase in sales and marketing expenses to support the launch of Skylanders Spyro’s Adventure, Call of
Duty: Modern Warfare 3 and Call of Duty Elite; and
• Additional litigation activities and settlement of lawsuits.
Activision’s operating income decreased in 2010 as compared to 2009, primarily due to:
• The release of fewer key titles in 2010 than in 2009 and weaker sales of games in the music and casual genres;
• Limited market success of two new intellectual properties, Blur and Singularity; and
• Higher inventory obsolescence of peripherals and write offs as a result of cancellations of certain titles (e.g., a
Guitar Hero title that had been planned for release in 2011 and True Crime: Hong Kong).
These negative impacts on operating income were partially offset by:
• Stronger performance from our Call of Duty franchise in both retail and digital channels;
• A positive shift in the sales mix to higher-margin digital products;
• Lower sales and marketing expenses as a result of fewer releases; and
• Savings realized from headcount reductions within certain administrative functions in the first quarter of 2010.
Blizzard
Blizzard’s operating income decreased for 2011 as compared to 2010 primarily due to lower revenues as described
above.
These negative impacts on operating income were partially offset by:
10