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9
Operating Segment Results
Our operating segments are consistent with our internal organizational structure, the manner in which our operations are reviewed and
managed by our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), the manner in which we assess
operating performance and allocate resources, and the availability of separate financial information. Currently, we have two reportable
operating segments (see Note 1 of the Notes to Consolidated Financial Statements). Previously, we reported “Distribution” as a
reportable segment. In the current period, this was no longer deemed a reportable segment and is included in “Other” along with our
recently announced Media Networks and Studios businesses. We do not aggregate operating segments.
The CODM reviews segment performance exclusive of the impact of the change in deferred revenues and related cost of sales with
respect to certain of our online-enabled games, stock-based compensation expense, amortization of intangible assets as a result of
purchase price accounting, and fees and other expenses (including legal fees, costs, expenses and accruals) related to acquisitions and
the Purchase Transaction. The CODM does not review any information regarding total assets on an operating segment basis, and
accordingly, no disclosure is made with respect thereto. Information on the operating segments and reconciliations of total segment net
revenues and total segment operating income to consolidated net revenues from external customers and consolidated income before
income tax expense for the years ended December 31, 2015, 2014, and 2013 are presented in the table below (amounts in millions):
For the Years Ended December 31,
2015 2014 2013
Increase/
(decrease)
2015 v 2014
Increase/
(decrease)
2014 v 2013
Segment net revenues:
Activision ................................................................................... $ 2,700 $ 2,686 $ 2,895 $ 14 $ (209)
Blizzard ...................................................................................... 1,565 1,720 1,124 (155) 596
Other(1) ...................................................................................... 356 407 323 (51) 84
Segments net revenues total ............................................... 4,621 4,813 4,342 (192) 471
Reconciliation to consolidated net revenues:
Net effect from deferral of net revenues .................................... 43 (405) 241 448 (646)
Consolidated net revenues ................................................. $ 4,664 $ 4,408 $ 4,583 $ 256 $ (175)
Segment income from operations:
Activision ................................................................................... 868 762 971 106 (209)
Blizzard ...................................................................................... 561 756 376 (195) 380
Other(1) ...................................................................................... 37 98 28 1
Segments income from operations total ............................. 1,466 1,527 1,355 (61) 172
Reconciliation to consolidated operating income and consolidated
income before income tax expense:
Net effect from deferral of net revenues and related cost of sales (39) (215) 229 176 (444)
Stock-based compensation expense ........................................... (92) (104) (110) 12 6
Amortization of intangible assets ............................................... (11) (12) (23) 1 11
Fees and other expenses related to acquisitions and the Purchase
Transaction ............................................................................. (5) (13) (79) 866
Consolidated operating income ...................................................... 1,319 1,183 1,372 136 (189)
Interest and other expense, net ................................................... 198 202 53 (4) 149
Consolidated income before income tax expense .......................... $ 1,121 $ 981 $ 1,319 $ 140 $ (338)
(1) Other includes other income and expenses from operating segments managed outside the reportable segments, including our
Media Networks, Studios, and Distribution businesses. Other also includes unallocated corporate income and expenses.
For a better understanding of the differences in presentation between our segment results and the consolidated results, the following
explains the nature of each reconciling item.
Net Effect from Deferral of Net Revenues and Related Cost of Sales
We have determined that some of our titles’ online functionality represents an essential component of gameplay and as a result,
represents a more-than-inconsequential separate deliverable. As such, we are required to recognize revenues from these titles over the
estimated service periods, which are generally less than one year. The related costs of sales are deferred and recognized when the
related revenues are recognized. In the operating segment results table, we present the amount of net revenues and related costs of
sales separately for each period as a result of this accounting treatment.