Activision 2009 Annual Report Download - page 18

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As a result of this shift in our focus, in 2011, we expect fewer overall releases but a more focused slate than in the
past two years. As such, we expect our top line net revenues to be down year-over-year, primarily due to lower revenues from
products with low-to-no profitability. In addition, since Blizzard had two major releases in 2010 and has not yet announced a
launch date for its next global release, we are currently assuming two fewer titles from Blizzard in 2011 and, accordingly,
lower revenues.
Consolidated Statements of Operations Data
Note—The historical financial statements prior to July 10, 2008 are those of Vivendi Games only. The financial
information of the businesses operated by Activision, Inc. prior to the Business Combination is included from the date of the
Business Combination (i.e. from July 10, 2008 onwards), but not for prior periods.
The following table sets forth consolidated statements of operations data for the periods indicated in dollars and as a
percentage of total net revenues (amounts in millions):
For the Years Ended December 31,
2010 2009 2008
Net revenues:
Product sales ...................................................................................... $3,087 69% $3,080 72% $1,872 62%
Subscription, licensing, and other revenues ....................................... 1,360 31 1,199 28 1,154 38
Total net revenues .......................................................................... 4,447 100 4,279 100 3,026 100
Costs and expenses:
Cost of sales—product costs .............................................................. 1,350 31 1,432 33 1,160 38
Cost of sales—MMORPG ................................................................. 241 5 212 5 193 7
Cost of sales—software royalties and amortization ........................... 338 8 348 8 267 9
Cost of sales—intellectual property licenses ..................................... 197 4 315 7 219 7
Product development ......................................................................... 642 14 627 15 592 20
Sales and marketing ........................................................................... 520 12 544 13 464 15
General and administrative ................................................................ 364 8 395 9 271 9
Impairment of intangible assets ......................................................... 326 7 409 10 — —
Restructuring...................................................................................... — — 23 1 93 3
Total costs and expenses ................................................................ 3,978 89 4,305 101 3,259 108
Operating income (loss) ......................................................................... 469 11 (26) (1) (233) (8)
Investment and other income, net .......................................................... 23 1 18 1 46 2
Income (loss) before income tax expense .............................................. 492 12 (8) — (187) (6)
Income tax expense (benefit) ................................................................. 74 2 (121) (3) (80) (2)
Net income (loss) ................................................................................... $418 10% $113 3% $(107) (4)%
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 operating performance is assessed and resources are allocated, and the availability of separate financial
information. We do not aggregate operating segments.
The CODM reviews segment performance exclusive of the impact of the change in deferred net revenues and related
cost of sales with respect to certain of our online-enabled games, stock-based compensation expense, restructuring expense,
amortization of intangible assets and purchase price accounting related adjustments, impairment of intangible assets,
integration and transaction costs, and other*. Information on the operating segments and reconciliations of total segment net
revenues and total segment income (loss) from operations to consolidated net revenues and operating income (loss) for the
years ended December 31, 2010, 2009, and 2008 are presented below (amounts in millions):