Activision 2010 Annual Report Download - page 19

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7
For the Years Ended December 31,
2010 2009 2008
Increase/
(decrease)
2010 v 2009
Increase/
(decrease)
2009 v 2008
Segment net revenues:
Activision ............................................................................... $2,769 $3,156 $2,152 $(387) $1,004
Blizzard .................................................................................. 1,656 1,196 1,343 460 (147)
Distribution ............................................................................ 378 423 227 (45) 196
Operating segment net revenue total .................................. 4,803 4,775 3,722 28 1,053
Reconciliation to consolidated net revenues:
Net effect from deferral of net revenues ................................ (356) (497) (713) 141 216
Other* .................................................................................... — 1 17 (1) (16)
Consolidated net revenues ................................................. $4,447 $4,279 $3,026 $168 $1,253
Segment income from operations:
Activision ............................................................................... $511 $663 $307 $(152) $356
Blizzard .................................................................................. 850 555 704 295 (149)
Distribution ............................................................................ 10 16 22 (6) (6)
Operating segment income from operations total .............. 1,371 1,234 1,033 137 201
Reconciliation to consolidated operating (loss) income:
Net effect from deferral of net revenues and related cost
of sales ............................................................................... (319) (383) (496) 64 113
Stock-based compensation expense ....................................... (131) (154) (90) 23 (64)
Restructuring.......................................................................... (3) (23) (93) 20 70
Amortization of intangible assets and purchase price
accounting related adjustments .......................................... (123) (259) (292) 136 33
Impairment of intangible assets ............................................. (326) (409) — 83 (409)
Integration and transaction costs ............................................ — (24) (29) 24 5
Other* .................................................................................... — (8) (266) 8 258
Total consolidated operating income (loss) ............................... $469 $(26) $(233) $495 $207
* Represents Non-Core activities, which are legacy Vivendi Games’ divisions or business units that we have exited,
divested or wound down as part of our restructuring and integration efforts as a result of the Business Combination.
Prior to July 1, 2009, Non-Core activities were managed as a stand-alone operating segment; however, in light of the
minimal activities and insignificance of Non-Core activities, as of that date we ceased their management as a
separate operating segment and consequently, we are no longer providing separate operating segment disclosure and
have reclassified our prior periods’ segment presentation so that it conforms to the current period’s presentation.
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. We also provide a discussion and analysis
of the operating segments for the years ended December 31, 2010, 2009, and 2008 in the Supplemental Pro Forma
Information section below as the pro forma basis provides greater comparability for the Activision and Distribution segments
as the Supplemental Pro Forma Information reflects pre-Business Combination businesses previously operated by
Activision, Inc. The Blizzard segment is not affected by any of the pro forma adjustments.
For 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 game’s online functionality represents an essential component of gameplay
and as a result a more-than-inconsequential separate deliverable. As such, we are required to recognize the revenues of these
game titles over the estimated service periods. The product life may range from a minimum of five months to a maximum of
less than a year. The related cost of sales is deferred and recognized to match revenues. In the table above, we present the
amount of net revenues and related cost of sales separately for each period as a result of the accounting treatment.