Activision 2012 Annual Report Download - page 34

Download and view the complete annual report

Please find page 34 of the 2012 Activision 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 100

  • 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
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

16
For 2011, product development costs increased slightly as compared to 2010, principally due to lower capitalization of our overall
product development costs related to future titles and higher accrued studio-related bonuses. This increase in product development expense was
partially offset by the benefits realized from our 2011 Restructuring, which involved a focus on reducing the number of titles in development and
publication, including the discontinuation of the development of music-based games. Additionally, product development costs in 2011 included
amounts written off due to the cancellation of a future game under development; however, the write-off of capitalized software development was
slightly less than in 2010.
Sales and Marketing (amounts in millions)
Year Ended
December 31,
2012
% of
consolidated
net revs.
Year Ended
December 31,
2011
% of
consolidated
net revs.
Year Ended
December 31,
2010
% of
consolidated net
revs.
Increase
(Decrease)
2012 v
2011
Increase
(Decrease)
2011 v
2010
Sales and marketing ...........
$578
12%
$545
11%
$516
12%
$33
$29
Sales and marketing expenses increased in 2012 as compared to 2011, primarily due to increased spending on sales and marketing
activities to support the launches of Diablo III and World of Warcraft: Mists of Pandaria, as well as continued investments in our Skylanders
franchise.
Sales and marketing expenses increased in 2011 as compared to 2010, primarily due to increased spending on sales and marketing
activities to support the launch of Skylanders Spyro’s Adventure, Call of Duty: Modern Warfare 3 and Call of Duty Elite in the fourth quarter of
2011.
General and Administrative (amounts in millions)
Year Ended
December 31,
2012
% of
consolidated
net revs.
Year Ended
December 31,
2011
% of
consolidated
net revs.
Year Ended
December 31,
2010
% of
consolidated
net revs.
Increase
(Decrease)
2012 v
2011
Increase
(Decrease)
2011 v
2010
General and
administrative ................
$561
12%
$456
10%
$375
8%
$105
$81
General and administrative expenses increased in 2012 as compared to 2011, primarily due to higher legal-related expenses (including
legal-related accruals, settlements and fees), stock-based compensation expenses and additional accrued bonuses reflecting our strong 2012
financial performance.
General and administrative expenses increased in 2011 as compared to 2010, primarily due to higher legal expenses incurred from
additional litigation activities and settlement of lawsuits, the impairment of our Distribution segment’s goodwill and higher depreciation expense
and facilities costs.
Impairment of Intangible Assets (amounts in millions)
Year Ended
December 31,
2012
% of
consolidated
net revs.
Year Ended
December 31,
2011
% of
consolidated
net revs.
Year Ended
December 31,
2010
% of
consolidated
net revs.
Increase
(Decrease)
2012 v
2011
Increase
(Decrease)
2011 v
2010
Impairment of intangible
assets ..............................
$—
—%
$—
—%
$326
7%
$—
$(326)
There was no impairment of intangible assets for the years ended December 31, 2012 and 2011.
In the fourth quarter of 2010, as a result of the franchise and industry results of the holiday season, we significantly revised our
outlook for the retail sales of software. Further, with the impact of the continued economic downturn on our industry in 2010 and the change in
the buying habits of casual consumers, we reassessed our overall expectations with respect to our future sales of certain games titles. We
considered these economic changes during our planning process for 2011 that we conducted during the months of November and December,
2010, which resulted in a strategy change to, among other things, focus on fewer title releases in the casual and music genres. As a result, we
updated our future projected revenue streams for our franchises in the casual and music genres. We performed recoverability and, where
applicable, impairment tests on the related intangible assets in accordance with ASC Subtopic 360-10. Based on the analysis performed, we
recorded impairment charges of $67 million, $9 million and $250 million to license agreements, game engines and internally developed
franchises intangible assets, respectively, for 2010 within our Activision segment. See Note 11 of the Notes to Consolidated Financial Statements