Blizzard 2005 Annual Report Download - page 35

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Sales and Marketing
(In thousands)
March 31, 2005
% of Consolidated
Net Revenues March 31, 2004
% of Consolidated
Net Revenues Increase/(Decrease) Percent Change
$230,058 16% $128,221 14% $101,837 79%
Sales฀and฀marketing฀expenses฀of฀$230.1฀million฀and฀$128.2฀million฀represented฀16%฀and฀14%฀of฀consolidated฀net฀revenues฀for฀the฀years฀ended฀March฀31,฀2005฀and฀2004,฀
respectively.฀The฀increases฀in฀both฀absolute฀dollars฀and฀as฀a฀percentage฀of฀net฀revenues฀was฀primarily฀generated฀by฀our฀publishing฀business฀as฀a฀result฀of฀significant฀
marketing฀programs,฀including฀television฀and฀in-theatre฀ad฀campaigns฀and฀in-store฀promotions,฀run฀in฀support฀of฀our฀key฀fiscal฀2005฀“big฀proposition”฀title฀releases฀
Spider-Man 2, Shrek 2, Doom 3, Shark Tale, X-Men Legends, THUG 2, Call of Duty: Finest Hour
฀and฀
Lemony Snicket’s A Series of Unfortunate Events
.฀Our฀experience฀has฀shown฀that฀this฀increased฀spending฀
will฀lengthen฀the฀product฀sales฀life฀cycle฀and฀add฀to฀the฀long-term฀prospects฀of฀the฀respective฀product฀lines.
General and Administrative
(In thousands)
March 31, 2005
% of Consolidated
Net Revenues March 31, 2004
% of Consolidated
Net Revenues Increase/(Decrease) Percent Change
$59,739 4% $44,612 5% $15,127 34%
General฀and฀administrative฀expenses฀of฀$59.7฀million฀and฀$44.6฀million฀represented฀4%฀and฀5%฀of฀consolidated฀net฀revenues฀for฀the฀years฀ended฀March฀31,฀2005฀and฀
2004,฀respectively.฀The฀increase฀in฀absolute฀dollars฀was฀primarily฀due฀to฀an฀increase฀in฀headcount฀and฀related฀costs฀to฀support฀business฀growth,฀as฀well฀as฀an฀increase฀in฀
professional฀services฀fees฀to฀support฀Sarbanes-Oxley฀related฀compliance.฀The฀decrease฀as฀a฀percentage฀of฀consolidated฀net฀revenues฀was฀due฀mainly฀to฀the฀significant฀
increase฀in฀sales฀volume.
Operating Income
(In thousands)
March 31,
2005
% of Segment
Net Revs
March 31,
2004
% of Segment
Net Revs
Increase/
(Decrease)
Percent
Change
Publishing $160,826 15% $ 93,223 14% $67,603 73%
Distribution 23,745 7 16,594 6 7,151 43
฀ Consolidated $184,571 13% $ 109,817 12% $74,754 68%
Publishing฀operating฀income฀for฀the฀year฀ended฀March฀31,฀2005฀increased฀$67.6฀million฀from฀the฀same฀period฀last฀year,฀from฀$93.2฀million฀to฀$160.8฀million.฀Excluding฀the฀
impact฀of฀changes฀in฀foreign฀currency฀rates,฀publishing฀operating฀income฀for฀the฀year฀ended฀March฀31,฀2005฀increased฀approximately฀$56.7฀million฀from฀the฀same฀period฀
last฀year.฀International฀publishing฀operating฀income฀for฀the฀year฀ended฀March฀31,฀2005฀benefited฀from฀the฀positive฀impact฀of฀the฀year-over-year฀strengthening฀of฀the฀EUR฀
and฀the฀GBP฀in฀relation฀to฀the฀U.S.฀dollar.฀The฀$56.7฀million฀increase฀is฀primarily฀due฀to:
•฀ ฀Strong฀performance฀in฀both฀the฀North฀America฀and฀international฀markets฀of฀our฀fiscal฀2005฀title฀releases.฀The฀strong฀performance฀of฀the฀fiscal฀2005฀releases฀was฀
driven฀by฀our฀largest฀lineup฀ever฀of฀big฀propositions,฀a฀record฀number฀of฀million-unit฀and฀multi-million-unit฀titles฀and฀an฀increased฀hand-held฀presence.
Partially฀offset฀by:
•฀ ฀Increased฀sales฀and฀marketing฀spending.
•฀ ฀Increased฀cost฀of฀sales—product฀costs,฀cost฀of฀sales—software฀royalties฀and฀amortization,฀and฀cost฀of฀sales—intellectual฀property฀licenses.
page 33
Activision, Inc. — 2005 Annual Report