Activision Blizzard Inc. (ATVI) is a global entertainment holding company that develops and publishes interactive video content and services. It's best known for franchises including World of Warcraft, Call of Duty, StarCraft, and Bubble Witch. Founded in 2008 from the merger of Activision Inc. and Vivendi Games, the company develops and distributes its video games and services on game consoles, personal computers (PCs), and mobile devices. Activision Blizzard also operates eSports leagues and sells digital advertising.

The company faces competition from other interactive entertainment companies, as well as competitors that provide other forms of entertainment, including film, television, social networking, music, and other types of consumer entertainment. Activision Blizzard's biggest competitors within the gaming industry include Microsoft Corp. (MSFT), Sony Corp. (SNE), and Nintendo Co. Ltd. (7974).

Key Takeaways

  • Activision Blizzard develops and publishes interactive entertainment for use on video game consoles, PCs, and mobile devices. It also operates eSports leagues.
  • The Activision segment, which develops and sells video games, is the company's biggest revenue and profit generator.
  • The company is focusing on sharply expanding revenue from its eSports offerings and advertising.
  • Activision Blizzard appointed Major League Baseball executive Tony Petitti to the role of President of Sports and Entertainment last year.

Activision Blizzard’s Financials

Activision Blizzard's revenue and net income have risen sharply as social-distancing measures related to the COVID-19 pandemic led to increasing user engagement during the company's 2020 fiscal year (FY), which ended December 31, 2020. The company posted net income of $2.2 billion on $8.1 billion of revenue during the year. Net income rose 46.2% as revenue grew 24.6% compared to FY 2019.

Activision Blizzard generates revenue from three main distribution vehicles: content distributed via digital online channels accounted for over 82% of total revenue; retail channels accounted for a little more than 9%; and other sources accounted for more than 8%.

As for separate gaming platforms: content designed for video game consoles accounted for over 34% of total revenue; PC-related content accounted for more than 25%; mobile and ancillary accounted for 32%, which includes non-platform-specific game-related revenues such as standalone sales of toys and accessories; and other sources comprised more than 8%.

Activision Blizzard noted that it experienced increased user engagement early in the year due to people being forced to shelter at home amid the pandemic. However, that trend moderated throughout the rest of the year and the company's monthly active users (MAUs) finished the year lower than at the end of FY 2019. Total MAUs fell 2.9% from the end of FY 2019 to the end of FY 2020.

Activision Blizzard’s Business Segments

The company conducts its business through the following three segments and breaks out the revenue and operating income for each: Activision Publishing Inc. ("Activision"), Blizzard Entertainment Inc. ("Blizzard"), and King Digital Entertainment ("King").

Activision 

Activision develops and publishes interactive software products and entertainment content, which it delivers through both premium and free-to-play offerings. It generates revenue from full-game and in-game sales as well as from licensing software to third-party or related-party companies that distribute its products. Activision's key product franchise is Call of Duty.

The business also generates revenue from its Call of Duty League, a global professional eSports league. The segment posted year-over-year (YOY) revenue growth of 77.6% in FY 2020. Revenue for the segment was $3.9 billion, or more than 49% of the company's total revenue. Operating income rose 119.8% to $1.9 billion, comprising about 55% of the operating income for all segments.

Blizzard

Blizzard develops and publishes interactive software products and entertainment content, which it delivers through both premium and free-to-play offerings. It generates revenue from full-game and in-game sales, subscriptions, and through licensing software to third-party or related-party companies that distribute its products. The business also maintains a proprietary online gaming service, Blizzard Battle.net.

Blizzard's key product franchises include World of Warcraft, Hearthstone, Diablo, and Overwatch. Blizzard also includes activities related to the Overwatch League, a global professional eSports league. Revenue rose 10.8% in FY 2020 to $1.9 billion, comprising nearly 24% of Activision Blizzard's total revenue. Operating income rose 49.4% to $693 million, accounting for about 20% of operating income for all segments.

King

King develops and publishes interactive entertainment content and services, particularly for the mobile platform. It delivers content mostly through free-to-play offerings and generates revenue primarily from in-game sales and in-game advertising. Its key product franchise is Candy Crush. Revenue rose 6.5% in FY 2020 to $2.2 billion, comprising about 27% of Activision Blizzard's total revenue. Operating income rose 15.8% to $857 million, accounting for about 25% of the operating income for all segments.

A note to readers that Activision Blizzard also generates some revenue and operating income from its distribution business, which is not represented as a reportable segment and falls under the company's "Other" category. The segment breakdowns above and pie charts exclude data from this "Other" category.

Activision Blizzard’s Recent Developments

Activision Blizzard informed employees at its Versailles, France, office in early October that it would be closing the location. The closure is part of a restructuring the company has been implementing over the past year. Earlier in the year, the company closed a Blizzard office in The Hague.

As part of its efforts to continue expanding its eSports offerings, Activision Blizzard announced in the first half of August the appointment of Major League Baseball (MLB) executive Tony Petitti to the role of President of Sports and Entertainment. Mr. Petitti most recently served as Deputy Commissioner and Chief Operating Officer of MLB and has 30 years of experience in sports and entertainment.

How Activision Blizzard Reports Diversity and Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Activision Blizzard and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Activision Blizzard releases. It shows Activision Blizzard does not disclose any data about the diversity of its board of directors, C-Suite, general management, and employees overall. It also shows Activision Blizzard does not reveal the diversity of itself by race, gender, ability, veteran status, or LGBTQ+ identity.