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COMPANY PROFILE

Activision Blizzard, Inc.

REFERENCE CODE: 36B9F70C-2ED3-416A-BD6A-74E543D87235

PUBLICATION DATE: 13 Nov 2015
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Activision Blizzard, Inc.

TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................3
Key Facts...............................................................................................................3
SWOT Analysis.....................................................................................................4

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Activision Blizzard, Inc.

Company Overview

COMPANY OVERVIEW
Activision Blizzard, Inc. (Activision Blizzard or "the company") is an interactive gaming company.
The company develops and publishes games for multiple platforms, including online, personal
computer (PC), video game console, handheld, mobile and tablets. It operates in North America,
Europe and Asia. Activision Blizzard is headquartered in Santa Monica, California and employed
6,800 people as on December 31, 2014.
The company recorded revenues of $4,408 million during the financial year ended December 2014
(FY2014), a decrease of 3.8% compared to FY2013.The operating profit of the company was $1,183
million in FY2014, a decrease of 13.8% compared to FY2013. The net profit of the company was
$835 million in FY2014, a decrease of 17.3% compared to FY2013.

KEY FACTS
Head Office

Activision Blizzard, Inc.

3100 Ocean Park Boulevard
Santa Monica
California 90405
USA

Phone

1 310 255 2000

Fax
Web Address

http://www.activisionblizzard.com/

Revenue / turnover 4,408.0

(USD Mn)
Financial Year End

December

Employees

6,800

NASDAQ Ticker

ATVI

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Activision Blizzard, Inc.

SWOT Analysis

SWOT ANALYSIS
Activision Blizzard, Inc. (Activision Blizzard or "the company") is an interactive gaming company.
The company develops and publishes games for multiple platforms, including online, personal
computer (PC), video game console, handheld, mobile and tablets. The company's presence across
multiple platforms and geographies shields it against risks associated with a single platform and
adverse economic trends in a single region. Furthermore, it also provides it exposure to a large
addressable market thereby enhancing the topline. However, intense competition could impact the
pricing of the company's solutions, thus impacting its margins.
Strengths

Weaknesses

Multi-platform presence
Diversified global presence
Large company with successful franchise
history

Reliance on few game titles for majority of

revenues
Dependence on video game console
manufacturers

Opportunities

Threats

Poised to benefit from robust games

software market
Growing mobile gaming industry
Positive outlook for worldwide online gaming
market

Intense competition
Rapid technological change and transitions
in console platforms
Software piracy

Strengths

Multi-platform presence
The company has positioned its business for long term growth through presence across multiple
platforms. The company develops and publishes video games on various consoles, handheld
platforms and the PC platform. Activision Blizzard offers games that operate on all major console
systems, including the Sony PlayStation 4, Nintendo Wii, Nintendo Wii U and Microsoft Xbox 360.
Its games are also compatible with handheld game systems, including Nintendo Dual Screen and
Nintendo 3DS. It also offers games for the PC and mobile devices. In addition, the company has a
robust portfolio of online subscription-based games in the massively multiplayer online role-playing
game (MMORPG) category. The company's subsidiary, Blizzard Entertainment develops and
publishes PC-based computer games and maintains a proprietary online-game related service called
Battle.net. As of December 31, 2014, approximately 10 million gamers worldwide subscribed to play
Blizzard's World of Warcraft. The company's presence across multiple platforms enables it to leverage

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SWOT Analysis

costs over a larger installed hardware base and it also enables the company to cater to varied
preferences of a large customer base thereby increasing unit sales.
Diversified global presence
The company has an established presence in multiple markets across the globe. At the end of
FY2014, the company operated 58 facilities in 17 countries. Moreover, net revenues from international
sales accounted for approximately 50.3%, 47%, and 50% of total consolidated net revenues for
FY2014, FY2013, and FY2012, respectively. Activision Blizzard has significant operations in the US,
Canada, the UK, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South
Korea and China. The company continues to offer both online and packaged software and games
with localized content in different geographies to capture incremental market share across several
regions. The company's presence across diverse geographies shields it against risks associated
with adverse economic trends in a single region. Furthermore, it also provides it exposure to a large
addressable market enhancing the topline.
Large company with successful franchise history
Activision Blizzard is one of the largest companies in the interactive gaming industry and has driven
significant competitive advantages through historically successful franchises. The company recorded
revenues of $4,408 million in FY2014. Its closest competitors, Take-Two Interactive and Ubisoft
recorded revenues of $2,350.6 million and E1,007.1 million ($1,349.7 million) respectively, during
the financial year ended March 2014. This indicates that the company enjoys significant scale
compared to its competitors.
Activision Blizzard has a history of successful franchises which has enabled the company to build
formidable market position. Established franchise games enable the company to introduce sequels
and brand extensions, which are less risky than introducing a new franchise game without any
existing brand equity or user base. The company has been adding new versions to its franchises
on a regular basis. For instance, Call of Duty, one of Activision Blizzard's leading franchises, has
been the best-selling Western interactive franchises since its launch in 2003, with approximately
$11 billion of life-to-date revenues. During 2014, the company released the latest installment in the
franchise, Call of Duty: Advanced Warfare, which, in the fourth quarter of 2014, and was the
best-selling video game release worldwide and the best-selling game on the next-generation PS4
and Xbox One console platforms. Activision Blizzard is currently developing sequels and additional
content to build on the continued success of the Call of Duty franchise.
The publishing and distribution of products and content based on proven franchises enhances
predictability of revenues and the probability of high unit volume sales and operating profits. Activision
Blizzard owns several successful intellectual properties, including Call of Duty and the Skylanders
franchise. The company also has an exclusive 10-year alliance with Bungie, a developer of successful
game franchises to bring Bungie's next action game universe, Destiny, to market. The company's
higher scale and successful franchise history positions Activision Blizzard at a competitive advantage
over its peers.

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SWOT Analysis

Weaknesses

Reliance on few game titles for majority of revenues

Activision Blizzard derives significant portion of revenues historically from products based on a
relatively small number of popular franchises and these products are responsible for a
disproportionately high percentage of profits. For example, the company's top three largest franchises
Call of Duty, Skylanders and World of Warcraft accounted for 67%, 80%, and 72% of total consolidated
net revenues for FY2014, FY2013, and FY2012, respectively. A limited number of popular franchises
will continue to produce a disproportionately high percentage of revenues and profits. Due to this
dependence on a limited number of franchises, the company is vulnerable to the performance of
these franchises which may significantly harm business and financial results.
Dependence on video game console manufacturers
A significant part of the company's business comes from sale of products for play on video game
platforms manufactured by third parties, such as Microsoft's Xbox One and Xbox 360, Nintendo's
Wii U and Wii, and Sony's PS4 and PS3. Sales of products for consoles accounted for 49% of
Activision Blizzard's consolidated net revenue in FY2014. The success of the company's business
is driven in large part by the availability of an adequate supply of these video game platforms and
the continued support for these platforms by their manufacturers. In addition, the company's success
also depends on the ability to accurately predict which platforms will be successful in the marketplace,
and developing commercially successful products for those platforms. If the platforms for which
Activision Blizzard is developing products are not released as anticipated or are not available in
adequate quantities to meet consumer demand, and do not attain wide market acceptance, then
the company's revenues may suffer. The company will be unable to fully recover its investment in
developing those products, which may adversely impact its financial position and results of operations.

Opportunities

Poised to benefit from robust games software market

The global games software market experienced strong growth during 2013 and the market is
forecasted to continue growing strongly over the forecast period to 2017. According to MarketLine
(a unit of Informa), the global games software market generated total revenues of $29.8 billion in
2014. Furthermore, the performance of the market is forecasted to accelerate, with an anticipated
CAGR of 1.6% for the five-year period, 2014-19, which is expected to drive the market to a value of
$32.2 billion by the end of 2019.
The company has significant presence in the global games software industry. The company's
subsidiary Activision Publishing is engaged in publishing interactive entertainment software products
and downloadable content. Activision Publishing develops and publishes video games on various

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SWOT Analysis

consoles, handheld platforms and the PC platform using both internally developed franchises and
licensed properties. The company offers games that operate on the Sony PlayStation 4, Nintendo
Wii and Nintendo Wii U, and Microsoft Xbox 360 console systems; the Nintendo Dual Screen and
Nintendo 3DS handheld game systems; apart from the PC and other devices.
The strong outlook for the global games software market will translate into improved demand for the
company's offerings and will support the company's topline growth.
Growing mobile gaming industry
The mobile gaming industry is expected to record strong growth in the coming years. According to
industry estimates, the mobile games market is predicted to grow at a rate of 27.3% annually to
reach $24 billion by 2016. The growth is expected to be driven by increasing number of players,
payers, as well as a higher average spend per paying mobile gamer. The tablet games market is
expected to grow four fold until 2016, to reach $10 billion. Moreover, Western Europe, North America
and Asia Pacific are expected to remain the most appealing markets for mobile game publishers.
Activision Blizzard is keen to benefit from this growing mobile games market. The company is a
worldwide publisher of mobile and tablet games.
The robustly growing end market allows the company to expand its market share and revenues in
the coming years.
Positive outlook for worldwide online gaming market
Worldwide online gaming market is expected to grow rapidly in the coming years. According to
industry estimates, the worldwide online gaming market is expected to reach $29 billion by 2016.
Majority (79.3%) of these revenues are expected to be derived from online games on personal
computers. In addition, approximately 59% of these revenues are expected to come from
subscriptions, online usage and virtual goods. Further, Asian markets, primarily China is expected
to contribute to majority of the revenues.
The company has been increasing its focus on online gaming services in recent years. Blizzard
Entertainment (Blizzard) is the leading publisher of online subscription-based games in the MMORPG
category. Blizzard maintains a proprietary online-game related service, Battle.net. The company's
leading online gaming franchisees include Call of Duty, which was launched in 2003. In January
2015, two of the new free-to-play games were released into beta testing. For instance, Activision
Blizzard launched a public open beta for Call of Duty Online available in China. Further, the company
closed beta testing for Heroes of the Storm, its upcoming free-to-play online team brawler featuring
iconic heroes from Blizzard games.
The company's online initiatives will position it to benefit from the projected growth and also enhance
its revenue generating capabilities by complementing its core business.

Threats

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SWOT Analysis

Intense competition
Activision Blizzard operates in highly competitive interactive software industry.The company competes
with other publishers of PC and video game console interactive entertainment software. Some of
these competitors vary in size from small companies with limited resources to very large corporations
with significantly greater financial, marketing and product development resources compared to
Activision Blizzard. For instance, integrated video game console hardware and software companies
such as Sony, Nintendo and Microsoft compete directly with the company in the development of
software titles for their respective platforms. Moreover, a number of competitors with large product
lines and popular titles typically have greater leverage with retailers, distributors and other customers,
who may be willing to promote titles with less consumer appeal in return for access to those
competitors' more popular titles.
Activision Blizzard also competes with other forms of interactive entertainment, such as games
developed for use by consumers on handheld and mobile devices or social networking sites, most
of which are free to play. Increased consumer acceptance and availability of such games could result
in a decline in platform-based software and negatively impact sales of the company's console and
handheld products. Intense competition could impact the pricing of the company's solutions, thus
impacting its margins.
Rapid technological change and transitions in console platforms
The rapid technological change in the gaming industry coupled with the transitions in console platforms
may impact the company's performance.The company's market is characterized by rapid technological
changes, evolving industry standards, frequent new product introductions and short product life
cycles. New products introduced by Activision Blizzard may not achieve significant market acceptance
or achieve sufficient sales to recover development, manufacturing, and marketing costs. In the past,
only a few interactive entertainment software products have achieved sustained market acceptance.
In addition, delays in product releases or disruptions in the release of one or more new products
could adversely affect the operating results of the company. Short lifecycles of products have been
adversely affecting the gaming business, and these trends are expected to further increase their
impact in the future.
Furthermore, during platform transitions, the company may simultaneously incur costs both in
developing and marketing new titles for prior-generation video game platforms, which may not sell
at premium prices, and also in developing products for current-generation platforms, which will not
generate immediate or near-term revenue. As a result, Activation Blizzard's operating results during
platform transitions may be more volatile. Any failure to successfully adapt to emerging technologies
could harm Activision Blizzard's competitive position, reduce its market share and have an adverse
impact on its revenues.
Software piracy
Ongoing piracy problems continue to impact the growth for players in the entertainment industry.
Unauthorized copying of Activision Blizzard's titles and reverse engineering of the products would

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SWOT Analysis

enable duplicating of the programming techniques proprietary to the company and creation of similar
competitive products. Further, in some countries where Activision Blizzard's products are distributed,
the laws do not protect the company's products and intellectual property rights to the same extent
as the laws of the US. Legal protection of Activision Blizzard's rights may be ineffective in such
countries. Moreover, the rapid expansion of broadband internet access may aggravate these problems
by making it possible to transmit digital files faster and more easily. Though the industry is taking
various steps worldwide to prevent piracy, it still remains one of the major factors affecting potential
revenues. In the recent years, organized piracy has evolved rapidly, enabling copying of the pirated
titles through internet. The increasing piracy will adversely affect the business value of Activision
Blizzard's products and thereby its revenues.

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