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Activision Blizzard (US)

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Activision Blizzard is one of the world's biggest independent games software developers, and owner of two of the industry's biggest franchises: World Of Warcraft and above all Call of Duty, the military shooter that has been the overall #1 gaming franchise for almost a decade. Yet performance at all the established gaming companies has been buffeted by the changing nature of the marketplace since 2010. The business was formed in 2008 by the merger of US company Activision with the software arm of French media and entertainment group Vivendi. Still intent on consolidating its existing assets, it was caught slightly by surprise by the sudden explosion of social media gaming, and especially mobile games. In 2015, it arranged to plug the sizeable hole in its portfolio with the acquisition of King Digital, makers of Candy Crush, for $5.9bn. More recently the similarly explosive popularity of MMG rival Fortnite has left another dent in performance.

Advertising

Who handles advertising? Click here for Agency Account Assignments. Activision Blizzard reported advertising expenses of $641m in 2016.

Competitors

Activision Blizzard's biggest rivals in traditional gaming are EA and Ubisoft. See Toys & Games Sector

Brands & Activities

Activision Blizzard's games portfolio is led by the hugely successful Call Of Duty series, a first person action game which still regularly tops rankings of the world's best-selling titles. The 2009 installment, Call Of Duty: Modern Warfare 2, was that year's overall top-selling title; Call of Duty: Black Ops was the best-seller in 2010, but was almost eclipsed by sister release World of Warcraft: Cataclysm. Published in December 2010, that game sold more than 3.3m copies in its first 24 hours on sale, making it the fastest-selling game in history. A year later, that record was beaten by Call of Duty: Modern Warfare 3, which managed 6.5m copies in 24 hours. Call of Duty: Black Ops II, released in Nov 2012, set new records as the year's top-selling game and also fastest ever to gross sales of $1bn, achieving that total in just 15 days. However 2014 release Call of Duty: Advanced Warfare turned out to be slightly less successful than anticipated, though still the year's best-seller. Call of Duty: Black Ops III set new records in the 2015 holiday season. Yet there was a slight fallback in performance of the franchise when 2016's Call of Duty: Infinite Warfare reported a downturn in traditional retail sales. The 2017 edition had a more retro feel with a return to WWII.

Overall performance had also dipped. The biggest cause for the decline in sales was a shift by gamers away from immersive desktop computer universes towards mobile gaming on smartphones and other portable devices, a change of habit which caught most existing game developers off-balance. Rather like the music industry, games companies have also experienced a dramatic decline in physical sales as users shift towards online subscription-based services. The decline in revenues also allowed Activision's arch-rival EA Games to regain the overall #1 spot by revenues among independent developers for 2014.

The company has attempted to compensate for the decline of CoD by developing a series of additional franchises, though few of these have achieved the same success as the war game, or "massively multiplayer online" or MMO universe World of Warcraft (though the latter has suffered a dramatic fall-off in subscriber numbers in 2015, down to 5.6m mid-year, from past highs in excess of 10m). Perhaps the most successful supporting game has been kids fantasy Skylanders. Together, CoD, WoW and Skylanders generated just over two-thirds of company revenues in 2014. Newer key franchises include fantasy series Diablo, Destiny and Starcraft, and a long-established favourite is the Tony Hawk action sports series. Former top-seller Guitar Hero was also resurrected with some success, though it was unable to recreate its former glory. The group's most successful new release in 2016 was new online universe Overwatch, which had attracted 25m registered users by the end of its first year.

Destiny is a new franchise co-developed by Activision with independent company Bungie. The second installment in the Destiny franchise, Destiny 2, was a huge hit in 2017. Call Of Duty: WWII and Destiny 2 were the top two console games in North America by revenues in 2017.

In a move to develop a presence in mobile gaming, Activision agreed in 2015 to acquire UK-based mobile gaming specialist King Digital for $5.9bn. That company is responsible for the enormously popular Candy Crush and its various spin-offs. It operates as a standalone unit within the group along similar lines to the separate Activision and Blizzard Entertainment development studios.

Financials

The addition of King Digital, and strong growth by new action releases like Overwatch, prompted a surprise rebound in financial performance in the final quarter of 2016. A key factor was also a marked shift by customers towards digital downloads rather than traditional physical software. As a result, revenues for the full year jumped by an extraordinary 42% to a record $6.61bn. Sales from digital channels alone almost doubled to $4.9bn, with the bulk of those revenues from recurring subscriptions. Net income from the year was up 8% to $966m.

For 2018, net revenues reached a new high of $7.5bn. Sales of physical product were just $2.26bn, with $5.25bn from subscriptions, licensing and other income streams. Net income was dented in 2017 by a large tax write-off; it rebounded in 2018 to $1.8bn. The Blizzard division behind World of Warcraft and other MMO games generated revenues of $2.27bn in 2018, while Activision added $2.74bn. King's contribution was $2.09bn.

Following the injection of Blizzard Entertainment into Activision, Vivendi ended up with a controlling 61% stake in the business. It agreed in 2013 to sell the bulk of this holding back to management for a total of around $8.2bn. Activision Blizzard bought back and canceled around 25% of its own equity, while an investor group led by CEO Bobby Kotick and long-time business partner and chairman Brian Kelly acquired another 24%. Vivendi was left with a holding of around 12%, and later cut this down to just over 6% in May 2014.

History of Activision Blizzard

The current group was formed in 2008 from the merger of US company Activision with French-owned Blizzard Entertainment, and the two games studios continue to operate as separate development units. Activision tends to be a specialist in single-player games such as CoD and Skylanders, while Blizzard is an expert in the creation of subscription-based "massively multi-player online" (MMO) games, which allows literally millions of players to inhabit the same online fantasy gaming environment all at the same time. World of Warcraft set the original template for this, and has been followed by Diablo, Starcraft and others.

Vivendi's gaming division started life as the software arm of the Havas publishing group. This was acquired by French utilities giant Compagnie Generale des Eaux in 1998 as the first step in its transformation into a global media group. Yet this over-ambitious plan all but collapsed in the face of the weakening global economy, and all of the traditional publishing businesses were divested, leaving only the software division in place by 2002. After struggling for several years, the business finally hit the jackpot with the launch of World of Warcraft. Launched at the end of 2004, it had signed up more than 11.5m subscribers worldwide by the end of 2008. WoW almost single-handedly turned around Vivendi Games' fortunes.

In 2005, Vivendi had put the games division up for sale as a result of a sharp slowdown in performance which resulted in a €200m loss for 2004. Microsoft was understood to be among the interested buyers, but offers were reportedly far lower than Vivendi was prepared to accept, and the sale offer was withdrawn. Bolstered by the popularity of Warcraft, Vivendi Games returned to profit for 2005. Operating income more than doubled in 2006, and by another 57% in 2007 to €181m, on revenues which broke the €1bn mark for the first time. Blizzard, the software house responsible for WoW, generated more than 80% of that total. In 2008, Vivendi Games became the global #1 as a result of an ambitious merger with US rival Activision.

Activision was arguably the software industry's first independent developer, having launched in 1979 to create games for the Atari console. Later it began to develop games for other formats, and acquired one-time pioneer of text-based adventures Infocom. Later the company acquired rights to develop games on a succession of hit movies, including Spider-man and James Bond. However, the computer gaming market had more or less imploded by 1990 because of the success of consoles. Technology entrepreneur Bobby Kotick acquired control of the business in 1991 with partners Howard Marks and Brian Kelly, backed by casinos mogul Steve Wynn. They relaunched it with more adventurous concepts. The first big hit was Tony Hawk's Pro Skater in 1999, followed by the first Call Of Duty. Activision bought out newly launched music game Guitar Hero in 2006.

The merger with Blizzard was first agreed in 2007, and completed the following year. Although Activision's management team took on most of the senior roles in the resulting business, Vivendi ended up with a 54% shareholding, and said it would proceed to acquire further publicly held shares. By the end of 2011, following further purchases and sales, it controlled 60% of equity.

Last full revision 17th January 2018

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