Activision Blizzard (ATVI) is a global entertainment holding company that develops and publishes interactive video content and services. It's best known for franchises such as World of Warcraft, Call of Duty, StarCraft, and Bubble Witch. Founded in 2008 from the merger of Activision 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.

In January 2022, Microsoft announced its intention to acquire Activision Blizzard for $68.7 billion in cash. As of mid-February 2023, the deal was still pending as regulatory agencies in various countries considered the potential effects on competition in the industry. The Federal Trade Commission has said it opposes the deal.

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. Some of Activision Blizzard's biggest competitors within the gaming industry include Sony (SNE) and Nintendo (7974).

Activision Blizzard’s Financials

Activision Blizzard announced financial results for its 2022 fiscal year on Feb. 6, 2023. The company reported net revenues of $7.53 billion, compared with $8.80 billion for 2021. Earnings per diluted share were $1.92, compared with $3.44 for 2021.

The company's big moneymaker in 2023 is Call of Duty: Modern Warfare II. Launched in October 2022, the game delivered the highest opening-quarter sell-through in franchise history.

Activision Blizzard generates revenue from three main distribution channels. These include content distributed via digital online channels (82% of revenue), retail channels (6%), and other sources (12%). The company also provides a revenue breakdown for separate gaming platforms: content for video game consoles (27% of revenue); PC-related content (23%); mobile and ancillary, which includes non-platform specific game-related revenues (39%); and other sources (12%) (percentage amounts add up to more than 100% due to rounding).

Activision Blizzard’s Business Segments

The company conducts its business through the following three segments and provides a breakdown of 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 subscriptions and 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.

Revenue for the Activision segment was $1.2 billion in Q4 FY 2021, down 30.2% compared to the year-ago quarter. The segment accounted for nearly 52% of companywide revenue. Operating income fell 20.8% YOY to $618 million, comprising about 53% of the total for the quarter.

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 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 for the Blizzard segment fell 27.0% in Q4 FY 2021 compared to the year-ago quarter. At $387 million, the segment accounted for more than 17% of the company's total revenue. Operating income rose 0.6% YOY to $161 million, comprising about 14% of the total for the quarter.

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 for the King segment was $684 million in Q4 FY 2021, up 18.5% compared to the year-ago quarter. The segment accounted for nearly 31% of companywide revenue. Operating income rose 59.1% YOY to $385 million, comprising about 33% of the total for the quarter.

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.

Activision Blizzard’s Recent Developments

On March 4, 2022 Activision Blizzard's President and Chief Operating Officer (COO) Daniel Alegre shared a memo with the company's employees concerning the company's response to Russia's recent invasion of Ukraine. The memo stated that the company would be suspending new sales of its games and in-game sales within Russia until the conflict is over.

On Jan. 18, 2022, Activision Blizzard issued a press release in which it stated that technology giant Microsoft had announced plans to acquire Activision Blizzard for $68.7 billion. The transaction is expected to close in FY 2023.