How Activision Blizzard Generates Revenue in Today's Gaming Industry

The Activision segment remains the powerhouse behind the majority of Activision Blizzard's revenue and profits.

Activision Blizzard (ATVI) stands as a leading global entertainment powerhouse specializing in the creation and distribution of interactive video games and services. Renowned for iconic franchises like World of Warcraft, Call of Duty, StarCraft, and Bubble Witch, the company was formed in 2008 through the merger of Activision and Vivendi Games. It delivers its expansive game portfolio across multiple platforms including consoles, PCs, and mobile devices. Beyond game development, Activision Blizzard also manages competitive eSports leagues and monetizes through digital advertising.

In early 2022, Microsoft announced plans to acquire Activision Blizzard for a staggering $68.7 billion in cash. As of mid-February 2023, this acquisition awaits regulatory approval amid scrutiny from various global authorities assessing its impact on market competition. The Federal Trade Commission has expressed opposition to the deal.

Activision Blizzard competes vigorously within the interactive entertainment sector, facing rivals not only from gaming giants like Sony and Nintendo but also from broader entertainment fields such as film, television, social media, and music.

Key Insights

• Activision Blizzard excels in developing and publishing interactive entertainment across consoles, PCs, and mobile devices, while also operating prominent eSports leagues.
  
• The company’s operations are segmented into three main divisions: Activision, Blizzard, and King.
• The Activision segment is the primary driver of revenue and profitability.
• In response to geopolitical events, Activision Blizzard has suspended all new game and in-game sales within Russia.
• Microsoft's proposed $68.7 billion acquisition of Activision Blizzard is anticipated to finalize in the 2023 fiscal year, pending regulatory clearance.
  

Financial Overview of Activision Blizzard

On February 6, 2023, Activision Blizzard released its fiscal 2022 financial results, reporting net revenues of $7.53 billion, down from $8.80 billion in 2021. Earnings per diluted share declined to $1.92 from $3.44 the previous year.

A major revenue highlight for 2023 is Call of Duty: Modern Warfare II, launched in October 2022, which achieved the franchise’s highest-ever first-quarter sales.

Revenue is primarily generated through three channels: digital online distribution (82%), retail sales (6%), and other sources (12%). Platform-wise, video game consoles account for 27% of revenue, PCs contribute 23%, mobile and ancillary services make up 39%, with other sources comprising 12% (percentages may slightly exceed 100% due to rounding).

Breakdown of Activision Blizzard’s Business Segments

Activision Blizzard operates through three core segments: Activision Publishing Inc. ("Activision"), Blizzard Entertainment Inc. ("Blizzard"), and King Digital Entertainment ("King"), each contributing distinct revenue and operating income streams.

Activision

The Activision segment focuses on developing and publishing interactive software and entertainment content, offered via both premium and free-to-play models. Revenue streams include full-game sales, in-game purchases, subscription services, and licensing agreements with third parties.

Call of Duty stands as Activision’s flagship franchise, complemented by revenue generated through the Call of Duty League, a global professional eSports competition.

In Q4 FY 2021, Activision reported $1.2 billion in revenue, marking a 30.2% decrease year-over-year, yet it still represented nearly 52% of the company's total revenue. Operating income was $618 million, down 20.8% compared to the previous year, accounting for approximately 53% of the quarterly total.

Blizzard

Blizzard develops and publishes interactive entertainment through premium and free-to-play offerings, generating income via full and in-game sales, subscriptions, and software licensing. It also operates Blizzard Battle.net, its proprietary online gaming platform.

Key Blizzard franchises include World of Warcraft, Hearthstone, Diablo, and Overwatch, with additional revenue from the Overwatch League eSports circuit.

Blizzard’s Q4 FY 2021 revenue dropped 27.0% year-over-year to $387 million, representing over 17% of total company revenue. Operating income slightly increased by 0.6% to $161 million, about 14% of the quarter's total.

King

King specializes in mobile interactive entertainment, primarily through free-to-play games monetized via in-game purchases and advertising. Candy Crush is its most notable franchise.

The King segment posted $684 million in revenue for Q4 FY 2021, an 18.5% increase year-over-year, contributing nearly 31% of total revenue. Operating income surged 59.1% to $385 million, approximately 33% of the quarter’s total.

Additionally, Activision Blizzard earns revenue and operating income from distribution activities categorized under "Other," which is not reported as a separate segment.

Recent Strategic Moves by Activision Blizzard

On March 4, 2022, President and COO Daniel Alegre communicated to employees the company’s decision to halt new game sales and in-game transactions in Russia in response to the ongoing conflict in Ukraine.

Earlier, on January 18, 2022, Activision Blizzard announced Microsoft’s intention to acquire the company for $68.7 billion, with the transaction expected to close within the 2023 fiscal year pending regulatory approvals.

Discover engaging topics and analytical content in Company Profiles as of 22-03-2022. The article titled " How Activision Blizzard Generates Revenue in Today's Gaming Industry " provides new insights and practical guidance in the Company Profiles field. Each topic is meticulously analyzed to deliver actionable information to readers.

The topic " How Activision Blizzard Generates Revenue in Today's Gaming Industry " helps you make smarter decisions within the Company Profiles category. All topics on our website are unique and offer valuable content for our audience.