Activision-Blizzard Loses $233m in Oct-Dec, Profits $418m in 2010

by Jacob Mazel, posted on 09 February 2011 / 6,077 Views

For the quarter ending December 2010, mega-publisher Activision-Blizzard has announced it made $1.427b in revenue, with a loss of $233m on a GAAP basis. As of the September quarter, Activision had forecast $1.26b in revenue during October to December 2010 by GAAP measures with a loss of one center per share ($-12m). Thus revenue figures beat expectations but losses were higher than expected. In the previous December quarter, the company earned even more money - $1.557b - but losses were $286m on a GAAP basis. Over the entirety of 2010, Activision-Blizzard made $4.447b in revenue, and attained profits of $418m. Both figures are up from the entirety of 2009, when Activision-Blizzard made only $4.279b in revenue with profits of $113m. In other words profit margins increased greatly from 2009 to 2010, going from 2.6% of all revenue generated to 9.4% in 2010 - a nearly four fold increase. Revenues from digital channels grew 20% to nearly $1.5b for the year according to Activision, roughly 30% of total revenue.

After digging through Activision's data, it does appear that profit from Call of Duty is deferred to later periods, which explains the loss for the quarter even with nearly 20m units of Call of Duty shipped ($500m or more in profit). Revenue splits shown below do include the totals from Call of Duty however, as Activision didn't sell 18m games on X360 and PS3 without Call of Duty for the quarter.

Activision lists a number of highlights for 2010. These include:

- Activision Blizzard was the #1 publisher overall in North America and Europe for the calendar year according to NPD, Chart-Track and GFK. It was also the number one publisher in these regions for digital.

- Activision Blizzard was the #1 publisher in North America on the Xbox® 360, PlayStation® 3 and PC collectively for the calendar year according to NPD.

- Blizzard Entertainment's World of Warcraft: Cataclysm, which was launched on December 7, 2010, sold through more than 3.3 million copies worldwide during its first 24 hours of release, making it the fastest-selling PC game of all time.  It continued to sell through more than 4.7 million copies in its first month.

- As of December 31, 2010, more than 12 million gamers worldwide are subscribed to play Blizzard Entertainment's World of Warcraft.

- For the December quarter, in North America and Europe, Call of Duty: Black Ops was the #1 best-selling console title in dollars ever during a single quarter and the Call of Duty franchise was the #1 franchise overall.

- In November 2010, Call of Duty: Black Ops became the first video game ever to surpass $650 million in retail sales in its first five days of release. To date, the game has achieved more than $1 billion in retail sales worldwide according to USA and European trackers.

- As of January 31, 2011, total unique gamers playing Activision Publishing's Call of Duty: Black Ops increased by more than 49% over the number of total unique gamers that played Call of Duty®: Modern Warfare for the first three months after each game's release.

- On February 1, 2011, Activision Publishing released Call of Duty: Black Ops First Strike, the first add-on pack for Call of Duty: Black Ops, on Xbox LIVE®.   The map pack set new Xbox LIVE records with more than 1.4 million downloads in the first 24 hours, an increase of more than 25% over last year's Call of Duty: Modern Warfare 2 Stimulus Package.The map pack also will be available on the PlayStation® 3 computer entertainment system on March 3, 2011 and on the PC later in the quarter.

Activision also notes it plans to focus more on highly profitable enterprises and will effectively abandon less profitable ones. The company notes:

"Activision Blizzard will continue to invest its capital and resources in the significant opportunities afforded by online gaming worldwide and will reduce its exposure to low-margin and low-potential businesses.  In 2011, the company will allocate the majority of its resources and focus toward opportunities which we expect will afford us the greatest competitive advantages and the greatest potential for best-in-class quality, high-margin digital growth, and long-term success.  These opportunities include Blizzard Entertainment's games currently in development, robust investment in forthcoming Call of Duty titles, the development of a best-in-class digital community surrounding the Call of Duty franchise, a new property from Bungie and an innovative new universe with broad appeal that will be revealed at Toy Fair later this week and will bring the world of toys, video games and the Internet together in an unprecedented way.  These investments should better position Activision Blizzard for long-term growth and enable it to continue expanding its position as the largest digital publisher. 

At the same time, due to continued declines in the music genre, the company will disband Activision Publishing's Guitar Hero business unit and discontinue development on its Guitar Hero game for 2011.  The company also will stop development on True Crime: Hong Kong™.  These decisions are based on the desire to focus on the greatest opportunities that the company currently has to create the world's best interactive entertainment experiences."

For January to December 2011, Activision-Blizzard expects to make $3.95b in revenue on a GAAP basis, with profit of 56 cents per share, or about $672m as the company currently has 1.2 billion shares. January to March 2011 revenues are forecast to reach $1.28b, with profit at $336m (28 cents per share).

During 2011, Activision-Blizzard expects the X360, Wii, and PS3 to each grow by 9m units in the USA and Europe, from their 2005-2010 bases of 43m, 64m, and 31m respectively. Handhelds are forecast to grow from 130m combined to 147m combined in the USA and Europe. The company expects retail X360 and PS3 sales to grow again in 2011. Digital revenues are forecast to increase 20% in 2011 as well. Online games in Asia are forecast to grow 15%.

For the quarter ending December 2010 as well as the entirety of 2010, Activision-Blizzard also offered a number of geographic and platform splits for how it earned its revenue. Highlights are listed below. All figures are on a GAAP basis.

- During 2010, Activision-Blizzard revenues were $1.44b from digital content, and $2.629b from retail content. In the October to December 2010 quarter, Activision-Blizzard revenues were $820m from retail, and $414m from digital content. Distribution figures (publishing games made by other comapnies for a fee) were $193m in the December 2010 quarter $378m for the entirety of 2010.

- In the December 2009 quarter, Activision-Blizzard made $1.0b from retail - so revenue dropped off 18% by reaching only $820m in the December 2010 quarter. Digital revenue grew from $336m to $414m though, offsetting some of the revenue decline. However, distribution also fell, dropping to $193m in the December 2010 quarter from $221m during the same period of 2009.

- On a year over basis, digital content grew from $1.234b in 2009 to $1.440b in 2010. Retail grew far slower for the company, jumping modestly from $2.622b in 2009 to $2.629b in 2010. Distribution in fell to $378m from $423m in 2009.

- Console revenue at Activision fell over 20% from the December 2009 quarter ($865m) to the December 2010 quarter ($687m). Wii fell to $141m in Q4 2010 from $260m in Q4 2009, X360 fell to $281m in Q4 2010 from $324m in Q4 2009, and PS2 collapsed (-89%) from $53m in Q4 2009 to $6m in Q4 2010. PS3 increased slightly to $259m in Q4 2010 from $228m in Q4 2009.

- With conservative average returns per game sold at about $20 for Wii and PS2 and $30 for X360 and PS3, Activision shipped about 7.05m Wii games, 9.35m X360 games, 8.65m PS3 games, and 200,000 PS2 games during the quarter. That is 25.25m console games - down from 34.05m games in Q4 2009.

- Portable software also decreased substantially - DS and PSP revenue fell to $83m for the quarter from $117m over the same period in 2009. PSP dropped by over half, from $16m to $6m, a fall of about 840,000 to 315,000 games shipped for the quarter. DS dropped from $101m to $77m, which is more like a drop from 6m units to 4.5m units.

- Fortunately for Activision-Blizzard, MMORPG revenue grew 10%, from $309m to $340m and PC revenue tripled from $45m to $124m. With portables and consoles declining, holiday revenue from Nintendo, Sony and Microsoft machines fell to 53% of total revenue in Oct-Dec 2010, down from 63% of total revenue in the same period of 2009. Remaining figures are from distribution.

- Over the entirety of 2010, Activision-Blizzard made 28% of its revenue from MMORPGs - $1.23b. In 2009 MMORPGs contributed $1.248b in revenue, 29% of the total earned. PC revenue doubled to $325m from $164m in 2009, jumping to 7% of total revenue from 4% in 2009.

- X360 revenue grew to $1.033b in 2010, 23% of Activision overall, despite the down holiday, and up from $857m and 19% of total revenue in 2009. PS3 revenue grew to $854m in 2010, up from $587m in 2009, making it 19% of total revenue rather than 14% of total revenue. PS2 revenue fell to 1% of total revenue, $35m, in 2010, down from 4% of total revenue - $174m - in 2009. Wii revenue fell to $408m in 2010, 9% of total revenue, from $584m and 14% of total revenue in 2009.

- PSP revenue fell to $16m in 2010 from $48m in 2009 - dropping to less than 0.3% of total revenue at Activision from about 1% in 2009. DS revenue fell to $168m in 2010, down from $196m in 2009, a drop from 5% to 4% of total revenue. Distribution revenue fell to 9% of 2010 revenue from 10% of 2009 revenue.

- Overall, PC, Distribution and MMORPG accounted for 44% of Activision revenue in 2010 up from 43% in 2009. Software for Wii and DS fell to 13% of total Activision revenue in 2010 from 19% in 2009. Software for PS3, PS2, and PSP rose to 20% of total revenue in 2010 from 19% in 2009 on PS3 growth. Activision software for X360 grew to 23% in 2010 from 19% in 2009.

- Geographically, 51% of Activision-Blizzard revenue came from North America in Oct-Dec 2010, 42% from Europe, and 7% from the Asia-Pacific region. That compares to a 49-46-5 split in the previous December quarter. For the year, revenues were split 54% North America, 39% Europe, 7% Asia-Pacific, compared to the 52-42-6 split from 2009.

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Richmyster6907 (on 11 February 2011)

Will they hurry up and go bankrupt.

weezy (on 11 February 2011)

@think-man why?

skullking (on 11 February 2011)

My condolences to all the talented people in the 'Hero' and True Crime development and publishing offices who lost there jobs due to this outcome. I hope you all find better and more exciting jobs because of it. ;)

think-man (on 11 February 2011)

I hope Activision will crash and burn.

Dragonred385 (on 10 February 2011)

Some things about wow worth mentioning: 1) Wow doesn't have 12 million playing it. If you look at the numbers it adds up to about 6.7 million. Still alot but not 12 million worth. Depending on where you look, the total number of people who bought Wrath is anywhere from 3.5-5 million copies, meaning that half the people playing would be playing vanilla wow or BC, which is highly unlikely. 2.) The 4.7 million cata units sold are pretty much the bulk of the amount it will sell. Wrath sold around 2.8 in its release and has only sold a third of that in the last three years. It will sell more units but it'll sell extremely slow and won't amount to that much.

viperlegendkiller (on 10 February 2011)

was anybody projectile vomiting as much as me reading this

Ail (on 10 February 2011)

The reason the stockmarket is not happy with those results isn't what they did in 2010. They are announcing lower revenue in 2011 ( but more profit) and investors are never happy about that. It's not really a surprise, it's going to be tough for CoD to keep selling 20 millions of units every year and on top of that they had 2 big Blizzard releases in 2010 ( Starcraft 2 and Cataclysm) and have none planned in 2011..

Ail (on 10 February 2011)

They made a little over 600 million$ of profit but they are not going to count most of that into the books before Q1, Q2 and Q3 2011. Roughly the way it works is Activision makes around that amount of profit in Q4 and the others 3 quarters are about flat with no profit and a short loss, for accounting purposes instead they spread the profit over all 4 quarters by defering some revenue...

bannedagain (on 09 February 2011)

so did they make a real profit or not. I don't care for gap, non gap. DID THEY PROFIT.

gossomer (on 09 February 2011)

Please report non gap revenue and earnings... GAP is not the right measure for financial performance.

Ail (on 09 February 2011)

Can't move the profit if you don't move the revenue. Besides that is the reason of the 1billion$+ difference between GAAP and non GAAP revenue.... There's a lot of tricks you can do that can affect profit but for revenue there aren't that many, the only thing you can do is recognize it when you get it or defer it to a later date...

TheSource (on 09 February 2011)

Ail, you're correct - the 86m share figure I had was the number of shares bought back by the company in recent months. When I divide earnings by "per share" values listed in cents I get the same number you gave. For COD, the profit is moved to later periods, but not the revenue.

Chevinator123 (on 09 February 2011)

i dont get it

jlauro (on 09 February 2011)

Just as it was a mistake to make so many guitar hero games a year, it's a mistake to completely abandon the genre. One game a year or two would do well..

heruamon (on 09 February 2011)

LOL...Blizzard can only keep this sinking up for so long...I wonder hos bonuses are handled for the employees of Blizzard, as compared to other parts of Activision?

Salnax (on 09 February 2011)

Music games games died a painful death. People attacked Guitar Hero, but the series was Activision's biggest on the Nintendo systems, which, believe it or not, are fairly popular. With the series out of the picture, all Activision has left is WOW and COD, two games that sell a lot, but only at a high cost.

LordTheNightKnight (on 09 February 2011)

@Ali, that would make sense.

Ail (on 09 February 2011)

Source, you made a major mistake in your post.... The number of shares outstanding for ATVI is 1.2 billions, not 86 millions, which makes all your profits computation off by a factor of 12.... Expected profit for 2011 is 672 million$, not 48 million$....................................

Kynes (on 09 February 2011)

Ail just explained it much better than I would have done.

yum123 (on 09 February 2011)

so can some one please explain what gaap is cause thats just wrong that they lost making 2 billion of 2 games

Kynes (on 09 February 2011)

GAAP. Accounting tricks. I would love to see non-GAAP numbers.

Ail (on 09 February 2011)

You know it woudn't be a bad idea for someone on vgchartz team to actually take the time to explain the reality so each time ATVI publishes Q4 results we don't have hundreds of clueless posts.. The reality is simple, they do the same every frigging Q4. They incured the marketing cost of Black Ops and Cataclysm in Q4 but defered over 1 billion$ of revenue to later quarter. This is the same reason why every year they don't release shit in Q1 and Q2 but make a botload of profit those quarters because that is when they really include the sales of Cataclysm and Black Ops in the books......

Ail (on 09 February 2011)

Sometime I wish people commenting on this stuff took the time to understand what GAAP and non GAAP is before making random comments.......

disolitude (on 09 February 2011)

The era of a bloated massive publisher business model is going the way of a dodo bird.

pezus (on 09 February 2011)

"At the same time, due to continued declines in the music genre, the company will disband Activision Publishing's Guitar Hero business unit and discontinue development on its Guitar Hero game for 2011. The company also will stop development on True Crime: Hong Kong™. " And so the true Call of Duty milking begins!

Rainbird (on 09 February 2011)

How can the lose money in a quarter like that?

dsage01 (on 09 February 2011)

but this doesn't make sense lost 233 million with the biggest world of warcraft and the biggest call of duty ever!

SamuelRSmith (on 09 February 2011)

Terrible, terrible results. Missed expectations by 13 cents a share. 'Street isn't going to like this.

Wagram (on 09 February 2011)