Operating Segments and Geographic Region

9 Months Ended

Sep. 30, 2013

Operating Segments and Geographic Region

Operating Segments and Geographic Region

9.       Operating segments and geographic region

Our operating segments are consistent with our internal organizational structure, the manner in which our operations are reviewed and managed by our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), the manner in which we assess operating performance and allocate resources, and the availability of separate financial information. Currently, we conduct our business through three operating segments: Activision, Blizzard and Distribution (see Note 1 of the Notes to Condensed Consolidated Financial Statements). We do not aggregate operating segments.

The CODM reviews segment performance exclusive of the impact of the change in deferred revenues and related cost of sales with respect to certain of our online-enabled games, stock-based compensation expense, amortization of intangible assets as a result of purchase price accounting, and expenses related to the Purchase Transaction and related debt financings. The CODM does not review any information regarding total assets on an operating segment basis, and accordingly, no disclosure is made with respect thereto. Information on the operating segments and reconciliations of total net revenues and total segment operating income to consolidated net revenues from external customers and consolidated income before income tax expense for the three and nine months ended September 30, 2013 and 2012 are presented below (amounts in millions):

			Three months ended September 30,
			2013		2012		2013		2012
							Income (loss) from operations
			Net revenues				before income tax expense
	Activision		$	319	$	283	$	41	$	(14)
	Blizzard			282		414		88		168
	Distribution			56		54		(1)		---
		Operating segments total		657		751		128		154
Reconciliation to consolidated net revenues /
consolidated income before income tax
expense:
	Net effect from deferral of net revenues and
		related cost of sales		34		90		32		110
	Stock-based compensation expense			---		---		(25)		(34)
	Amortization of intangible assets			---		---		(3)		(3)
	Fees and other expenses related to the Purchase
		Transaction and related debt financings		---		---		(62)		---
Consolidated net revenues / operating income			$	691	$	841		70		227
	Interest and other investment income (expense), net							(4)		1
Consolidated income before income tax expense							$	66	$	228
			Nine months ended September 30,
			2013		2012		2013		2012
							Income (loss) from operations
			Net revenues				before income tax expense
	Activision		$	1,090	$	928	$	214	$	(84)
	Blizzard			837		1,299		282		629
	Distribution			143		166		(1)		---
		Operating segments total		2,070		2,393		495		545
Reconciliation to consolidated net revenues /
consolidated income before income tax
expense:
	Net effect from deferral of net revenues and
		related cost of sales		995		695		738		514
	Stock-based compensation expense			---		---		(76)		(85)
	Amortization of intangible assets			---		---		(8)		(7)
	Fees and other expenses related to the Purchase
		Transaction and related debt financings		---		---		(62)		---
Consolidated net revenues / operating income			$	3,065	$	3,088	$	1,087	$	967
	Interest and other investment income (expense), net							(1)		4
Consolidated income before income tax expense							$	1,086	$	971

Geographic information for the three and nine months ended September 30, 2013 and 2012 is based on the location of the selling entity. Net revenues from external customers by geographic region were as follows (amounts in millions):

		Three months ended September 30,				Nine months ended September 30,
		2013		2012		2013		2012
Net revenues by geographic region:
	North America	$	344	$	403	$	1,643	$	1,567
	Europe		290		333		1,180		1,220
	Asia Pacific		57		105		242		301
Total consolidated net revenues		$	691	$	841	$	3,065	$	3,088

Net revenues by platform were as follows (amounts in millions):

		Three months ended September 30,				Nine months ended September 30,
		2013		2012		2013		2012
Net revenues by platform:
	Console	$	296	$	227	$	1,634	$	1,430
	Online subscriptions1		205		226		714		701
	Other2		55		62		300		320
	PC		79		272		274		471
Total platform net revenues			635		787		2,922		2,922
Distribution			56		54		143		166
Total consolidated net revenues		$	691	$	841	$	3,065	$	3,088

(1)       Revenues from online subscriptions consist of revenues from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, value-added services, and revenues from Call of Duty Elite memberships.

(2)Revenues from other include revenues from handheld and mobile devices, as well as non-platform specific game related revenues such as standalone sales of toys and accessories products from the Skylanders franchise and other physical merchandise and accessories.

Long-lived assets by geographic region at September 30, 2013 and December 31, 2012 were as follows (amounts in millions):

		At September 30, 2013		At December 31, 2012
Long-lived assets* by geographic region:
	North America	$	101	$	90
	Europe		31		40
	Asia Pacific		7		11
Total long-lived assets by geographic region		$	139	$	141

*The only long-lived assets that we classify by region are our long-term tangible fixed assets, which only include property, plant and equipment assets; all other long-term assets are not allocated by location.

We did not have any single external customer that accounted for 10% or more of consolidated net revenues for the three and nine months ended September 30, 2013 and 2012.