Operating Segments and Geographic Region

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Operating Segments and Geographic Region

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 fees and other expenses (including legal fees, costs, expenses and accruals) 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, 2015 and 2014 are presented below (amounts in millions):

	Three Months Ended September 30,
	2015			2014			2015			2014
	Net revenues						Income (loss) from operations before income tax expense (benefit)
Activision	$	591		$	704		$	122		$	95
Blizzard	369			388			128			164
Distribution	80			78			1			1
Operating segments total	1,040			1,170			251			260
Reconciliation to consolidated net revenues / consolidated income (loss) before income tax expense (benefit):
Net effect from deferral of net revenues and related cost of sales	(50		)	(417		)	(26		)	(180		)
Stock-based compensation expense	—			—			(28		)	(22		)
Amortization of intangible assets	—			—			(1		)	(2		)
Fees and other expenses related to the Purchase Transaction and related debt financings	—			—			—			(48		)
Consolidated net revenues / operating income	$	990		$	753		$	196		$	8
Interest and other expense, net							51			51
Consolidated income (loss) before income tax expense (benefit)							$	145		$	(43	)

	Nine Months Ended September 30,
	2015		2014		2015			2014
	Net revenues				Income from operations before income tax expense
Activision	$	1,208	$	1,193	$	244		$	66
Blizzard	1,106		1,189		383			548
Distribution	189		218		—			(1		)
Operating segments total	2,503		2,600		627			613
Reconciliation to consolidated net revenues / consolidated income before income tax expense:
Net effect from deferral of net revenues and related cost of sales	809		233		517			260
Stock-based compensation expense	—		—		(70		)	(76		)
Amortization of intangible assets	—		—		(4		)	(4		)
Fees and other expenses related to the Purchase Transaction and related debt financings	—		—		—			(48		)
Consolidated net revenues / operating income	$	3,312	$	2,833	$	1,070		$	745
Interest and other expense, net					151			152
Consolidated income before income tax expense					$	919		$	593

Geographic information presented below for the three and nine months ended September 30, 2015 and 2014 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,
	2015		2014		2015		2014
Net revenues by geographic region:
North America	$	495	$	350	$	1,750	$	1,384
Europe	367		316		1,219		1,172
Asia Pacific	128		87		343		277
Total consolidated net revenues	$	990	$	753	$	3,312	$	2,833

The Company's net revenues in the U.S. were 46% and 45% of consolidated net revenues for the three months ended September 30, 2015 and 2014, respectively. The Company's net revenues in the U.K. were 13% and 14% of consolidated net revenues for the three months ended September 30, 2015 and 2014, respectively. The Company's net revenues in France were 7% and 19% of consolidated net revenues for the three months ended September 30, 2015 and 2014, respectively. No other country's net revenues exceeded 10% of consolidated net revenues for the three months ended September 30, 2015 and 2014.

The Company's net revenues in the U.S. were 50% and 46% of consolidated net revenues for the nine months ended September 30, 2015 and 2014, respectively. The Company's net revenues in the U.K. were 13% and 14% of consolidated net revenues for the nine months ended September 30, 2015 and 2014, respectively. The Company's net revenues in France were 8% and 16% of consolidated net revenues for the nine months ended September 30, 2015 and 2014, respectively. No other country's net revenues exceeded 10% of consolidated net revenues for the nine months ended September 30, 2015 and 2014.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014
Net revenues by platform:
Console	$	420	$	270	$	1,737	$	1,402
Online1	195		205		687		601
PC	164		165		427		447
Mobile and other2	131		35		272		165
Total Activision Blizzard net revenues	910		675		3,123		2,615
Distribution	80		78		189		218
Total consolidated net revenues	$	990	$	753	$	3,312	$	2,833

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

²  Revenues from mobile and other include revenues from handheld, mobile and tablet 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, 2015 and December 31, 2014 were as follows (amounts in millions):

	At September 30, 2015		At December 31, 2014
Long-lived assets1 by geographic region:
North America	$	153	$	122
Europe	38		29
Asia Pacific	9		6
Total long-lived assets by geographic region	$	200	$	157

¹  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.