Operating Segments and Geographic Region

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Operating Segments and Geographic Region

Operating Segments and Geographic Region

Currently, we have three reportable segments. Our operating segments are consistent with the manner in which our operations are reviewed and managed by our Chief Executive Officer, who is our chief operating decision maker (“CODM”). The CODM reviews segment performance exclusive of: the impact of the change in deferred revenues and related cost of revenues with respect to certain of our online-enabled games; share-based compensation expense; amortization of intangible assets as a result of purchase price accounting; and fees and other expenses (including legal fees, expenses, and accruals) related to acquisitions, associated integration activities, and financings; certain restructuring costs; and other non-cash charges. The CODM does not review any information regarding total assets on an operating segment basis, and accordingly, no disclosure is made with respect thereto.

Our operating segments are also consistent with our internal organization structure, the way we assess operating performance and allocate resources, and the availability of separate financial information. We do not aggregate operating segments.

Information on the reportable segments and reconciliations of total segment net revenues and total segment operating income to consolidated net revenues from external customers and consolidated income before income tax expense for the three months ended March 31, 2017 and 2016 are presented below (amounts in millions):

	For the Three Months Ended March 31,
	2017		2016		2017			2016
	Net revenues				Operating income and income before income tax expense
Activision	$	215	$	360	$	24		$	99
Blizzard	441		294		166			86
King	474		207		166			67
Reportable segments total	1,130		861		356			252
Reconciliation to consolidated net revenues / consolidated income before income tax expense:
Other segments (1)	66		47		(5		)	—
Net effect from recognition (deferral) of deferred net revenues and related cost of revenues	530		547		396			369
Share-based compensation expense	—		—		(33		)	(44		)
Amortization of intangible assets	—		—		(190		)	(82		)
Fees and other expenses related to the King Acquisition (2)	—		—		(4		)	(34		)
Restructuring costs (3)	—		—		(11		)	—
Other non-cash charges (4)	—		—		(16		)	—
Consolidated net revenues / operating income	$	1,726	$	1,455	$	493		$	461
Interest and other expense (income), net					40			52
Consolidated income before income tax expense					$	453		$	409

(1) Other segments include other income and expenses from operating segments managed outside the reportable segments, including our MLG, Studios, and Distribution businesses. Other segments also include unallocated corporate income and expenses.

(2) Reflects fees and other expenses, such as legal, banking and professional services fees, primarily related to the King Acquisition and associated integration activities, inclusive of related debt financings.

(3) Reflects restructuring charges incurred, primarily severance costs.

(4) Reflects a non-cash accounting charge to reclassify certain cumulative translation losses into earnings due to the substantial liquidation of certain of our foreign entities.

Geographic information presented below for the three months ended March 31, 2017 and 2016, is based on the location of the paying customer. Net revenues from external customers by geographic region were as follows (amounts in millions):

	For the Three Months Ended March 31,
	2017		2016
Net revenues by geographic region:
Americas	$	929	$	753
EMEA (1)	554		521
Asia Pacific	243		181
Total consolidated net revenues	$	1,726	$	1,455

(1) EMEA consists of the Europe, Middle East, and Africa geographic regions.

The Company's net revenues in the U.S. were 47% and 49% of consolidated net revenues for the three months ended March 31, 2017 and 2016, respectively. The Company's net revenues in the U.K. were 10% and 11% of consolidated net revenues for the three months ended March 31, 2017 and 2016, respectively. No other country's net revenues exceeded 10% of consolidated net revenues for the three months ended March 31, 2017 or 2016.

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

	For the Three Months Ended March 31,
	2017		2016
Net revenues by platform:
Console	$	615	$	765
PC	566		400
Mobile and ancillary (1)	475		243
Other (2)	70		47
Total consolidated net revenues	$	1,726	$	1,455

(1) Net revenues from mobile and ancillary include revenues from mobile devices, as well as non-platform specific game-related revenues, such as standalone sales of toys and accessories from our Skylanders franchise and other physical merchandise and accessories.

(2) Net revenues from Other include revenues from our MLG, Studios, and Distribution businesses.

Long-lived assets by geographic region at March 31, 2017 and December 31, 2016, were as follows (amounts in millions):

	At March 31, 2017		At December 31, 2016
Long-lived assets (1) by geographic region:
Americas	$	147	$	154
EMEA	80		87
Asia Pacific	18		17
Total long-lived assets by geographic region	$	245	$	258

(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.