Operating Segments and Geographic Region (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of 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

Information on reportable segment net revenues and operating income for the three months ended September 30, 2018 and 2017, are presented below (amounts in millions):



	Three Months Ended September 30, 2018
	Activision		Blizzard		King		Total
Segment Net Revenues
Net revenues from external customers	$	397	$	627	$	506	$	1,530
Intersegment net revenues (1)	—		8		—		8
Segment net revenues	$	397	$	635	$	506	$	1,538

Segment operating income	$	112	$	189	$	184	$	485

	Three Months Ended September 30, 2017
	Activision		Blizzard		King		Total
Segment Net Revenues
Net revenues from external customers	$	759	$	531	$	528	$	1,818
Intersegment net revenues (1)	—		—		—		—
Segment net revenues	$	759	$	531	$	528	$	1,818

Segment operating income	$	261	$	168	$	208	$	637

Information on reportable segment net revenues and operating income for the nine months ended September 30, 2018 and 2017, are presented below (amounts in millions):



	Nine Months Ended September 30, 2018
	Activision		Blizzard		King		Total
Segment Net Revenues
Net revenues from external customers	$	1,047	$	1,592	$	1,542	$	4,181
Intersegment net revenues (1)	—		14		—		14
Segment net revenues	$	1,047	$	1,606	$	1,542	$	4,195

Segment operating income	$	288	$	444	$	543	$	1,275

	Nine Months Ended September 30, 2017
	Activision		Blizzard		King		Total
Segment Net Revenues
Net revenues from external customers	$	1,291	$	1,539	$	1,482	$	4,312
Intersegment net revenues (1)	—		—		—		—
Segment net revenues	$	1,291	$	1,539	$	1,482	$	4,312

Segment operating income	$	371	$	552	$	538	$	1,461


(1)	Intersegment revenues reflect licensing and service fees charged between segments.

Reconciliations of total segment net revenues and total segment operating income to consolidated net revenues and consolidated income before income tax expense are presented in the table below (amounts in millions):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Reconciliation to consolidated net revenues:
Segment net revenues	$	1,538		$	1,818		$	4,195		$	4,312
Revenues from other segments (1)	128			84			246			204
Net effect from recognition (deferral) of deferred net revenues	(146		)	(284		)	692			458
Elimination of intersegment revenues (2)	(8		)	—			(14		)	—
Consolidated net revenues	$	1,512		$	1,618		$	5,119		$	4,974

Reconciliation to consolidated income before income tax expense:
Segment operating income	$	485		$	637		$	1,275		$	1,461
Operating (loss) income from other segments (1)	7			(12		)	(4		)	(15		)
Net effect from recognition (deferral) of deferred net revenues and related cost of revenues	(89		)	(132		)	468			370
Share-based compensation expense	(55		)	(47		)	(166		)	(120		)
Amortization of intangible assets	(83		)	(187		)	(279		)	(571		)
Fees and other expenses related to the acquisition of King (3)	—			(3		)	—			(12		)
Restructuring costs (4)	—			—			—			(11		)
Other non-cash charges (5)	—			1			—			(14		)
Consolidated operating income	265			257			1,294			1,088
Interest and other expense (income), net	13			37			67			109
Loss on extinguishment of debt	40			—			40			12
Consolidated income before income tax expense	$	212		$	220		$	1,187		$	967


(1)	Includes other income and expenses from operating segments managed outside the reportable segments, including our Studios and Distribution businesses. Also includes unallocated corporate income and expenses.


(2)	Intersegment revenues reflect licensing and service fees charged between segments.


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


(4)	Reflects restructuring charges, primarily severance costs.


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

Schedule of net revenues by distribution channels

Due to requirements from our adoption of the new revenue accounting standard as discussed in Note 2, net revenues by distribution channel for the three and nine months ended September 30, 2018, include a reconciliation to our segment revenues as disclosed for each of our reportable segments above. Net revenues by distribution channel were as follows (amounts in millions):



	Three Months Ended September 30, 2018
	Activision			Blizzard			King		Non-reportable segments		Elimination of intersegment revenues (3)			Total
Net revenues by distribution channel:
Digital online channels (1)	$	299		$	480		$	505	$	—	$	(8	)	$	1,276
Retail channels	53			23			—		—		—			76
Other (2)	—			35			—		125		—			160
Total consolidated net revenues	$	352		$	538		$	505	$	125	$	(8	)	$	1,512

Change in deferred revenues:
Digital online channels (1)	$	57		$	101		$	1	$	—	$	—		$	159
Retail channels	(12		)	(2		)	—		—		—			(14		)
Other (2)	—			(2		)	—		3		—			1
Total change in deferred revenues	$	45		$	97		$	1	$	3	$	—		$	146

Segment net revenues:
Digital online channels (1)	$	356		$	581		$	506	$	—	$	(8	)	$	1,435
Retail channels	41			21			—		—		—			62
Other (2)	—			33			—		128		—			161
Total segment net revenues	$	397		$	635		$	506	$	128	$	(8	)	$	1,658



	Nine Months Ended September 30, 2018
	Activision			Blizzard			King			Non-reportable segments		Elimination of intersegment revenues (3)			Total
Net revenues by distribution channel:
Digital online channels (1)	$	1,110		$	1,355		$	1,547		$	—	$	(14	)	$	3,998
Retail channels	707			57			—			—		—			764
Other (2)	—			124			—			233		—			357
Total consolidated net revenues	$	1,817		$	1,536		$	1,547		$	233	$	(14	)	$	5,119

Change in deferred revenues:
Digital online channels (1)	$	(234	)	$	79		$	(5	)	$	—	$	—		$	(160	)
Retail channels	(536		)	(10		)	—			—		—			(546		)
Other (2)	—			1			—			13		—			14
Total change in deferred revenues	$	(770	)	$	70		$	(5	)	$	13	$	—		$	(692	)

Segment net revenues:
Digital online channels (1)	$	876		$	1,434		$	1,542		$	—	$	(14	)	$	3,838
Retail channels	171			47			—			—		—			218
Other (2)	—			125			—			246		—			371
Total segment net revenues	$	1,047		$	1,606		$	1,542		$	246	$	(14	)	$	4,427

Net revenues by distribution channel for the three and nine months ended September 30, 2017, were as follows (amounts in millions):



	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Net revenues by distribution channel:
Digital online channels (1)	$	1,354	$	4,048
Retail channels	168		698
Other (2)	96		228
Total consolidated net revenues	$	1,618	$	4,974


(1)	Net revenues from “Digital online channels” include revenues from digitally-distributed subscriptions, downloadable content, microtransactions, and products, as well as licensing royalties.


(2)	Net revenues from “Other” include revenues from our Studios and Distribution businesses, as well as revenues from MLG and the Overwatch League.


(3)	Intersegment revenues reflect licensing and service fees charged between segments.

Schedule of net revenues by geographic region

Geographic information presented below is based on the location of the paying customer. Net revenues by geographic region, including a reconciliation to each of our reportable segment’s net revenues, for the three and nine months ended September 30, 2018, were as follows (amounts in millions):



	Three Months Ended September 30, 2018
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (2)			Total
Net revenues by geographic region:
Americas	$	214	$	242	$	309	$	13	$	(4	)	$	774
EMEA (1)	109		172		143		112		(2		)	534
Asia Pacific	29		124		53		—		(2		)	204
Total consolidated net revenues	$	352	$	538	$	505	$	125	$	(8	)	$	1,512

Change in deferred revenues:
Americas	$	33	$	43	$	—	$	—	$	—		$	76
EMEA (1)	8		48		1		3		—			60
Asia Pacific	4		6		—		—		—			10
Total change in deferred revenues	$	45	$	97	$	1	$	3	$	—		$	146

Segment net revenues:
Americas	$	247	$	285	$	309	$	13	$	(4	)	$	850
EMEA (1)	117		220		144		115		(2		)	594
Asia Pacific	33		130		53		—		(2		)	214
Total segment net revenues	$	397	$	635	$	506	$	128	$	(8	)	$	1,658



	Nine Months Ended September 30, 2018
	Activision			Blizzard			King			Non-reportable segments		Elimination of intersegment revenues (2)			Total
Net revenues by geographic region:
Americas	$	1,074		$	716		$	945		$	13	$	(8	)	$	2,740
EMEA (1)	613			497			448			220		(4		)	1,774
Asia Pacific	130			323			154			—		(2		)	605
Total consolidated net revenues	$	1,817		$	1,536		$	1,547		$	233	$	(14	)	$	5,119

Change in deferred revenues:
Americas	$	(439	)	$	43		$	(3	)	$	—	$	—		$	(399	)
EMEA (1)	(287		)	34			(2		)	13		—			(242		)
Asia Pacific	(44		)	(7		)	—			—		—			(51		)
Total change in deferred revenues	$	(770	)	$	70		$	(5	)	$	13	$	—		$	(692	)

Segment net revenues:
Americas	$	635		$	759		$	942		$	13	$	(8	)	$	2,341
EMEA (1)	326			531			446			233		(4		)	1,532
Asia Pacific	86			316			154			—		(2		)	554
Total segment net revenues	$	1,047		$	1,606		$	1,542		$	246	$	(14	)	$	4,427

Net revenues by geographic region for the three and nine months ended September 30, 2017, were as follows (amounts in millions):



	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Net revenues by geographic region:
Americas	$	798	$	2,586
EMEA (1)	593		1,684
Asia Pacific	227		704
Total consolidated net revenues	$	1,618	$	4,974


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


(2)	Intersegment revenues reflect licensing and service fees charged between segments.

Schedule of net revenues by platform

Net revenues by platform, including a reconciliation to each of our reportable segment’s net revenues, for the three and nine months ended September 30, 2018, were as follows (amounts in millions):



	Three Months Ended September 30, 2018
	Activision		Blizzard			King		Non-reportable segments		Elimination of intersegment revenues (3)			Total
Net revenues by platform:
Console	$	307	$	40		$	—	$	—	$	—		$	347
PC	40		414			36		—		(8		)	482
Mobile and ancillary (1)	5		49			469		—		—			523
Other (2)	—		35			—		125		—			160
Total consolidated net revenues	$	352	$	538		$	505	$	125	$	(8	)	$	1,512

Change in deferred revenues:
Console	$	29	$	(9	)	$	—	$	—	$	—		$	20
PC	16		101			—		—		—			117
Mobile and ancillary (1)	—		7			1		—		—			8
Other (2)	—		(2		)	—		3		—			1
Total change in deferred revenues	$	45	$	97		$	1	$	3	$	—		$	146

Segment net revenues:
Console	$	336	$	31		$	—	$	—	$	—		$	367
PC	56		515			36		—		(8		)	599
Mobile and ancillary (1)	5		56			470		—		—			531
Other (2)	—		33			—		128		—			161
Total segment net revenues	$	397	$	635		$	506	$	128	$	(8	)	$	1,658



	Nine Months Ended September 30, 2018
	Activision			Blizzard			King			Non-reportable segments		Elimination of intersegment revenues (3)			Total
Net revenues by platform:
Console	$	1,597		$	133		$	—		$	—	$	—		$	1,730
PC	208			1,140			118			—		(14		)	1,452
Mobile and ancillary (1)	12			139			1,429			—		—			1,580
Other (2)	—			124			—			233		—			357
Total consolidated net revenues	$	1,817		$	1,536		$	1,547		$	233	$	(14	)	$	5,119

Change in deferred revenues:
Console	$	(695	)	$	(25	)	$	—		$	—	$	—		$	(720	)
PC	(76		)	96			—			—		—			20
Mobile and ancillary (1)	1			(2		)	(5		)	—		—			(6		)
Other (2)	—			1			—			13		—			14
Total change in deferred revenues	$	(770	)	$	70		$	(5	)	$	13	$	—		$	(692	)

Segment net revenues:
Console	$	902		$	108		$	—		$	—	$	—		$	1,010
PC	132			1,236			118			—		(14		)	1,472
Mobile and ancillary (1)	13			137			1,424			—		—			1,574
Other (2)	—			125			—			246		—			371
Total segment net revenues	$	1,047		$	1,606		$	1,542		$	246	$	(14	)	$	4,427

Net revenues by platform for the three and nine months ended September 30, 2017, were as follows (amounts in millions):



	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
Net revenues by platform:
Console	$	527	$	1,710
PC	461		1,534
Mobile and ancillary (1)	534		1,502
Other (2)	96		228
Total consolidated net revenues	$	1,618	$	4,974


(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 Studios and Distribution businesses, as well as revenues from MLG and the Overwatch League.


(3)	Intersegment revenues reflect licensing and service fees charged between segments.

Long-lived assets by geographic region

Long-lived assets by geographic region were as follows (amounts in millions):



	At September 30, 2018		At December 31, 2017
Long-lived assets (1) by geographic region:
Americas	$	202	$	197
EMEA	61		75
Asia Pacific	18		22
Total long-lived assets by geographic region	$	281	$	294


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