Operating Segments and Geographic Regions

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

Operating Segments and Geographic Regions

8. Operating Segments and Geographic Regions

We have three reportable segments—Activision, Blizzard, and King. 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 (including liability awards accounted for under ASC 718); amortization of intangible assets as a result of purchase price accounting; fees and other expenses (including legal fees, expenses, and accruals) related to acquisitions, associated integration activities, and financings; certain restructuring and related costs; certain partnership wind down and related costs; and certain 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 organizational 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 reportable segment net revenues and operating income are presented below (amounts in millions):

	Three Months Ended June 30, 2023
	Activision		Blizzard		King		Total
Segment Revenues
Net revenues from external customers	$	574	$	1,049	$	747	$	2,370
Intersegment net revenues (1)	—		9		—		9
Segment net revenues	$	574	$	1,058	$	747	$	2,379
Segment operating income	$	167	$	409	$	266	$	842
	Three Months Ended June 30, 2022
	Activision		Blizzard		King		Total
Segment Revenues
Net revenues from external customers	$	490	$	390	$	684	$	1,564
Intersegment net revenues (1)	—		11		—		11
Segment net revenues	$	490	$	401	$	684	$	1,575
Segment operating income	$	92	$	94	$	271	$	457

	Six Months Ended June 30, 2023
	Activision		Blizzard		King		Total
Segment Revenues
Net revenues from external customers	$	1,154	$	1,484	$	1,486	$	4,124
Intersegment net revenues (1)	—		17		—		17
Segment net revenues	$	1,154	$	1,501	$	1,486	$	4,141
Segment operating income	$	346	$	466	$	507	$	1,319
	Six Months Ended June 30, 2022
	Activision		Blizzard		King		Total
Segment Revenues
Net revenues from external customers	$	943	$	655	$	1,366	$	2,964
Intersegment net revenues (1)	—		20		—		20
Segment net revenues	$	943	$	675	$	1,366	$	2,984
Segment operating income	$	151	$	148	$	514	$	813

(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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Reconciliation to consolidated net revenues:
Segment net revenues	$	2,379	$	1,575	$	4,141	$	2,984
Revenues from non-reportable segments (1)	91		73		192		155
Net effect from recognition (deferral) of deferred net revenues (2)	(254)		7		274		293
Elimination of intersegment revenues (3)	(9)		(11)		(17)		(20)
Consolidated net revenues	$	2,207	$	1,644	$	4,590	$	3,412
Reconciliation to consolidated income before income tax expense:
Segment operating income	$	842	$	457	$	1,319	$	813
Operating income (loss) from non-reportable segments (1)	24		(5)		30		14
Net effect from recognition (deferral) of deferred net revenues and related cost of revenues (2)	(162)		1		308		236
Share-based compensation expense (4)	(102)		(100)		(226)		(199)
Amortization of intangible assets (5)	—		(2)		(4)		(4)
Restructuring and related costs (6)	—		3		—		5
Partnership wind down and related costs (7)	2		—		(2)		—
Merger and acquisition-related fees and other expenses (8)	(21)		(16)		(42)		(48)
Consolidated operating income	583		338		1,383		817
Interest expense from debt	27		27		54		54
Other (income) expense, net	(168)		(10)		(290)		(23)
Consolidated income before income tax expense	$	724	$	321	$	1,619	$	786

(1)Includes other income and expenses outside of our reportable segments, including our Distribution business and unallocated corporate income and expenses.

(2)Reflects the net effect from recognition (deferral) of deferred net revenues, along with related cost of revenues, on certain of our online-enabled products.

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

(4)Reflects expenses related to share-based compensation.

(5)Reflects amortization of intangible assets from purchase price accounting.

(6)Reflects restructuring initiatives.

(7)Reflects expenses related to the wind down of our partnership with NetEase, Inc. in Mainland China in regards to licenses covering the publication of several Blizzard titles which expired in January 2023.

(8)Reflects fees and other expenses related to our proposed transaction with Microsoft, which primarily consist of legal and advisory fees.

Net revenues by distribution channel, including a reconciliation to each of our reportable segment’s net revenues, were as follows (amounts in millions):

	Three Months Ended June 30, 2023
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by distribution channel:
Digital online channels (1)	$	764	$	510	$	747	$	—	$	(9)	$	2,012
Retail channels	75		6		—		—		—		81
Other (2)	5		11		—		98		—		114
Total consolidated net revenues	$	844	$	527	$	747	$	98	$	(9)	$	2,207
Change in deferred revenues:
Digital online channels (1)	$	(208)	$	490	$	—	$	—	$	—	$	282
Retail channels	(62)		41		—		—		—		(21)
Other (2)	—		—		—		(7)		—		(7)
Total change in deferred revenues	$	(270)	$	531	$	—	$	(7)	$	—	$	254
Segment net revenues:
Digital online channels (1)	$	556	$	1,000	$	747	$	—	$	(9)	$	2,294
Retail channels	13		47		—		—		—		60
Other (2)	5		11		—		91		—		107
Total segment net revenues	$	574	$	1,058	$	747	$	91	$	(9)	$	2,461

	Three Months Ended June 30, 2022
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by distribution channel:
Digital online channels (1)	$	527	$	273	$	685	$	—	$	(11)	$	1,474
Retail channels	62		3		—		—		—		65
Other (2)	11		20		—		74		—		105
Total consolidated net revenues	$	600	$	296	$	685	$	74	$	(11)	$	1,644
Change in deferred revenues:
Digital online channels (1)	$	(59)	$	104	$	(1)	$	—	$	—	$	44
Retail channels	(51)		1		—		—		—		(50)
Other (2)	—		—		—		(1)		—		(1)
Total change in deferred revenues	$	(110)	$	105	$	(1)	$	(1)	$	—	$	(7)
Segment net revenues:
Digital online channels (1)	$	468	$	377	$	684	$	—	$	(11)	$	1,518
Retail channels	11		4		—		—		—		15
Other (2)	11		20		—		73		—		104
Total segment net revenues	$	490	$	401	$	684	$	73	$	(11)	$	1,637

	Six Months Ended June 30, 2023
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by distribution channel:
Digital online channels (1)	$	1,666	$	1,034	$	1,485	$	—	$	(17)	$	4,168
Retail channels	177		8		—		—		—		185
Other (2)	11		15		—		211		—		237
Total consolidated net revenues	$	1,854	$	1,057	$	1,485	$	211	$	(17)	$	4,590
Change in deferred revenues:
Digital online channels (1)	$	(570)	$	404	$	1	$	—	$	—	$	(165)
Retail channels	(130)		40		—		—		—		(90)
Other (2)	—		—		—		(19)		—		(19)
Total change in deferred revenues	$	(700)	$	444	$	1	$	(19)	$	—	$	(274)
Segment net revenues:
Digital online channels (1)	$	1,096	$	1,438	$	1,486	$	—	$	(17)	$	4,003
Retail channels	47		48		—		—		—		95
Other (2)	11		15		—		192		—		218
Total segment net revenues	$	1,154	$	1,501	$	1,486	$	192	$	(17)	$	4,316

	Six Months Ended June 30, 2022
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by distribution channel:
Digital online channels (1)	$	1,142	$	574	$	1,367	$	—	$	(20)	$	3,063
Retail channels	146		5		—		—		—		151
Other (2)	22		22		—		154		—		198
Total consolidated net revenues	$	1,310	$	601	$	1,367	$	154	$	(20)	$	3,412
Change in deferred revenues:
Digital online channels (1)	$	(250)	$	73	$	(1)	$	—	$	—	$	(178)
Retail channels	(117)		2		—		—		—		(115)
Other (2)	—		(1)		—		1		—		—
Total change in deferred revenues	$	(367)	$	74	$	(1)	$	1	$	—	$	(293)
Segment net revenues:
Digital online channels (1)	$	892	$	647	$	1,366	$	—	$	(20)	$	2,885
Retail channels	29		7		—		—		—		36
Other (2)	22		21		—		155		—		198
Total segment net revenues	$	943	$	675	$	1,366	$	155	$	(20)	$	3,119

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

(2)Net revenues from “Other” primarily include revenues from our Distribution business, the Overwatch League, and the Call of Duty League.

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

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, were as follows (amounts in millions):

	Three Months Ended June 30, 2023
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (2)		Total
Net revenues by geographic region:
Americas	$	545	$	268	$	469	$	1	$	(5)	$	1,278
EMEA (1)	215		159		192		97		(3)		660
Asia Pacific	84		100		86		—		(1)		269
Total consolidated net revenues	$	844	$	527	$	747	$	98	$	(9)	$	2,207
Change in deferred revenues:
Americas	$	(174)	$	247	$	(1)	$	—	$	—	$	72
EMEA (1)	(80)		153		1		(7)		—		67
Asia Pacific	(16)		131		—		—		—		115
Total change in deferred revenues	$	(270)	$	531	$	—	$	(7)	$	—	$	254
Segment net revenues:
Americas	$	371	$	515	$	468	$	1	$	(5)	$	1,350
EMEA (1)	135		312		193		90		(3)		727
Asia Pacific	68		231		86		—		(1)		384
Total segment net revenues	$	574	$	1,058	$	747	$	91	$	(9)	$	2,461

	Three Months Ended June 30, 2022
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (2)		Total
Net revenues by geographic region:
Americas	$	396	$	147	$	446	$	—	$	(7)	$	982
EMEA (1)	147		89		163		74		(3)		470
Asia Pacific	57		60		76		—		(1)		192
Total consolidated net revenues	$	600	$	296	$	685	$	74	$	(11)	$	1,644
Change in deferred revenues:
Americas	$	(61)	$	52	$	(1)	$	—	$	—	$	(10)
EMEA (1)	(44)		25		(1)		(1)		—		(21)
Asia Pacific	(5)		28		1		—		—		24
Total change in deferred revenues	$	(110)	$	105	$	(1)	$	(1)	$	—	$	(7)
Segment net revenues:
Americas	$	335	$	199	$	445	$	—	$	(7)	$	972
EMEA (1)	103		114		162		73		(3)		449
Asia Pacific	52		88		77		—		(1)		216
Total segment net revenues	$	490	$	401	$	684	$	73	$	(11)	$	1,637

	Six Months Ended June 30, 2023
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (2)		Total
Net revenues by geographic region:
Americas	$	1,197	$	525	$	942	$	3	$	(11)	$	2,656
EMEA (1)	471		311		374		208		(5)		1,359
Asia Pacific	186		221		169		—		(1)		575
Total consolidated net revenues	$	1,854	$	1,057	$	1,485	$	211	$	(17)	$	4,590
Change in deferred revenues:
Americas	$	(453)	$	203	$	—	$	(1)	$	—	$	(251)
EMEA (1)	(205)		126		—		(18)		—		(97)
Asia Pacific	(42)		115		1		—		—		74
Total change in deferred revenues	$	(700)	$	444	$	1	$	(19)	$	—	$	(274)
Segment net revenues:
Americas	$	744	$	728	$	942	$	2	$	(11)	$	2,405
EMEA (1)	266		437		374		190		(5)		1,262
Asia Pacific	144		336		170		—		(1)		649
Total segment net revenues	$	1,154	$	1,501	$	1,486	$	192	$	(17)	$	4,316

	Six Months Ended June 30, 2022
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (2)		Total
Net revenues by geographic region:
Americas	$	856	$	273	$	883	$	—	$	(13)	$	1,999
EMEA (1)	331		183		333		154		(5)		996
Asia Pacific	123		145		151		—		(2)		417
Total consolidated net revenues	$	1,310	$	601	$	1,367	$	154	$	(20)	$	3,412
Change in deferred revenues:
Americas	$	(226)	$	40	$	—	$	—	$	—	$	(186)
EMEA (1)	(124)		13		(1)		1		—		(111)
Asia Pacific	(17)		21		—		—		—		4
Total change in deferred revenues	$	(367)	$	74	$	(1)	$	1	$	—	$	(293)
Segment net revenues:
Americas	$	630	$	313	$	883	$	—	$	(13)	$	1,813
EMEA (1)	207		196		332		155		(5)		885
Asia Pacific	106		166		151		—		(2)		421
Total segment net revenues	$	943	$	675	$	1,366	$	155	$	(20)	$	3,119

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

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

The Company’s net revenues in the U.S. were 50% and 52% of consolidated net revenues for the three months ended June 30, 2023 and 2022, respectively. The Company’s net revenues in the U.K. were 10% of consolidated net revenues for both the three months ended June 30, 2023 and 2022. No other country’s net revenues exceeded 10% of consolidated net revenues for the three months ended June 30, 2023 or 2022.

The Company’s net revenues in the U.S. were 51% of consolidated net revenues for both the six months ended June 30, 2023 and 2022. The Company’s net revenues in the U.K. were 10% of consolidated net revenues for both the six months ended June 30, 2023 and 2022. No other country’s net revenues exceeded 10% of consolidated net revenues for the six months ended June 30, 2023 or 2022.

Net revenues by platform, including a reconciliation to each of our reportable segment’s net revenues, were as follows (amounts in millions):

	Three Months Ended June 30, 2023
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by platform:
Console	$	492	$	64	$	—	$	—	$	—	$	556
PC	204		381		18		—		(9)		594
Mobile and ancillary (1)	143		71		729		—		—		943
Other (2)	5		11		—		98		—		114
Total consolidated net revenues	$	844	$	527	$	747	$	98	$	(9)	$	2,207
Change in deferred revenues:
Console	$	(174)	$	200	$	—	$	—	$	—	$	26
PC	(90)		336		—		—		—		246
Mobile and ancillary (1)	(6)		(5)		—		—		—		(11)
Other (2)	—		—		—		(7)		—		(7)
Total change in deferred revenues	$	(270)	$	531	$	—	$	(7)	$	—	$	254
Segment net revenues:
Console	$	318	$	264	$	—	$	—	$	—	$	582
PC	114		717		18		—		(9)		840
Mobile and ancillary (1)	137		66		729		—		—		932
Other (2)	5		11		—		91		—		107
Total segment net revenues	$	574	$	1,058	$	747	$	91	$	(9)	$	2,461

	Three Months Ended June 30, 2022
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by platform:
Console	$	357	$	19	$	—	$	—	$	—	$	376
PC	97		229		17		—		(11)		332
Mobile and ancillary (1)	135		28		668		—		—		831
Other (2)	11		20		—		74		—		105
Total consolidated net revenues	$	600	$	296	$	685	$	74	$	(11)	$	1,644
Change in deferred revenues:
Console	$	(100)	$	3	$	—	$	—	$	—	$	(97)
PC	(15)		40		—		—		—		25
Mobile and ancillary (1)	5		62		(1)		—		—		66
Other (2)	—		—		—		(1)		—		(1)
Total change in deferred revenues	$	(110)	$	105	$	(1)	$	(1)	$	—	$	(7)
Segment net revenues:
Console	$	257	$	22	$	—	$	—	$	—	$	279
PC	82		269		17		—		(11)		357
Mobile and ancillary (1)	140		90		667		—		—		897
Other (2)	11		20		—		73		—		104
Total segment net revenues	$	490	$	401	$	684	$	73	$	(11)	$	1,637

	Six Months Ended June 30, 2023
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by platform:
Console	$	1,089	$	105	$	—	$	—	$	—	$	1,194
PC	473		767		36		—		(17)		1,259
Mobile and ancillary (1)	281		170		1,449		—		—		1,900
Other (2)	11		15		—		211		—		237
Total consolidated net revenues	$	1,854	$	1,057	$	1,485	$	211	$	(17)	$	4,590
Change in deferred revenues:
Console	$	(452)	$	197	$	—	$	—	$	—	$	(255)
PC	(241)		284		—		—		—		43
Mobile and ancillary (1)	(7)		(37)		1		—		—		(43)
Other (2)	—		—		—		(19)		—		(19)
Total change in deferred revenues	$	(700)	$	444	$	1	$	(19)	$	—	$	(274)
Segment net revenues:
Console	$	637	$	302	$	—	$	—	$	—	$	939
PC	232		1,051		36		—		(17)		1,302
Mobile and ancillary (1)	274		133		1,450		—		—		1,857
Other (2)	11		15		—		192		—		218
Total segment net revenues	$	1,154	$	1,501	$	1,486	$	192	$	(17)	$	4,316

	Six Months Ended June 30, 2022
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by platform:
Console	$	816	$	43	$	—	$	—	$	—	$	859
PC	221		481		34		—		(20)		716
Mobile and ancillary (1)	251		55		1,333		—		—		1,639
Other (2)	22		22		—		154		—		198
Total consolidated net revenues	$	1,310	$	601	$	1,367	$	154	$	(20)	$	3,412
Change in deferred revenues:
Console	$	(315)	$	(2)	$	—	$	—	$	—	$	(317)
PC	(77)		22		—		—		—		(55)
Mobile and ancillary (1)	25		55		(1)		—		—		79
Other (2)	—		(1)		—		1		—		—
Total change in deferred revenues	$	(367)	$	74	$	(1)	$	1	$	—	$	(293)
Segment net revenues:
Console	$	501	$	41	$	—	$	—	$	—	$	542
PC	144		503		34		—		(20)		661
Mobile and ancillary (1)	276		110		1,332		—		—		1,718
Other (2)	22		21		—		155		—		198
Total segment net revenues	$	943	$	675	$	1,366	$	155	$	(20)	$	3,119

(1)Net revenues from “Mobile and ancillary” primarily include revenues from mobile devices.

(2)Net revenues from “Other” primarily include revenues from our Distribution business, the Overwatch League, and the Call of Duty League.

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

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

	At June 30, 2023		At December 31, 2022
Long-lived assets* by geographic region:
Americas	$	277	$	279
EMEA	98		103
Asia Pacific	20		21
Total long-lived assets by geographic region	$	395	$	403

*    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 and lease right-of-use assets. All other long-term assets are not allocated by location.