Activision Blizzard (ATVI)

Activision and Vivendi Games rely on independent third parties to develop some of their respective software products.

        Activision and Vivendi Games rely on independent third-party software developers to develop some of their software products. Since they depend on these developers, in the aggregate, the companies remain subject to the following risks:

•

continuing strong demand for developers' resources, combined with the recognition they receive in connection with their work, may cause developers who worked for either of Activision or Vivendi Games in the past either to work for a competitor in the future or to renegotiate agreements on terms less favorable for the companies;



•

limited financial resources and business expertise and inability to retain skilled personnel may force developers out of business prior to completing products or require Activision or Vivendi Games to fund additional costs; and



•

the companies' competitors may acquire the businesses of key developers or sign them to exclusive development arrangements. In either case, the companies would not be able to continue to engage such developers' services for their products, except for those that they are contractually obligated to complete.

        Increased competition for skilled third-party software developers also has compelled Activision and Vivendi Games to agree to make significant advance payments on royalties to game developers. If the products subject to these arrangements do not generate sufficient revenues to recover these royalty advances, Activision or Vivendi Games, as applicable, would have to write-off unrecovered portions of these payments, which could cause material harm to such company's business and financial results. Typically, Activision and Vivendi Games pay developers a royalty based on a percentage of net revenues, less agreed upon deductions, but from time to time, the companies have agreed to pay developers fixed per unit product royalties after royalty advances are fully recouped. To the extent that sales prices of products on which the companies have agreed to pay a fixed per unit royalty are marked down, profitability could be adversely affected.

Activision and Vivendi Games rely on independent third parties to develop some of their respective software products.

        Activision and Vivendi Games rely on independent third-party software developers to develop some of their software products. Since they depend on these
developers, in the aggregate, the companies remain subject to the following risks:

•

continuing
strong demand for developers' resources, combined with the recognition they receive in connection with their work, may cause developers who worked for either of
Activision or Vivendi Games in the past either to work for a competitor in the future or to renegotiate agreements on terms less favorable for the companies;




•

limited
financial resources and business expertise and inability to retain skilled personnel may force developers out of business prior to completing products or require
Activision or Vivendi Games to fund additional costs; and




•

the
companies' competitors may acquire the businesses of key developers or sign them to exclusive development arrangements. In either case, the companies would not be able
to continue to engage such developers' services for their products, except for those that they are contractually obligated to complete.

        Increased
competition for skilled third-party software developers also has compelled Activision and Vivendi Games to agree to make significant advance payments on royalties to game
developers. If the products subject to these arrangements do not generate sufficient revenues to recover these royalty advances, Activision or Vivendi Games, as applicable, would have to
write-off unrecovered portions of these payments, which could cause material harm to such company's business and financial results. Typically, Activision and Vivendi Games pay developers a
royalty based on a percentage of net revenues, less agreed upon deductions, but from time to time, the companies have agreed to pay developers fixed per unit product royalties after royalty advances
are fully recouped. To the extent that sales prices of products on which the companies have agreed to pay a fixed per unit royalty are marked down, profitability could be adversely affected.

Activision and Vivendi Games rely on independent third parties to develop some of their respective software products.