Activision Blizzard (ATVI)

Blizzard Entertainment Segment ("Blizzard")—Business Overview

Strategy

        Maintain and Build upon Our Leadership Position in the MMORPG Category and PC Online categories. Blizzard plans to maintain and build upon our leadership position in the MMORPG genre by regularly providing new content and game features to further solidify the loyalty of our subscriber base, as well as to expand the global game footprint to new markets.

        We believe that the PC online market will remain a fast growing category throughout the world. The large and still growing PC installed base in all regions and the continuing development of broadband connectivity facilitates online games and community experiences while creating access to new potential customers. Given the success of World of Warcraft in Asia, we expect to be well positioned to capture the growing consumer demand in this region. Blizzard is among the few companies with video game franchises created and developed in the United States ("U.S.") that have gained and retained success in Asia. Warcraft and StarCraft are strong brands in Asia. Titles in those series have been among the most played games in the region for many years and support a thriving professional gaming industry, particularly in South Korea. Also, as World of Warcraft is a server-based game, only playable online, Blizzard is one of the few companies that can target markets that have been dominated by piracy and be able to monetize former illegitimate players as well as expand in markets that have not been penetrated by consoles, but offer a large PC installed base.

Products

        Blizzard is a leading company in the subscription-based MMORPG category. World of Warcraft was initially launched in November 2004 in North America, Australia, and New Zealand; and was subsequently launched in South Korea, Europe, China, Singapore, Taiwan, Hong Kong, and Macau in 2005; Malaysia in 2006; and Thailand in 2007. In December 2008, World of Warcraft had more than 11.5 million paying subscribers worldwide. World of Warcraft is available in various different languages based on the regions in which it is played and has earned awards and praise from publications around the world. Blizzard launched an expansion pack to World of Warcraft, World of Warcraft: The Burning Crusade, in January 2007 in North America, Europe, Australia, New Zealand, Singapore, Malaysia, and Thailand. World of Warcraft: The Burning Crusade was launched in South Korea in February 2007; Taiwan, Hong Kong, and Macau in April 2007; and China in September 2007. Blizzard launched the second World of Warcraft expansion pack, World of Warcraft: Wrath of the Lich King in November 2008 in all territories except China where we anticipate launching in 2009. Revenues associated with the World of Warcraft franchises accounted for 97%, 97%, and 95% of Blizzard's consolidated net revenues for the years ended December 31, 2008, 2007, and 2006, respectively.

        Additionally, in the PC online category, we have announced the development of sequels for StarCraft, a real-time strategy game, and Diablo, an action role-playing game.

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Table of Contents

Product Development and Support

        As a development studio, creator and publisher of World of Warcraft, Diablo, StarCraft, and Warcraft franchises, Blizzard focuses on creating well-designed, high quality games. All product development is done internally by a strong core group of talented designers, producers, programmers, artists, and sound engineers. To maintain its current subscribers and attract new subscribers, Blizzard continues to develop new patches to upgrade World of Warcraft. In addition to its headquarters in Irvine, California, Blizzard maintains offices in or around Austin, Texas; Paris, France; Cork, Ireland; Seoul, South Korea; Shanghai, China; and Taipei, Taiwan, to provide 24/7 game support to World of Warcraft players in their native language, enhance online community management, and tailor marketing initiatives to specific regions.

Marketing, Sales, and Distribution

        The Blizzard business involves the development, marketing, sales and support of traditional games and online subscription-based games in the MMORPG category. Blizzard distributes its product and generates revenues worldwide through various means: subscription revenues (which consist of fees from individuals playing World of Warcraft and other ancillary online revenues); retail sales of physical "boxed" product; electronic download sales of PC products; and licensing revenues from third-party companies who distribute World of Warcraft in China and Taiwan. In addition, Blizzard operates a free online game service, Battle.net, which attracts millions of active players making it one of the largest online-game related services in the world. Battle.net is a service that allows millions of players to connect and play Blizzard games and strengthens brand loyalty among current Blizzard gamers.

Blizzard Entertainment Segment ("Blizzard")—Business Overview

Strategy

        Maintain and Build upon Our Leadership Position in the MMORPG Category and PC Online
categories. Blizzard plans to maintain and build upon our leadership position in the MMORPG genre by regularly providing new content and game features to further solidify the
loyalty of our subscriber base, as well as to expand the global game footprint to new markets.

        We
believe that the PC online market will remain a fast growing category throughout the world. The large and still growing PC installed base in all regions and the continuing development
of broadband connectivity facilitates online games and community experiences while creating access to new potential customers. Given the success of World of
Warcraft in Asia, we expect to be well positioned to capture the growing consumer demand in this region. Blizzard is among the few companies with video game franchises created
and developed in the United States ("U.S.") that have gained and retained success in Asia. Warcraft and StarCraft are strong brands in Asia. Titles in those series have been among the most played
games in the region for many years and support a thriving professional gaming industry, particularly in South Korea. Also, as World of Warcraft is a
server-based game, only playable online, Blizzard is one of the few companies that can target markets that have been dominated by piracy and be able to monetize former illegitimate players as well as
expand in markets that have not been penetrated by consoles, but offer a large PC installed base.

Products

        Blizzard is a leading company in the subscription-based MMORPG category. World of
Warcraft was initially launched in November 2004 in North America, Australia, and New Zealand; and was subsequently launched in South Korea, Europe, China, Singapore, Taiwan,
Hong Kong, and Macau in 2005; Malaysia in 2006; and Thailand in 2007. In December 2008, World of Warcraft had more than 11.5 million paying
subscribers worldwide. World of Warcraft is available in various different languages based on the regions in which it is played and has earned awards
and praise from publications around the world. Blizzard launched an expansion pack to World of Warcraft, World of Warcraft: The
Burning Crusade, in January 2007 in North America, Europe, Australia, New Zealand, Singapore, Malaysia, and Thailand. World of Warcraft: The Burning
Crusade was launched in South Korea in February 2007; Taiwan, Hong Kong, and Macau in April 2007; and China in September 2007.
Blizzard launched the second World of Warcraft expansion pack, World of Warcraft: Wrath of the Lich King
in November 2008 in all territories except China where we anticipate launching in 2009. Revenues associated with the World of Warcraft franchises
accounted for 97%, 97%, and 95% of Blizzard's consolidated net revenues for the years ended December 31, 2008, 2007, and 2006, respectively.

        Additionally,
in the PC online category, we have announced the development of sequels for StarCraft, a real-time strategy game, and Diablo, an action role-playing
game.

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HREF="#bg18301a_main_toc">Table of Contents

Product Development and Support

        As a development studio, creator and publisher of World of Warcraft, Diablo, StarCraft,
and Warcraft franchises, Blizzard focuses on creating well-designed, high quality games. All product development is done internally by a strong core group of talented designers, producers,
programmers, artists, and sound engineers. To maintain its current subscribers and attract new subscribers, Blizzard continues to develop new patches to upgrade World of
Warcraft. In addition to its headquarters in Irvine, California, Blizzard maintains offices in or around Austin, Texas; Paris, France; Cork, Ireland; Seoul, South Korea;
Shanghai, China; and Taipei, Taiwan, to provide 24/7 game support to World of Warcraft players in their native language, enhance online community
management, and tailor marketing initiatives to specific regions.

Marketing, Sales, and Distribution

        The Blizzard business involves the development, marketing, sales and support of traditional games and online subscription-based games
in the MMORPG category. Blizzard distributes its product and generates revenues worldwide through various means: subscription revenues (which consist of fees from individuals playing World of Warcraft
and other ancillary online revenues); retail sales of physical "boxed" product; electronic download sales of PC products; and licensing revenues from third-party companies who distribute World of
Warcraft in China and Taiwan. In addition, Blizzard operates a free online game service, Battle.net, which attracts millions of active players making it one of the largest online-game
related services in the world. Battle.net is a service that allows millions of players to connect and play Blizzard games and strengthens brand loyalty among current Blizzard gamers.