Activision Blizzard (ATVI)

Breakage Revenues

        World of Warcraft boxed product sales, and subscription revenues are recognized upon activation of the game. For certain products, activation has not occurred, which led us to analyze historical activation patterns over an extended period of time, to determine when the likelihood of activation ever occurring becomes remote. We recognize revenues from un-activated subscriptions, prepaid subscription cards, as

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Table of Contents

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

3. Summary of significant accounting policies (Continued)

well as prepaid subscription sales, when the likelihood of future activation occurring is remote (defined as "breakage revenues"). In 2008, we recognized breakage revenues for the first time since the initial launch of World of Warcraft. For the year ended December 31, 2008, we recorded $6 million of breakage revenues from the sale of packaged software in product sales, and $16 million of prepaid and subscription breakage revenues in subscription, licensing and other revenues in the accompanying Consolidated Statements of Operations.

Breakage Revenues

        World of Warcraft boxed product sales, and subscription revenues are recognized upon
activation of the game. For certain products, activation has not occurred, which led us to analyze historical activation patterns over an extended period of time, to determine when the likelihood of
activation ever occurring becomes remote. We recognize revenues from un-activated subscriptions, prepaid subscription cards, as

F-19

HREF="#bg18301a_main_toc">Table of Contents

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

3. Summary of significant accounting policies (Continued)

well
as prepaid subscription sales, when the likelihood of future activation occurring is remote (defined as "breakage revenues"). In 2008, we recognized breakage revenues for the first time since the
initial launch of World of Warcraft. For the year ended December 31, 2008, we recorded $6 million of breakage revenues from the sale of
packaged software in product sales, and $16 million of prepaid and subscription breakage revenues in subscription, licensing and other revenues in the accompanying Consolidated Statements of
Operations.