This excerpt taken from the ATVI 10-Q filed May 8, 2009.
Managements Overview of Business Trends
In the U.S. and Europe, for the first quarter of 2009, Activision Blizzard had two of the top-five best-selling titles across all platforms: Guitar Hero World Tour and Call of Duty: World at War; additionally, Call of Duty and Guitar Hero remained two of the top-five best-selling franchises in the U.S. and Europe according to The NPD Group, Charttrack and Gfk.
Other business highlights for the first quarter of 2009 are as follows:
· Guitar Hero World Tour was the #1 best-selling third-party title in the U.S. across all platforms in dollars, according to The NPD Group.
· In the U.S. and Europe, Guitar Hero World Tour was the #1 best-selling third-party title in dollars for the Wii and the only third-party game to rank as a top-five best seller for the platform, according to The NPD Group, Charttrack and Gfk.
· World of Warcraft: Wrath of the Lich King remained the #1 PC game in dollars in the U.S. for the quarter, according to The NPD Group.
· Activision Blizzard had three of the top-10 best-selling PC titles in dollars in the U.S., according to The NPD Group.
· For the quarter, European revenues for the Guitar Hero franchise grew 84% year over year, according to Charttrack and Gfk.
Activision 2009 Scheduled Releases
During 2009, Activision expects to continue to build its success in releasing games based on proven franchises such as Call of Duty, Guitar Hero, Transformers, X-Men, Marvel, Tony Hawk, Wolfenstein, and Ice Age. Games released during the quarter ended March 31, 2009 included Guitar Hero: Metallica for the Xbox 360, PS3, and Wii in North America; Monsters vs. Aliens worldwide on multiple platforms; and the first map pack for Call of Duty: World at War. The more notable games, among other titles, scheduled for release during the remainder of 2009 include: X-Men Origins: Wolverine; Guitar Hero: Smash Hits; Transformers: Revenge of the Fallen; Ice Age: Dawn of the Dinosaurs; Prototype, a new third-person action game; a new Wolfenstein game; the second map pack for Call of Duty: World at War; Marvel Ultimate Alliance 2; our new wholly owned first-person action game called Singularity; a new game based on the Tony Hawk franchise; a new anticipated racing game titled Blur developed by Bizarre Creations; DJ Hero; Guitar Hero 5; Band Hero; Call of Duty: Modern Warfare 2; and a new game based on the breakout hit toy and popular action animated TV series, Bakugan.
We continue to monitor the adverse economic conditions which may have unfavorable impacts on our businesses, such as deterioration of consumer demand, pressure on prices of our products, credit quality of our receivables, and foreign currency exchange rates.
These excerpts taken from the ATVI 10-K filed Feb 27, 2009.
Management's Overview of Business Trends
Activision's 2009 scheduled releasesWe expect to launch games based on proven franchises such as Call of Duty, Guitar Hero, Transformers, Wolverine, Marvel, Tony Hawk, Wolfenstein, and Ice Age. Games scheduled for release during the quarter ended March 31, 2009 include Guitar Hero: Metallica
for the Xbox 360, PS3, Wii in North America; Monsters vs. Aliens worldwide on multiple platforms; approximately 50 downloadable songs for Guitar Hero; and the first map pack for Call of Duty: World at War. The more notable games, among other titles, scheduled for release during 2009 include: Marvel Ultimate Alliance 2; Wolverine, based on XMen: Origins Wolverine, which is one of the most popular Marvel characters; Transformers: Revenge of the Fallen; Prototype, an all new and third-person open-world action game; Ice Age 3; DJ Hero, a new line extension of the Guitar Hero franchise; Call of Duty: Modern Warfare 2; a new racing game developed by Bizarre Creations; a new game based on the Tony Hawk franchise; an all new Wolfenstein; and our new wholly owned first-person action game called Singularity.
Console hardware platformsIn 2005, Microsoft released the Xbox 360 and, in 2006, Sony and Nintendo introduced their respective hardware platforms, the PlayStation 3 and Wii. Activision's plan is to continue to build a significant presence on the PS3, Wii, and Xbox 360 by expanding the number of titles released on these platforms and hand-held platforms while continuing to market to the PS2 platform as long as it is economically attractive to do so given its large installed base.
Business combination and investmentsWe have engaged in, evaluated, and expect to continue to engage in and evaluate, a wide array of potential strategic transactions, including acquisitions of companies, businesses, intellectual properties, and other assets. On July 9, 2008, we consummated our Business Combination with Vivendi Games. Upon the closing of the Business Combination, Activision, Inc. was renamed Activision Blizzard, Inc. As of December 31, 2008, Vivendi owned approximately 55% of our common stock. Activision Blizzard now conducts the combined business operations of Activision, Inc. and Vivendi Games including Blizzard Entertainment, Inc. See also Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
To further strengthen our development resources and underscore our commitment as leader in the music-based genre, on September 11, 2008, we acquired Freestyle Games, Ltd., a premier United Kingdom-based video game developer specializing in the music-based genre. Additionally, on November 10, 2008, we acquired Budcat Creations, LLC, an Iowa City, Iowa based video game developer. Budcat Creations is an award-winning development studio with expertise on the Wii and NDS.
International operationsActivision focuses on the growth of the European market through developing localized contents for its Guitar Hero franchises and other franchises or titles in terms of contents and packaging. For the Asian market, Blizzard distributes World of Warcraft through direct operations and licenses. Blizzard has licensing arrangements with The9 to distribute World of Warcraft in China and with SoftWorld in Taiwan. Internet game room players and prepaid cards are also very popular in Asia, particularly in South Korea. Recently, Blizzard has licensed its StarCraft II, Warcraft III: Reign of Chaos, Warcraft III: The Frozen Throne, and Battle.net platform to a company affiliated with NetEase.com, Inc. Blizzard and NetEase have also established a joint venture, which will provide support for the operation of the licensed games and Battle.net platform in China. For the year ended December 31, 2008, Blizzard released a Russian language version of World of Warcraft in Russia and expanded its Spanish version into Latin America.
Integration and reorganizationFollowing the Business Combination on July 9, 2008, we have restructured the Vivendi Games businesses to capture cost-synergies and to streamline the combined Activision Blizzard organization. For the first six months of 2009, we expect to continue to incur restructuring expenses mainly relating to severance payments of remaining interim employees who are currently assisting us to exit our non-core operations and under-utilized facilities. We anticipate substantially exiting or winding down our non-core operations and substantially completing our organizational restructuring activities as a result of the Business Combination by June 2009.
For the six months ending June 30, 2009, we anticipate incurring between $20 million and $40 million of additional before tax restructuring charges, and after tax cash restructuring charges
between $15 million and $25 million relating to the Business Combination. Overall, including charges incurred through December 31, 2008, we expect to incur before tax restructuring charges between $113 million and $133 million by June 30, 2009, with an after tax cash impact between $55 million and $70 million. The after tax charges are expected to consist primarily of employee-related severance cash costs (approximately $47 million), facility exit cash costs (approximately $18 million), and cash contract terminations costs (approximately $5 million). Separately, through December 31, 2008, these restructuring charges were partially offset by cash proceeds of approximately $28 million from asset disposals and after tax cash benefits related to the streamlining of the Vivendi Games title portfolio. For the next six months, we anticipate between $2 million to $7 million of further cash proceeds to partially offset future restructuring cash charges. We do not expect these anticipated restructuring expenses to materially effect future earnings and cash flow of Activision Blizzard.
Console online gamesActivision has published games with online functionality that constitutes a more-than-inconsequential separate service deliverable in addition to the product, and in which our performance obligations extend beyond the sale of the game. Vendor-specific objective evidence of fair value does not exist for these online features, as we do not separately charge for this component of these titles. As a result, we recognize all of the revenue from the sale of these titles ratably over an estimated service period. In addition, we defer the costs of sales of these titles to match revenue.
MMORPG online gamesBlizzard published the first expansion pack World of Warcarft: The Burning Crusade, in January 2007 and the second expansion pack, World of Warcraft: Wrath of the Lich King in November 2008. We expect these expansions will extend Blizzard's subscription revenues by retaining existing customers and attracting new customers.
Impact of deferred revenues and related cost of salesFor the year ended December 31, 2008, the net impact of deferred revenues and related cost of sales decreased consolidated net revenues and total cost of sales by $713 million and $217 million, respectively. We anticipate, for the year ending December 31, 2009, the net impact of deferred revenues and related cost of sales will decrease consolidated net revenues and total cost of sales by approximately $500 million and $220 million, respectively. As our major releases are planned in the December quarter of 2009, we expect that a majority of the revenues and related costs of sales will be deferred in the December quarter of 2009, and recognized in 2010. However, the actual amount of revenues and cost of sales deferred will vary significantly depending upon the timing of the release of these titles and the sales volume of such products.
Other revenuesActivision is continuing the development of online capabilities for its games. Activision plans to continue to exploit other revenue sources, including downloadable content and in-game advertising for its console games.
Economic conditionsWe continue to monitor the recent adverse changes in economic conditions which may have unfavorable impacts on our businesses, such as deteriorating consumer demand, pricing pressure on our products, credit quality of our receivables, and foreign currency exchange rates.
Management's Overview of Business Trends
Activision's 2009 scheduled releasesWe expect to launch games based on proven franchises such as Call of Duty, Guitar