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Operating Segments and Geographic Regions

12 Months Ended

Dec. 31, 2019

Operating Segments and Geographic Regions

Currently, 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; 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; 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 the reportable segment net revenues and segment operating income are presented below (amounts in millions):



	Year Ended December 31, 2019
	Activision		Blizzard		King		Total
Segment Revenues
Net revenues from external customers	$	2,219	$	1,676	$	2,031	$	5,926
Intersegment net revenues (1)	—		43		—		43
Segment net revenues	$	2,219	$	1,719	$	2,031	$	5,969

Segment operating income	$	850	$	464	$	740	$	2,054

	Year Ended December 31, 2018
	Activision		Blizzard		King		Total
Segment Revenues
Net revenues from external customers	$	2,458	$	2,238	$	2,086	$	6,782
Intersegment net revenues (1)	—		53		—		53
Segment net revenues	$	2,458	$	2,291	$	2,086	$	6,835

Segment operating income	$	1,011	$	685	$	750	$	2,446

	Year Ended December 31, 2017
	Activision		Blizzard		King		Total
Segment Revenues
Net revenues from external customers	$	2,628	$	2,120	$	1,998	$	6,746
Intersegment net revenues (1)	—		19		—		19
Segment net revenues	$	2,628	$	2,139	$	1,998	$	6,765

Segment operating income	$	1,005	$	712	$	700	$	2,417


(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):



	Years Ended December 31,
	2019			2018			2017
Reconciliation to consolidated net revenues:
Segment net revenues	$	5,969		$	6,835		$	6,765
Revenues from non-reportable segments (1)	462			480			410
Net effect from recognition (deferral) of deferred net revenues (2)	101			238			(139		)
Elimination of intersegment revenues (3)	(43		)	(53		)	(19		)
Consolidated net revenues	$	6,489		$	7,500		$	7,017

Reconciliation to consolidated income before income tax expense:
Segment operating income	$	2,054		$	2,446		$	2,417
Operating income (loss) from non-reportable segments (1)	24			31			(19		)
Net effect from recognition (deferral) of deferred net revenues and related cost of revenues (2)	52			100			(71		)
Share-based compensation expense	(166		)	(209		)	(178		)
Amortization of intangible assets	(203		)	(370		)	(757		)
Fees and other expenses related to the acquisition of King (4)	—			—			(15		)
Restructuring costs (5)	(137		)	(10		)	(15		)
Other non-cash charges (6)	—			—			(14		)
Discrete tax-related items (7)	(17		)	—			(39		)
Consolidated operating income	1,607			1,988			1,309
Interest and other expense (income), net	(26		)	71			146
Loss on extinguishment of debt	—			40			12
Consolidated income before income tax expense	$	1,633		$	1,877		$	1,151


(1)	Includes other income and expenses from operating segments managed outside the reportable segments, including our Distribution business. Also includes 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 fees and other expenses, such as legal, banking, and professional services fees, related to the acquisition of King and associated integration activities, including related debt financings.


(5)	Reflects restructuring initiatives, which include severance and other restructuring-related costs.


(6)	Reflects a non-cash accounting charge to reclassify certain cumulative translation gains (losses) into earnings due to the substantial liquidation of certain of our foreign entities.


(7)	Reflects the impact of other unusual or unique tax-related items and activities.

Due to requirements from our adoption of a new revenue accounting standard in 2018, net revenues by distribution channel for the years ended December 31, 2019 and 2018, include a reconciliation to our segment revenues as disclosed for each of our reportable segments above. Net revenues by distribution channel were as follows (amounts in millions):



	Year Ended December 31, 2019
	Activision			Blizzard			King		Non-reportable segments			Elimination of intersegment revenues (3)			Total
Net revenues by distribution channel:
Digital online channels (1)	$	1,366		$	1,580		$	2,029	$	—		$	(43	)	$	4,932
Retail channels	818			91			—		—			—			909
Other (2)	3			181			—		464			—			648
Total consolidated net revenues	$	2,187		$	1,852		$	2,029	$	464		$	(43	)	$	6,489

Change in deferred revenues:
Digital online channels (1)	$	122		$	(128	)	$	2	$	—		$	—		$	(4	)
Retail channels	(90		)	(5		)	—		—			—			(95		)
Other (2)	—			—			—		(2		)	—			(2		)
Total change in deferred revenues	$	32		$	(133	)	$	2	$	(2	)	$	—		$	(101	)

Segment net revenues:
Digital online channels (1)	$	1,488		$	1,452		$	2,031	$	—		$	(43	)	$	4,928
Retail channels	728			86			—		—			—			814
Other (2)	3			181			—		462			—			646
Total segment net revenues	$	2,219		$	1,719		$	2,031	$	462		$	(43	)	$	6,388



	Year Ended December 31, 2018
	Activision			Blizzard			King			Non-reportable segments		Elimination of intersegment revenues (3)			Total
Net revenues by distribution channel:
Digital online channels (1)	$	1,740		$	2,009		$	2,090		$	—	$	(53	)	$	5,786
Retail channels	998			109			—			—		—			1,107
Other (2)	—			148			—			459		—			607
Total consolidated net revenues	$	2,738		$	2,266		$	2,090		$	459	$	(53	)	$	7,500

Change in deferred revenues:
Digital online channels (1)	$	(96	)	$	32		$	(4	)	$	—	$	—		$	(68	)
Retail channels	(184		)	(7		)	—			—		—			(191		)
Other (2)	—			—			—			21		—			21
Total change in deferred revenues	$	(280	)	$	25		$	(4	)	$	21	$	—		$	(238	)

Segment net revenues:
Digital online channels (1)	$	1,644		$	2,041		$	2,086		$	—	$	(53	)	$	5,718
Retail channels	814			102			—			—		—			916
Other (2)	—			148			—			480		—			628
Total segment net revenues	$	2,458		$	2,291		$	2,086		$	480	$	(53	)	$	7,262



	Year Ended December 31, 2017
Net revenues by distribution channel:
Digital online channels (1)	$	5,479
Retail channels	1,033
Other (2)	505
Total consolidated net revenues	$	7,017


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


(2)	Net revenues from “Other” primarily includes revenues from our Distribution business and the Overwatch 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):



	Year Ended December 31, 2019
	Activision		Blizzard			King		Non-reportable segments			Elimination of intersegment revenues (2)			Total
Net revenues by geographic region:
Americas	$	1,286	$	822		$	1,254	$	—		$	(21	)	$	3,341
EMEA (1)	691		543			557		464			(16		)	2,239
Asia Pacific	210		487			218		—			(6		)	909
Total consolidated net revenues	$	2,187	$	1,852		$	2,029	$	464		$	(43	)	$	6,489

Change in deferred revenues:
Americas	$	16	$	(62	)	$	2	$	—		$	—		$	(44	)
EMEA (1)	12		(57		)	—		(2		)	—			(47		)
Asia Pacific	4		(14		)	—		—			—			(10		)
Total change in deferred revenues	$	32	$	(133	)	$	2	$	(2	)	$	—		$	(101	)

Segment net revenues:
Americas	$	1,302	$	760		$	1,256	$	—		$	(21	)	$	3,297
EMEA (1)	703		486			557		462			(16		)	2,192
Asia Pacific	214		473			218		—			(6		)	899
Total segment net revenues	$	2,219	$	1,719		$	2,031	$	462		$	(43	)	$	6,388



	Year Ended December 31, 2018
	Activision			Blizzard			King			Non-reportable segments		Elimination of intersegment revenues (2)			Total
Net revenues by geographic region:
Americas	$	1,622		$	1,004		$	1,269		$	13	$	(28	)	$	3,880
EMEA (1)	897			692			599			446		(16		)	2,618
Asia Pacific	219			570			222			—		(9		)	1,002
Total consolidated net revenues	$	2,738		$	2,266		$	2,090		$	459	$	(53	)	$	7,500

Change in deferred revenues:
Americas	$	(163	)	$	15		$	(3	)	$	—	$	—		$	(151	)
EMEA (1)	(127		)	16			(1		)	21		—			(91		)
Asia Pacific	10			(6		)	—			—		—			4
Total change in deferred revenues	$	(280	)	$	25		$	(4	)	$	21	$	—		$	(238	)

Segment net revenues:
Americas	$	1,459		$	1,019		$	1,266		$	13	$	(28	)	$	3,729
EMEA (1)	770			708			598			467		(16		)	2,527
Asia Pacific	229			564			222			—		(9		)	1,006
Total segment net revenues	$	2,458		$	2,291		$	2,086		$	480	$	(53	)	$	7,262



	Year Ended December 31, 2017
Net revenues by geographic region:
Americas	$	3,607
EMEA (1)	2,464
Asia Pacific	946
Total consolidated net revenues	$	7,017


(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 46%, 46%, and 45% of consolidated net revenues for the years ended December 31, 2019, 2018, and 2017, respectively. The Company’s net revenues in the United Kingdom (“U.K.”) for each of the years ended December 31, 2019, 2018, and 2017 were 12% of consolidated net revenues. No other country’s net revenues exceeded 10% of consolidated net revenues for the years ended December 31, 2019, 2018, or 2017.

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



	Year Ended December 31, 2019
	Activision			Blizzard			King		Non-reportable segments			Elimination of intersegment revenues (3)			Total
Net revenues by platform:
Console	$	1,783		$	137		$	—	$	—		$	—		$	1,920
PC	298			1,346			117		—			(43		)	1,718
Mobile and ancillary (1)	103			188			1,912		—			—			2,203
Other (2)	3			181			—		464			—			648
Total consolidated net revenues	$	2,187		$	1,852		$	2,029	$	464		$	(43	)	$	6,489

Change in deferred revenues:
Console	$	(36	)	$	(18	)	$	—	$	—		$	—		$	(54	)
PC	57			(110		)	—		—			—			(53		)
Mobile and ancillary (1)	11			(5		)	2		—			—			8
Other (2)	—			—			—		(2		)	—			(2		)
Total change in deferred revenues	$	32		$	(133	)	$	2	$	(2	)	$	—		$	(101	)

Segment net revenues:
Console	$	1,747		$	119		$	—	$	—		$	—		$	1,866
PC	355			1,236			117		—			(43		)	1,665
Mobile and ancillary (1)	114			183			1,914		—			—			2,211
Other (2)	3			181			—		462			—			646
Total segment net revenues	$	2,219		$	1,719		$	2,031	$	462		$	(43	)	$	6,388



	Year Ended December 31, 2018
	Activision			Blizzard			King			Non-reportable segments		Elimination of intersegment revenues (3)			Total
Net revenues by platform:
Console	$	2,351		$	187		$	—		$	—	$	—		$	2,538
PC	368			1,711			154			—		(53		)	2,180
Mobile and ancillary (1)	19			220			1,936			—		—			2,175
Other (2)	—			148			—			459		—			607
Total consolidated net revenues	$	2,738		$	2,266		$	2,090		$	459	$	(53	)	$	7,500

Change in deferred revenues:
Console	$	(257	)	$	(8	)	$	—		$	—	$	—		$	(265	)
PC	(23		)	33			(1		)	—		—			9
Mobile and ancillary (1)	—			—			(3		)	—		—			(3		)
Other (2)	—			—			—			21		—			21
Total change in deferred revenues	$	(280	)	$	25		$	(4	)	$	21	$	—		$	(238	)

Segment net revenues:
Console	$	2,094		$	179		$	—		$	—	$	—		$	2,273
PC	345			1,744			153			—		(53		)	2,189
Mobile and ancillary (1)	19			220			1,933			—		—			2,172
Other (2)	—			148			—			480		—			628
Total segment net revenues	$	2,458		$	2,291		$	2,086		$	480	$	(53	)	$	7,262



	Year Ended December 31, 2017
Net revenues by platform:
Console	$	2,389
PC	2,042
Mobile and ancillary (1)	2,081
Other (2)	505
Total consolidated net revenues	$	7,017


(1)	Net revenues from “Mobile and ancillary” include revenues from mobile devices, as well as non-platform specific game-related revenues, such as standalone sales of physical merchandise and accessories.


(2)	Net revenues from “Other” primarily includes revenues from our Distribution business and the Overwatch 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 December 31,
	2019		2018		2017
Long-lived assets* by geographic region:
Americas	$	322	$	203	$	197
EMEA	142		62		75
Asia Pacific	21		17		22
Total long-lived assets by geographic region	$	485	$	282	$	294


*	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 beginning with 2019, as a result of our adoption of a new lease accounting standard, our lease ROU assets; all other long-term assets are not allocated by location.

For information regarding significant customers, see “Concentration of Credit Risk” in Note 2.