10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2011

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to            

Commission File Number 1-15839

ACTIVISION BLIZZARD, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-4803544
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3100 Ocean Park Boulevard, Santa Monica, CA	90405
(Address of principal executive offices)	(Zip Code)

(310) 255-2000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer x	Accelerated Filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o No x

The number of shares of the registrant’s Common Stock outstanding at July 29, 2011 was 1,142,815,142.

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

Table of Contents

	Cautionary Statement	3
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at June 30, 2011 and December 31, 2010	4
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and June 30, 2010	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and June 30, 2010	6
	Condensed Consolidated Statement of Changes in Shareholders’ Equity for the six months ended June 30, 2011	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
PART II.	OTHER INFORMATION	40
Item 1.	Legal Proceedings	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	42
SIGNATURE		43
EXHIBIT INDEX		44
CERTIFICATIONS

2

CAUTIONARY STATEMENT

This Quarterly Report on Form 10-Q contains, or incorporates by reference, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements consist of any statement other than a recitation of historical fact and include, but are not limited to: (1) projections of revenues, expenses, income or loss, earnings or loss per share, cash flow or other financial items; (2) statements of our plans and objectives, including those relating to product releases; (3) statements of future economic performance; and (4) statements of assumptions underlying such statements. We generally use words such as “outlook,” “forecast,” “will,” “could,” “should,” “would,” “to be,” “plans,” “believes,” “may,” “expects,” “intends,” “anticipates,” “estimate,” “future,” “positioned,” “potential,” “project,” “remain,” “scheduled,” “set to,” “subject to,” “upcoming” and other similar expressions to help identify forward-looking statements. Forward-looking statements are subject to business and economic risk, reflect management’s current expectations, estimates and projections about our business, and are inherently uncertain and difficult to predict. Our actual results could differ materially. The forward-looking statements contained herein speak only at the date on which this Quarterly Report on Form 10-Q was first filed. Risks and uncertainties that may affect our future results include, but are not limited to, sales levels of Activision Blizzard’s titles, increasing concentration of titles, shifts in consumer spending trends, the impact of the current macroeconomic environment and market conditions within the video game industry, Activision Blizzard’s ability to predict consumer preferences, including interest in specific genres such as first-person action and massively multiplayer online games and preferences among competing hardware platforms, the seasonal and cyclical nature of the interactive game market, changing business models including digital delivery of content, competition including from used games and other forms of entertainment, possible declines in software pricing, product returns and price protection, product delays, adoption rate and availability of new hardware (including peripherals) and related software, rapid changes in technology and industry standards, litigation risks and associated costs, the effectiveness of Activision Blizzard’s restructuring efforts, protection of proprietary rights, maintenance of relationships with key personnel, customers, licensees, licensors, vendors, and third-party developers, including the ability to attract, retain and develop key personnel and developers that can create high quality “hit” titles, counterparty risks relating to customers, licensees, licensors and manufacturers, domestic and international economic, financial and political conditions and policies, foreign exchange rates and tax rates, and the identification of suitable future acquisition opportunities and potential challenges associated with geographic expansion, and the other  factors  identified in “Risk Factors” included in Part II, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2010. The forward-looking statements contained herein are based upon information available to us as of the date of this Quarterly Report on Form 10-Q and we assume no obligation to update any such forward-looking statements. Although these forward-looking statements are believed to be true when made, they may ultimately prove to be incorrect. These statements are not guarantees of our future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and may cause actual results to differ materially from current expectations.

Activision Blizzard’s names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or trade names of Activision Blizzard.

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Part I.   FINANCIAL INFORMATION

Item 1.  Financial Statements

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions, except share data)

	At June 30,		At December 31,
	2011		2010
Assets
Current assets:
Cash and cash equivalents	$	2,334	$	2,812
Short-term investments	610		696
Accounts receivable, net of allowances of $251 million and $377 million at June 30, 2011 and December 31, 2010, respectively	140		640
Inventories	93		112
Software development	126		147
Intellectual property licenses	43		45
Deferred income taxes, net	511		648
Other current assets	97		299
Total current assets	3,954		5,399
Long-term investments	25		23
Software development	90		55
Intellectual property licenses	16		28
Property and equipment, net	163		169
Other assets	17		15
Intangible assets, net	144		160
Trademark and trade names	433		433
Goodwill	7,130		7,132
Total assets	$	11,972	$	13,414
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	156	$	363
Deferred revenues	601		1,726
Accrued expenses and other liabilities	489		838
Total current liabilities	1,246		2,927
Deferred income taxes, net	97		120
Other liabilities	164		164
Total liabilities	1,507		3,211
Commitments and contingencies (Note 14)
Shareholders’ equity:
Common stock, $0.000001 par value, 2,400,000,000 shares authorized, 1,142,158,668 and 1,382,479,839 shares issued at June 30, 2011 and December 31, 2010, respectively	—		—
Additional paid-in capital	9,735		12,353
Less: Treasury stock, at cost, no shares and 199,159,987 shares at June 30, 2011 and December 31, 2010, respectively	—		(2,194		)
Retained earnings	701		57
Accumulated other comprehensive income (loss)	29		(13		)
Total shareholders’ equity	10,465		10,203
Total liabilities and shareholders’ equity	$	11,972	$	13,414

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in millions, except per share data)

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Net revenues
Product sales	$	768	$	643	$	1,829	$	1,629
Subscription, licensing, and other revenues	378		324		766		646
Total net revenues	1,146		967		2,595		2,275
Costs and expenses
Cost of sales – product costs	213		235		512		572
Cost of sales – massively multi-player online role-playing game (“MMORPG”)	59		53		122		109
Cost of sales – software royalties and amortization	47		51		109		150
Cost of sales – intellectual property licenses	24		29		53		72
Product development	116		100		258		237
Sales and marketing	90		125		150		181
General and administrative	127		74		228		143
Restructuring	3		—		22		—
Total costs and expenses	679		667		1,454		1,464
Operating income	467		300		1,141		811
Investment and other income, net	2		1		5		1
Income before income tax expense	469		301		1,146		812
Income tax expense	134		82		308		212
Net income	$	335	$	219	$	838	$	600
Earnings per common share
Basic	$	0.29	$	0.18	$	0.71	$	0.48
Diluted	$	0.29	$	0.17	$	0.71	$	0.47
Weighted-average shares outstanding
Basic	1,141		1,232		1,157		1,239
Diluted	1,150		1,248		1,166		1,254
Dividends per common share	$	—	$	—	$	0.165	$	0.15

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in millions)

	For the Six Months Ended
	June 30,
	2011			2010
Cash flows from operating activities:
Net income	$	838		$	600
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	119			81
Depreciation and amortization	52			59
Amortization and write-off of capitalized software development costs and intellectual property licenses (1)	124			142
Stock-based compensation expense (2)	43			61
Excess tax benefits from stock option exercises	(4		)	(6		)
Changes in operating assets and liabilities:
Accounts receivable	518			525
Inventories	21			78
Software development and intellectual property licenses	(116		)	(158		)
Other assets	209			224
Deferred revenues	(1,164		)	(936		)
Accounts payable	(216		)	(144		)
Accrued expenses and other liabilities	(368		)	(325		)
Net cash provided by operating activities	56			201
Cash flows from investing activities:
Proceeds from maturities of investments	374			188
Payment of contingent consideration	(3		)	(4		)
Purchases of short-term investments	(300		)	(388		)
Capital expenditures	(18		)	(39		)
Decrease in restricted cash	10			16
Net cash provided by (used in) investing activities	63			(227		)
Cash flows from financing activities:
Proceeds from issuance of common stock to employees	26			30
Repurchase of common stock	(501		)	(349		)
Dividends paid	(192		)	(187		)
Excess tax benefits from stock option exercises	4			6
Net cash used in financing activities	(663		)	(500		)
Effect of foreign exchange rate changes on cash and cash equivalents	66			(28		)
Net decrease in cash and cash equivalents	(478		)	(554		)
Cash and cash equivalents at beginning of period	2,812			2,768
Cash and cash equivalents at end of period	$	2,334		$	2,214

(1)   Excludes deferral and amortization of stock-based compensation expense.

(2)   Includes the net effects of capitalization, deferral, and amortization of stock-based compensation expense.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Six Months Ended June 30, 2011

(Unaudited)

(Amounts in millions)

																Accumulated
					Additional											Other			Total
	Common Stock				Paid-In			Treasury Stock					Retained			Comprehensive			Shareholders’
	Shares		Amount		Capital			Shares		Amount			Earnings			Income (Loss)			Equity
Balance at December 31, 2010	1,382		$	—	$	12,353		(199	)	$	(2,194	)	$	57		$	(13	)	$	10,203
Components of comprehensive income:
Net income	—		—		—			—		—			838			—			838
Unrealized appreciation on investments, net of taxes																2			2
Foreign currency translation adjustment	—		—		—			—		—			—			40			40
Total comprehensive income	—		—		—			—		—			—			—			880
Issuance of common stock pursuant to employee stock options and restricted stock rights	4		—		26			—		—			—			—			26
Stock-based compensation expense related to employee stock options and restricted stock rights	—		—		51			—		—			—			—			51
Dividends ($0.165 per common share) (See Note 13)	—		—		—			—		—			(194		)	—			(194		)
Shares repurchased (See Note 13)	—		—		—			(45	)	(501		)	—			—			(501		)
Retirement of treasury shares	(244	)	—		(2,695		)	244		2,695			—			—			—
Balance at June 30, 2011	1,142		$	—	$	9,735		—		$	—		$	701		$	29		$	10,465

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

7

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.     Description of Business and Basis of Consolidation and Presentation

Description of Business

Activision Blizzard, Inc. is a worldwide online, personal computer (“PC”), console, handheld and mobile game publisher. The terms “Activision Blizzard,” the “Company,” “we,” “us,” and “our” are used to refer collectively to Activision Blizzard, Inc. and its subsidiaries.

The common stock of Activision Blizzard is traded on The NASDAQ Stock Market under the ticker symbol “ATVI.” Vivendi S.A. (“Vivendi”) owned approximately 63% of Activision Blizzard’s outstanding common stock at June 30, 2011.

We maintain significant operations in the United States, Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea and China.

Basis of Consolidation and Presentation

Activision Blizzard prepared the accompanying unaudited condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission for interim reporting. As permitted under those rules and regulations, certain notes or other information that are normally required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted if they substantially duplicate the disclosures contained in the annual audited consolidated financial statements. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair statement of our financial position and results of operations in accordance with U.S. GAAP have been included in the accompanying unaudited condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements include the accounts and operations of Activision Blizzard. All intercompany accounts and transactions have been eliminated. The condensed consolidated financial statements have been prepared in conformity with U.S. GAAP. The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates and assumptions.

Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

The Company considers events or transactions that occur after the balance sheet date, but before the financial statements are issued, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosures.

2.     Summary of significant accounting policies

Revenue Recognition

Revenue Arrangements with Multiple Deliverables

On January 1, 2011, we adopted amendments to an accounting standard related to revenue recognition for arrangements with multiple deliverables (which standard, as amended, is referred to herein as the “new accounting principles”).  The new accounting principles establish a selling price hierarchy for determining the selling price of a deliverable and require the application of the relative selling price method to allocate the arrangement consideration to each deliverable in a multiple deliverables revenue arrangement. Certain of our revenue arrangements have multiple deliverables and, as such, are accounted for under the new accounting principles. These revenue arrangements include product sales consisting of both software and hardware deliverables (such as peripherals or other ancillary collectors’ items sold together with physical “boxed” software) and our sales of World of Warcraft boxed products, expansion packs and value-added services, each of which is considered with the related subscription

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services for these purposes.  Our assessment of deliverables and units of accounting does not change under the new accounting principles.

Pursuant to the guidance of ASU 2009-13, when a revenue arrangement contains multiple elements, such as hardware and software products, licenses and/or services, we allocate revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor-specific-objective-evidence (“VSOE”) if it is available, third-party evidence (“TPE”) if VSOE is not available, or best estimated selling price (“BESP”) if neither VSOE nor TPE is available. In multiple element arrangements where more-than-incidental software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue.

As noted above, when neither VSOE nor TPE is available for a deliverable, we use BESP. We do not have significant revenue arrangements that require BESP for the three or six months ended June 30, 2011.  The inputs we use to determine the selling price of our significant deliverables include the actual price charged by the Company for a deliverable that the Company sells separately, which represents the VSOE, and the wholesale prices of the same or similar products, which represents TPE. The pattern and timing of revenue recognition for deliverables and allocation of the arrangement consideration did not change upon the adoption of the new accounting principles. Also, we do not expect the adoption of the new accounting principles to have a material effect on our financial statements in the periods after our initial adoption.

Product Sales

We recognize revenue from the sale of our products upon the transfer of title and risk of loss to our customers and once any performance obligations have been completed. Certain products are sold to customers with a street date (i.e., the earliest date these products may be sold by retailers). For these products, we recognize revenue on the later of the street date and the sale date. Revenue from product sales is recognized after deducting the estimated allowance for returns and price protection.

For our software products with online functionality, we evaluate whether those features or functionality are more than an inconsequential separate deliverable in addition to the software product. This evaluation is performed for each software product and any online transaction, such as a digital download of a title or product add-ons, when it is released.

When we determine that a software title contains online functionality that constitutes a more-than-inconsequential separate service deliverable in addition to the product, principally because of its importance to gameplay, we consider our performance obligations for this title to extend beyond the sale of the game. VSOE of fair value does not exist for the online functionality, as we do not separately charge for this component of the title. As a result, we recognize all of the software-related revenue from the sale of the title ratably over the estimated service period, which is estimated to begin the month after the later of the sale date and the street date of the title. In addition, we initially defer the costs of sales for the title (excluding intangible asset amortization), and recognize the costs of sales as the related revenues are recognized. Cost of sales includes manufacturing costs, software royalties and amortization, and intellectual property licenses costs.

We recognize revenues from World of Warcraft boxed product, expansion packs and value-added services, in each case with the related subscription service revenue, ratably over the estimated service periods beginning upon activation of the software and delivery of the related services. Revenues attributed to the sale of World of Warcraft boxed software and related expansion packs are classified as product sales and revenues attributable to subscriptions and other value-added services are classified as subscription, licensing and other revenues.

Revenues for software products with more-than-inconsequential separate service deliverables and World of Warcraft products are recognized over the estimated service periods, which range from a minimum of five months to a maximum of less than a year.

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For our software products with features we consider to be incidental to the overall product offering and an inconsequential deliverable, such as products which provide limited online features at no additional cost to the consumer, we recognize the related revenue from them upon the transfer of title and risk of loss of the product to our customer.

With respect to online transactions, such as online downloads of titles or product add-ons that do not include a more-than-inconsequential separate service deliverable, revenue is recognized when the fee is paid by the online customer to purchase online content, the product is available for download and is activated for gameplay. In addition, persuasive evidence of an arrangement must exist and collection of the related receivable must be probable.

Sales incentives and other consideration given by us to our customers, such as rebates and product replacement fees, are considered adjustments of the selling price of our products and are reflected as reductions to revenue. Sales incentives and other consideration that represent costs incurred by us for assets or services received, such as the appearance of our products in a customer’s national circular ad, are reflected as sales and marketing expenses when the benefit from the sales incentive is separable from sales to the same customer and we can reasonably estimate the fair value of the benefit.

Subscription Revenues

Subscription revenues are derived from World of Warcraft, a game that is playable through Blizzard’s servers on a subscription-only basis. After the first month of free usage that is included with the World of Warcraft boxed software, the World of Warcraft end user may enter into a subscription agreement for additional future access. Revenues associated with the sale of subscriptions via boxed software and prepaid subscription cards, as well as prepaid subscriptions sales, are deferred until the subscription service is activated by the consumer and recognized ratably over the subscription period. Revenue from internet gaming rooms in Asia is recognized upon usage of the time packages sold. Value-added service revenues associated with subscriptions are recognized ratably over the estimated service periods.

Licensing Revenues

Third-party licensees in Russia, China and Taiwan distribute and host Blizzard’s World of Warcraft game in their respective countries under license agreements with Blizzard. We receive royalties from the licensees as a result. We recognize these royalties as revenues based on the end users’ activation of the underlying prepaid time, if all other performance obligations have been completed or based on usage by the end user when we have continuing service obligations. We recognize any upfront licensing fee received over the term of the contracts.

With respect to license agreements that provide customers the right to make multiple copies in exchange for guaranteed amounts, revenue is generally recognized upon delivery of a master copy. Per copy royalties on sales that exceed the guarantee are recognized as earned. In addition, persuasive evidence of an arrangement must exist and collection of the related receivable must be probable.

Breakage Revenues

World of Warcraft boxed product sales and subscription revenues are recognized upon activation of the game. We analyze historical activation patterns over time to determine when the likelihood of activation ever occurring becomes remote. We recognize revenues from subscriptions that have not yet been activated, prepaid subscription cards, as well as prepaid subscription sales, when the likelihood of future activation occurring is remote (defined as “breakage revenues”).

Other Revenues

Other revenues primarily include licensing activity of intellectual property other than software to third-parties. Revenue is recorded upon receipt of licensee statements, or upon the receipt of cash, provided the license period has begun.

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3.     Inventories

Our inventories consist of the following (amounts in millions):

	At June 30, 2011		At December 31, 2010
Finished goods	$	81	$	98
Purchased parts and components	12		14
Inventories	$	93	$	112

4.     Intangible assets, net

Intangible assets, net consist of the following (amounts in millions):

	At June 30, 2011
	Estimated	Gross
	useful	carrying		Accumulated			Net carrying
	lives	amount		amortization			amount
Acquired definite-lived intangible assets:
License agreements	3 - 10 years	$	88	$	(76	)	$	12
Game engines	2 - 5 years	32		(31		)	1
Internally-developed franchises	11 - 12 years	309		(180		)	129
Distribution agreements	4 years	18		(16		)	2
Acquired indefinite-lived intangible assets:
Activision trademark	Indefinite	386		—			386
Acquired trade names	Indefinite	47		—			47
Total		$	880	$	(303	)	$	577

	At December 31, 2010
	Estimated	Gross
	useful	carrying		Accumulated			Net carrying
	lives	amount		amortization			amount
Acquired definite-lived intangible assets:
License agreements	3 - 10 years	$	88	$	(74	)	$	14
Game engines	2 - 5 years	32		(30		)	2
Internally-developed franchises	11 - 12 years	309		(167		)	142
Distribution agreements	4 years	18		(16		)	2
Acquired indefinite-lived intangible assets:
Activision trademark	Indefinite	386		—			386
Acquired trade names	Indefinite	47		—			47
Total		$	880	$	(287	)	$	593

Amortization expense of intangible assets was $7 million and $16 million for the three and six months ended June 30, 2011, respectively.  Amortization expense of intangible assets was $11 million and $29 million for the three and six months ended June 30, 2010, respectively

The carrying amounts as of June 30, 2011 and December 31, 2010 in the tables above reflect a new cost basis for license agreements, game engines and internally-developed franchises due to impairment charges taken for the year ended December 31, 2010.  The new cost basis includes the original gross carrying amount, less accumulated amortization and impairment charges of the impaired assets as of December 31, 2010.

At June 30, 2011, future amortization of definite-lived intangible assets is estimated as follows (amounts in millions):

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2011 (remaining six months)	$	57
2012	35
2013	18
2014	9
2015	7
Thereafter	18
Total	$	144

5.     Income taxes

The income tax expense of $134 million for the three months ended June 30, 2011 reflected an effective tax rate of 28.6%. The effective tax rate of 28.6% for the three months ended June 30, 2011 differed from the statutory rate of 35.0% primarily due to foreign income taxes levied at relatively lower rates, geographic mix in profitability, recognition of federal and California research and development credits and federal domestic production deductions.

For the six months ended June 30, 2011, the tax rate was based on our projected annual effective tax rate for 2011, and also included certain discrete tax items recorded during the period. Our tax expense of $308 million for the six months ended June 30, 2011 reflected an effective tax rate of 26.9% which differed slightly from the effective tax rate of 26.1% for the six months ended June 30, 2010, primarily due to a minor increase in the projected amount of domestic earnings with a higher statutory rate, relative to earnings in foreign jurisdictions with a lower statutory rate.

The overall effective income tax rate for the year could be different from the effective tax rate for the three and six months ended June 30, 2011 and will be dependent, in part, on our profitability for the remainder of the year. In addition, our effective income tax rates for the remainder of 2011 and future periods will depend on a variety of factors, such as changes in the mix of income by tax jurisdiction, applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and other matters, and variations in the estimated and actual level of annual pre-tax income or loss.  Further, the effective tax rate could fluctuate significantly on a quarterly basis and could be adversely affected by the extent that income (loss) before income tax expenses (benefit) is lower than anticipated in foreign regions where taxes are levied at lower statutory rates and/or higher than anticipated in our domestic region where taxes are levied at higher statutory rates.

6.     Software development and intellectual property licenses

The following table summarizes the components of our software development costs and intellectual property licenses (amounts in millions):

	At		At
	June 30,		December 31,
	2011		2010
Internally developed software costs	$	141	$	142
Payments made to third-party software developers	75		60
Total software development costs	$	216	$	202
Intellectual property licenses	$	59	$	73

Amortization, write-offs and impairments are comprised of the following (amounts in millions):

	Three months ended June 30,				Six months ended June 30,
	2011		2010		2011		2010
Amortization of capitalized software development costs and intellectual property licenses	$	57	$	67	$	130	$	168
Write-offs and impairments	—		—		—		15

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7.     Comprehensive income and accumulated other comprehensive income (loss)

Comprehensive Income

The components of comprehensive income were as follows (amounts in millions):

	Three months ended June 30,					Six months ended June 30,
	2011		2010			2011		2010
Net income	$	335	$	219		$	838	$	600
Other comprehensive income (loss):
Foreign currency translation adjustment	1		(13		)	40		(33		)
Unrealized appreciation on investments, net of taxes	2		—			2		—
Other comprehensive income (loss)	3		(13		)	42		(33		)
Comprehensive income	$	338	$	206		$	880	$	567

The components of accumulated other comprehensive income (loss) were as follows (amounts in millions):

	At		At
	June 30,		December 31,
	2011		2010
Foreign currency translation adjustment	$	29	$	(11	)
Unrealized depreciation on investments, net of deferred income taxes of $0 at June 30, 2011 and $(1) at December 31, 2010	—		(2		)
Accumulated other comprehensive income (loss)	$	29	$	(13	)

Income taxes were not provided for foreign currency translation items as these are considered indefinite investments in non-U.S. subsidiaries.

8.Fair value measurements

Fair Value Measurements on a Recurring Basis

Financial Accounting Standards Board (“FASB”) literature regarding fair value measurements for financial and non-financial assets and liabilities establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The three levels of inputs used to measure fair value are as follows:

·Level 1—Quoted prices in active markets for identical assets or liabilities.

·Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data.

·Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The table below segregates all assets and liabilities that are measured at fair value on a recurring basis (which means they are so measured at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date (amounts in millions):

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			Fair Value Measurements at
			June 30, 2011 Using
			Quoted
			Prices in
			Active
			Markets for		Significant
			Identical		Other		Significant
	As of		Financial		Observable		Unobservable
	June 30,		Instruments		Inputs		Inputs		Balance Sheet
	2011		(Level 1)		(Level 2)		(Level 3)		Classification
Financial assets:
Money market funds	$	2,214	$	2,214	$	—	$	—	Cash and cash equivalents
U.S. treasuries and government agency securities	596		596		—		—		Short-term investments
ARS held through Morgan Stanley Smith Barney LLC	25		—		—		25		Long-term investments
Total financial assets at fair value	$	2,835	$	2,810	$	—	$	25

			Fair Value Measurements at
			December 31, 2010 Using
			Quoted
			Prices in
			Active
			Markets for		Significant
			Identical		Other		Significant
	As of		Financial		Observable		Unobservable
	December 31,		Instruments		Inputs		Inputs		Balance Sheet
	2010		(Level 1)		(Level 2)		(Level 3)		Classification
Financial assets:
Money market funds	$	2,216	$	2,216	$	—	$	—	Cash and cash equivalents
U.S. treasuries and foreign government bonds with original maturities of three months or less	332		332		—		—		Cash and cash equivalents
U.S. treasuries and government agency securities	672		672		—		—		Short-term investments
ARS held through Morgan Stanley Smith Barney LLC	23		—		—		23		Long-term investments
Foreign exchange contract derivatives	1		—		1		—		Other assets—current
Total financial assets at fair value	$	3,244	$	3,220	$	1	$	23

The following tables provide a reconciliation of the beginning and ending balances of our financial assets and financial liabilities classified as Level 3 by major categories (amounts in millions) at June 30, 2011 and 2010, respectively:

	Level 3
			Total
			financial
			assets at
	ARS		fair
	(a)		value
Balance at January 1, 2011	$	23	$	23
Total unrealized gains included in other comprehensive income	2		2
Balance at June 30, 2011	$	25	$	25

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	Level 3
							Total
							financial
				ARS rights			assets at
	ARS			from UBS			fair			Other financial
	(a)			(b)			value			liabilities
Balance at January 1, 2010	$	77		$	7		$	84		$	(23	)
Total gains (losses) (realized/unrealized) included in investment and other income, net	7			(7		)	—			—
Purchases of acquired sales, issuances and settlements	(61		)	—			(61		)	—
Balance at June 30, 2010	$	23		$	—		$	23		$	(23	)

(a)Fair value measurements of the auction rate securities (“ARS”) have been estimated using an income-approach model (specifically, discounted cash-flow analysis). When estimating the fair value, we consider both observable market data and non-observable factors, including credit quality, duration, insurance wraps, collateral composition, maximum rate formulas, comparable trading instruments and the likelihood of redemption. Significant assumptions used in the analysis include estimates for interest rates, spreads, cash flow timing and amounts, and holding periods of the securities. Assets measured at fair value using significant unobservable inputs (Level 3) represent 1% of our financial assets measured at fair value on a recurring basis at June 30, 2011.

In June 2010, we sold the remainder of our ARS held with UBS at par and recognized a gain of $7 million, which is included within investment and other income, net in our condensed consolidated statement of operations for the six months ended June 30, 2010.

(b)ARS rights from UBS represented an offer from UBS providing us with the right to require UBS to purchase our ARS held through UBS at par value. To value the ARS rights, we considered the intrinsic value, time value of money, and our assessment of the credit worthiness of UBS. We exercised our ARS rights with UBS on June 30, 2010 and recorded a loss of $7 million, which is included within investment and other income, net in our condensed consolidated statement of operations for the six months ended June 30, 2010.

Foreign Currency Forward Contracts Not Designated as Hedges

We transact business in various currencies other than the U.S. dollar and have significant international sales and expenses denominated in currencies other than the U.S. dollar, subjecting us to currency exchange rate risks. To mitigate our risk from foreign currency fluctuations we periodically enter into currency derivative contracts, primarily swaps and forward contracts with maturities of twelve months or less, with Vivendi as our principal counterparty. We do not hold or purchase any foreign currency contracts for trading or speculative purposes and we do not designate these forward contracts or swaps as hedging instruments.  Accordingly, we report the fair value of these contracts in our condensed consolidated balance sheet with changes in fair value recorded in our condensed consolidated statement of operations. The fair value of foreign currency contracts is estimated based on the prevailing exchange rates of the various hedged currencies as of the end of the period.

Fair Value Measurements on a Non-Recurring Basis

We measure the fair value of certain assets on a non-recurring basis, generally annually or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  For the six-month period ended June 30, 2011, there were no impairment charges related to assets that are measured on a non-recurring basis.

The table below presents intangible assets that are not subject to recurring fair value measurement at December 31, 2010 (amounts in millions):

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			Fair Value Measurements at
			December 31, 2010 Using
			Quoted
			Prices in
			Active
			Markets for		Significant
			Identical		Other		Significant
	As of		Financial		Observable		Unobservable
	December 31,		Instruments		Inputs		Inputs
	2010		(Level 1)		(Level 2)		(Level 3)		Total Losses
Non-financial assets:
Intangible assets, net	$	—	$	—	$	—	$	—	$	326
Total non-financial assets at fair value	$	—	$	—	$	—	$	—	$	326

We considered the continued economic downturn within our industry in 2010 and the change in the buying habits of casual consumers while planning for 2011 during the fourth quarter of 2010, resulting in a significant revision of our outlook for retail sales of software and a strategy change to, among other things, focus on fewer title releases in the casual genre and discontinue the development of music-based titles. As we considered this change in strategy to be an indicator of a potential impairment of our intangible assets, we updated our future projected revenue streams for certain franchises in the casual games and music genres. We performed recoverability tests and, where applicable, measured the impairment of the related intangible assets in accordance with ASC Subtopic 360-10.

Determining whether an impairment has occurred requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the estimated remaining useful life over which these cash flows will occur, the amount of these cash flows and the asset’s residual value, if any. For intangible assets that do not pass the recoverability test, the measurement of an impairment loss requires a determination of fair value, which is based on the best information available. Based on the characteristics of the assets being valued and the availability of information, the Company used the income approach, which presumes that the value of an asset can be estimated by the net economic benefit to be received over the estimated remaining useful life of the asset, discounted to present value. We derived the required cash flow estimates from our historical experience and our internal business plans and applied an appropriate discount rate. Based on this analysis, we recorded impairment charges of $67 million, $9 million and $250 million to license agreements, game engines and internally-developed franchises intangible assets, respectively, for the year ended December 31, 2010 within our Activision Publishing Inc. segment.

9.  Restructuring

On February 3, 2011, the Board of Directors of the Company approved a restructuring plan (the “2011 Restructuring”) involving a focus on the development and publication of a reduced slate of titles on a going-forward basis, including the discontinuation of the development of music-based games, the closure of the related business unit and the cancellation of other titles then in production, along with a related reduction in studio headcount and corporate overhead.

The following table details the amount of the 2011 Restructuring reserves included in accrued expenses and other liabilities in the condensed consolidated balance sheet at June 30, 2011 (amounts in millions):

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						Contract
				Facilities		termination
	Severance			costs		costs		Total
Balance at December 31, 2010	$	—		$	—	$	—	$	—
Costs charged to expense	17			4		1		22
Costs paid or otherwise settled	(10		)	—		—		(10		)
Balance at June 30, 2011	$	7		$	4	$	1	$	12

The 2011 Restructuring charges for the three and six months ended June 30, 2011 were $3 million and $22 million, respectively.  These charges, as well as the 2011 Restructuring reserve balances at June 30, 2011, were recorded within our Activision Publishing, Inc. segment. We have substantially completed the 2011 Restructuring and we expect to incur a maximum of approximately $6 million of additional restructuring expenses relating thereto.

We have substantially completed our implementation of our organizational restructuring plan as a result of the business combination (the “Business Combination”) by and among the Company (then known as Activision, Inc.), Sego Merger Corporation, a wholly-owned subsidiary of the Company, Vivendi S.A. (“Vivendi”), VGAC LLC, a wholly-owned subsidiary of Vivendi, and Vivendi Games, Inc. (“Vivendi Games”), a wholly-owned subsidiary of VGAC LLC, consummated in July 2008. There were minimal cash payments and no additional charges to the income statement for the three and six months ended June 30, 2011 relating to that restructuring.

10.  Operating segments and geographic region

Our operating segments are consistent with our internal organizational structure, the manner in which our operations are reviewed and managed by our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), the manner in which operating performance is assessed and resources are allocated, and the availability of separate financial information. We do not aggregate operating segments.

Currently, we operate under three operating segments:

Activision Publishing, Inc.

Activision Publishing, Inc. (“Activision”) is a leading international developer and publisher of interactive software products and content. Activision develops games based on both internally-developed and licensed intellectual property. Activision markets and sells games it develops and, through our affiliate label program, games developed by certain third-party publishers.  We sell games both through retail channels and by digital download.  Activision currently offers games that operate on the Sony Computer Entertainment, Inc. (“Sony”) PlayStation 3 (“PS3”), Nintendo Co. Ltd. (“Nintendo”) Wii (“Wii”), and Microsoft Corporation (“Microsoft”) Xbox 360 (“Xbox 360”) console systems; the Nintendo Dual Screen (“DS”) handheld game systems; the PC; the Apple iOS devices and other handheld and mobile devices.

Blizzard Entertainment, Inc.

Blizzard Entertainment, Inc. (“Blizzard”) develops, markets and sells role-playing action and strategy PC-based computer games, including games in the multiple-award winning Diablo and StarCraft franchises.  Blizzard also develops, hosts, and supports its online subscription-based games in the massively multi-player online role-playing game (“MMORPG”) category in which it is a leader in terms of both subscriber base and revenues generated through its World of Warcraft franchise. Blizzard also maintains a proprietary online-game related service, Battle.net.  Blizzard distributes its products and generates revenues worldwide through various means, including: subscriptions (which consist of fees from individuals playing World of Warcraft, prepaid cards and other value-added service revenues such as realm transfers, faction changes, and other character customizations within the World of Warcraft gameplay); retail sales of physical “boxed” products; online download sales of PC products; and licensing of software to third-party or related party companies that distribute World of Warcraft and StarCraft II.

Activision Blizzard Distribution

Activision Blizzard Distribution (“Distribution”) consists of operations in Europe that provide warehousing, logistical and sales distribution services to third-party publishers of interactive entertainment software, our own publishing operations, and manufacturers of interactive entertainment hardware.

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The CODM reviews segment performance exclusive of the impact of the change in deferred net revenues and related cost of sales with respect to certain of our online-enabled games, stock-based compensation expense, restructuring expense, amortization of intangible assets, and impairment of intangible assets. The CODM does not review any information regarding total assets on an operating segment basis, and accordingly, no disclosure is made with respect thereto.  Information on the operating segments and reconciliations of total segment net revenues and total segment income (loss) from operations to consolidated net revenues and income before income tax expense from external customers for the three and six months ended June 30, 2011 and 2010 are presented below (amounts in millions):

	Three months ended June 30,
	2011		2010		2011			2010
					Income from operations
	Net revenues				before income tax expense
Activision	$	323	$	333	$	31		$	(53	)
Blizzard	313		299		135			155
Distribution	63		51		(1		)	(1		)
Operating segments total	699		683		165			101
Reconciliation to consolidated net revenues / operating income and consolidated income before income tax expense:
Net effect from deferral of net revenues and related cost of sales	447		284		332			227
Stock-based compensation expense	—		—		(20		)	(17		)
Restructuring	—		—		(3		)	(1		)
Amortization of intangible assets	—		—		(7		)	(10		)
Consolidated net revenues / operating income	$	1,146	$	967	467			300
Investment and other income, net					2			1
Consolidated income before income tax expense					$	469		$	301

	Six months ended June 30,
	2011		2010		2011			2010
					Income from operations
	Net revenues				before income tax expense
Activision	$	646	$	670	$	78		$	(46	)
Blizzard	671		605		306			313
Distribution	137		122		—			(1		)
Operating segments total	1,454		1,397		384			266
Reconciliation to consolidated net revenues / operating income and consolidated income before income tax expense:
Net effect from deferral of net revenues and related cost of sales	1,141		878		838			637
Stock-based compensation expense	—		—		(43		)	(60		)
Restructuring	—		—		(22		)	(4		)
Amortization of intangible assets	—		—		(16		)	(28		)
Consolidated net revenues / operating income	$	2,595	$	2,275	$	1,141		$	811
Investment and other income, net					5			1
Consolidated income before income tax expense					$	1,146		$	812

Geographic information for the three and six months ended June 30, 2011 and 2010 is based on the location of the selling entity.  Net revenues from external customers by geographic region were as follows (amounts in millions):

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	Three months ended June 30,				Six months ended June 30,
	2011		2010		2011		2010
Net revenues by geographic region:
North America	$	580	$	567	$	1,328	$	1,270
Europe	467		337		1,061		861
Asia Pacific	99		63		206		144
Total consolidated net revenues	$	1,146	$	967	$	2,595	$	2,275

Net revenues by platform were as follows (amounts in millions):

	Three months ended June 30,				Six months ended June 30,
	2011		2010		2011		2010
Net revenues by platform:
Online subscriptions*	$	359	$	291	$	754	$	602
Console	611		507		1,436		1,346
Hand-held	33		39		63		78
PC and Other	80		79		205		127
Total platform net revenues	1,083		916		2,458		2,153
Distribution	63		51		137		122
Total consolidated net revenues	$	1,146	$	967	$	2,595	$	2,275

*Revenue from online subscriptions consists of revenue from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, and value-added services.

We did not have any single external customer that accounted for 10% or more of net revenues for the three or six months ended June 30, 2011 and 2010.

11.  Goodwill

The changes in the carrying amount of goodwill by operating segment for the six months ended June 30, 2011 are as follows (amounts in millions):

	Activision			Blizzard		Distribution		Total
Balance at December 31, 2010	$	6,942		$	178	$	12	$	7,132
Tax benefit credited to goodwill	(4		)	—		—		(4		)
Issuance of contingent consideration	3			—		—		3
Foreign exchange	(1		)	—		—		(1		)
Balance at June 30, 2011	$	6,940		$	178	$	12	$	7,130

The tax benefit credited to goodwill represents the tax deduction resulting from the exercise of stock options that were outstanding and vested at the consummation of the Business Combination and included in the purchase price of the Company, to the extent that the tax deduction did not exceed the fair value of those options. Conversely, to the extent that the tax deduction did exceed the fair value of those options, the tax benefit is credited to additional paid-in capital.

Issuance of contingent consideration consists of additional purchase consideration paid during 2011 in relation to a previous acquisition.

12.  Computation of basic/diluted earnings per common share

The following table sets forth the computation of basic and diluted earnings per common share (amounts in millions, except per share data):

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	Three months ended June 30,						Six months ended June 30,
	2011			2010			2011			2010
Numerator:
Consolidated net income	$	335		$	219		$	838		$	600
Less: Distributed earnings to unvested stock-based awards that participate in earnings	—			—			(3		)	(2		)
Less: Undistributed earnings allocated to unvested stock-based awards that participate in earnings	(5		)	(2		)	(9		)	(3		)
Numerator for basic and diluted earnings per common share - net income available to common shareholders	330			217			826			595
Denominator:
Denominator for basic earnings per common share - weighted-average common shares outstanding	1,141			1,232			1,157			1,239
Effect of potential dilutive common shares under the treasury stock method:
Employee stock options	9			16			9			15
Denominator for diluted earnings per common share - weighted-average common shares outstanding plus dilutive effect of employee stock options	1,150			1,248			1,166			1,254
Basic earnings per common share	$	0.29		$	0.18		$	0.71		$	0.48
Diluted earnings per common share	$	0.29		$	0.17		$	0.71		$	0.47

Our unvested restricted stock rights are considered participating securities since these securities have non-forfeitable rights to dividends or dividend equivalents during the contractual period of the award. Since the unvested restricted stock rights are considered participating securities, we are required to use the two-class method in our computation of basic and diluted earnings per common share. For the three and six months ended June 30, 2011 and 2010, we had outstanding unvested restricted stock rights of 17 million and 10 million shares of common stock on a weighted-average basis, respectively.

Potential common shares are not included in the denominator of the diluted earnings per common share calculation when inclusion of such shares would be anti-dilutive. Therefore, options to acquire 31 million shares of common stock were not included in the calculation of diluted earnings per common share for both the three and six months ended June 30, 2011 and options to acquire 23 million shares of common stock were not included in the calculation of diluted earnings per common share for both the three and six months ended June 30, 2010 as the effect of their inclusion would be anti-dilutive.

13. Capital transactions

Repurchase Program

On February 10, 2010, our Board of Directors authorized a stock repurchase program (the “2010 Stock Repurchase Program”) under which we were authorized to repurchase up to $1 billion of our common stock.  The 2010 Stock Repurchase Program expired on December 31, 2010.  In January 2011, we settled a $22 million purchase of 1.8 million shares of our common stock that we had committed to repurchase in December 2010 pursuant to the 2010 Stock Repurchase Program.

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On February 3, 2011, our Board of Directors authorized a new stock repurchase program (the “2011 Stock Repurchase Program”) under which we may repurchase up to $1.5 billion of our common stock, on terms and conditions to be determined by the Company, until the earlier of March 31, 2012 and a determination by the Board of Directors to discontinue the repurchase program.  During the six months ended June 30, 2011, we repurchased 43 million shares of our common stock for $479 million pursuant to the 2011 Stock Repurchase Program.

Dividend

On February 10, 2010, Activision Blizzard’s Board of Directors declared a cash dividend of $0.15 per common share payable on April 2, 2010 to shareholders of record at the close of business on February 22, 2010, and on April 2, 2010, we made a cash dividend payment of $187 million to such shareholders. On October 22, 2010, the Company made dividend equivalent payments of $2 million related to this cash dividend to the holders of restricted stock units.

On February 9, 2011, our Board of Directors approved a cash dividend of $0.165 per common share to be paid on May 11, 2011 to shareholders of record as of March 16, 2011, and on May 11, 2011, we made a cash dividend payment of $192 million to such shareholders.

14.  Commitments and contingencies

At June 30, 2011, we did not have any significant changes to our commitments since December 31, 2010.  See Note 18 of the Notes to Consolidated Financial Statements included in Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2010 for more information regarding our commitments.

Legal Proceedings

After concluding an internal human resources inquiry into breaches of contract and insubordination by two senior employees at Infinity Ward, the Company terminated its employment of Jason West and Vince Zampella on March 1, 2010. On March 3, 2010, West and Zampella filed a complaint against the Company in Los Angeles Superior Court for breach of contract and wrongful termination, among other claims.   West and Zampella are seeking damages, including punitive damages, in excess of $36 million and declaratory relief.  On April 9, 2010, the Company filed a cross complaint against West and Zampella, asserting claims for breach of contract and fiduciary duty, among other claims.  The Company is seeking damages and declaratory relief.

In addition, 38 current and former employees of Infinity Ward filed a complaint against the Company in Los Angeles Superior Court on April 27, 2010 (Alderman et al. v. Activision Publishing, Inc. et al.).  An amended complaint was filed on July 8, 2010, which added seven additional plaintiffs.  On October 5, 2010, five plaintiffs, all current employees of Infinity Ward, filed dismissals without prejudice.  There are currently 40 plaintiffs in the case.  The plaintiffs have asserted claims for breach of contract, violation of the Labor Code of the State of California, conversion and other claims.  The plaintiffs claim that the Company failed to pay them bonuses and other compensation allegedly owed to them in an amount at least between $75 million and $125 million, plus punitive damages.  On October 12, 2010, the court consolidated this matter with the West and Zampella matter.

On January 18, 2011, the court granted the Company’s motion to amend its cross complaint against West and Zampella to add allegations with respect to them and to add Electronic Arts, Inc. as a party. On January 31, 2011, the case was transferred to the complex division.

All parties have now responded to all of the governing pleadings in the case.  A status conference is set for August 9, 2011.

The Company has accrued and will continue to accrue appropriate amounts related to bonuses and other monies allegedly owed in connection with this matter. The Company does not expect this lawsuit to have a material impact on the Company.

In addition, we are party to other routine claims and suits brought by us and against us in the ordinary course of business, including disputes arising over intellectual property rights, contractual claims, employment laws, regulations and relationships, and collection matters. In the opinion of management, after consultation with legal counsel, the outcome of such routine claims and lawsuits will not have a material adverse effect on our business, financial condition, results of operations, or liquidity.

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15.  Related party transactions

Treasury

Our foreign currency risk management program seeks to reduce risks arising from foreign currency fluctuations. We use derivative financial instruments, primarily currency forward contracts and swaps, with Vivendi as our principal counterparty. The gross notional amount of outstanding foreign exchange swaps was $35 million and $138 million at June 30, 2011 and December 31, 2010, respectively. A pre-tax net unrealized gain of less than a million and $5 million for the three months ended June 30, 2011 and 2010, respectively, resulted from the foreign exchange contracts and swaps with Vivendi and were recognized in the condensed consolidated statements of operations.  A pre-tax net unrealized loss of less than a million dollars and unrealized gain of $4 million for the six months ended June 30, 2011 and 2010, respectively, resulted from the foreign exchange contracts and swaps with Vivendi and were recognized in the condensed consolidated statements of operations.

Other

Activision Blizzard has entered into various transactions and agreements, including cash management services, investor agreement, and music royalty agreements with Vivendi and its subsidiaries and affiliates.  None of these services, transactions and agreements with Vivendi and its subsidiaries and affiliates is material either individually or in the aggregate to the condensed consolidated financial statements as a whole.

16.  Recently issued accounting pronouncements

In May 2011, the FASB issued an update to the accounting on fair value measurement to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards (“IFRS”). This update changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements. This update does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards within U.S. GAAP or IFRS. This update is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. Early adoption is prohibited. We are currently evaluating the impact, if any, of this new accounting update on our consolidated financial statements.

In June 2011, the FASB issued an update to the accounting on comprehensive income to increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS. This update requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This update does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. Further, this update does not affect how earnings per share is calculated or presented. This update is effective for interim and annual periods beginning after December 15, 2011 and is applied retrospectively. Early adoption is permitted. We do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

Activision Blizzard, Inc. is a worldwide online, personal computer (“PC”), console, handheld and mobile game publisher. The terms “Activision Blizzard,” the “Company,” “we,” “us,” and “our” are used to refer collectively to Activision Blizzard, Inc. and its subsidiaries. Based upon our organizational structure, we conduct our business through three operating segments as follows:

Activision Publishing, Inc.

Activision Publishing, Inc. (“Activision”) is a leading international developer and publisher of interactive software products and content. Activision develops games based on both internally-developed and licensed intellectual property. Activision markets and sells games it develops and, through our affiliate label program, games developed by certain third-party publishers.  We sell games both through retail channels and by digital download.  Activision currently offers games that operate on the Sony Computer Entertainment, Inc. (“Sony”) PlayStation 3 (“PS3”), Nintendo Co. Ltd. (“Nintendo”) Wii (“Wii”), and Microsoft Corporation (“Microsoft”) Xbox 360 (“Xbox 360”) console systems; the Nintendo Dual Screen (“DS”) handheld game systems; the PC; the Apple iOS devices and other handheld and mobile devices.

Blizzard Entertainment, Inc.

Blizzard Entertainment, Inc. (“Blizzard”) develops, markets and sells role-playing action and strategy PC-based computer games, including games in the multiple-award winning Diablo and StarCraft franchises.  Blizzard also develops, hosts, and supports its online subscription-based games in the massively multi-player online role-playing game (“MMORPG”) category in which it is a leader in terms of both subscriber base and revenues generated through its World of Warcraft franchise. Blizzard also maintains a proprietary online-game related service, Battle.net.  Blizzard distributes its products and generates revenues worldwide through various means, including: subscriptions (which consist of fees from individuals playing World of Warcraft, prepaid cards and other value-added service revenues such as realm transfers, faction changes, and other character customizations within the World of Warcraft gameplay); retail sales of physical “boxed” products; online download sales of PC products; and licensing of software to third-party or related party companies that distribute World of Warcraft and StarCraft II.

Activision Blizzard Distribution

Activision Blizzard Distribution (“Distribution”) consists of operations in Europe that provide warehousing, logistical and sales distribution services to third-party publishers of interactive entertainment software, our own publishing operations, and manufacturers of interactive entertainment hardware.

Business Highlights

For the three months ended June 30, 2011, Activision Blizzard’s results were strong, with net revenues of $1.1 billion as compared to net revenues of $967 million in the same period in 2010, and earnings per diluted share of $0.29 as compared to earnings per diluted share of $0.17 in the same period in 2010.

For the three months ended June 30, 2011, net revenues from digital online channels (as defined below) increased by 27% year-over-year, to $423 million, or 37% of total consolidated net revenues, as compared to $332 million, or 34% of total consolidated net revenues, in the same period in 2010.   Further, net revenues from digital online channels, excluding the impact of change in deferred net revenues (a non-GAAP financial measure), increased by 13% year-over-year, to $424 million, or 61% of total consolidated net revenues, for the three months ended June 30, 2011, as compared to $374 million, or 55% of total consolidated net revenues, in the same period in 2010. Please refer to the reconciliation between GAAP and non-GAAP net revenues by distribution channel and our non-GAAP financial measures disclosure below.

For the six months ended June 30, 2011, Activision Blizzard’s results were also strong, with net revenues of $2.6 billion as compared to net revenues of $2.3 billion in the same period in 2010, and earnings per diluted share of $0.71 as compared to earnings per diluted share of $0.47 in the same period in 2010.

According to The NPD Group, with respect to the U.S., and Charttrack and Gfk, with respect to Europe, during the six months ended June 30, 2011, based on sales from retail channels, Call of Duty: Black Ops was the #1 title in the U.S and Europe.

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For the six months ended June 30, 2011, net revenues from digital online channels grew by 28% year-over-year, to $851 million, or 33% of total consolidated net revenues, as compared to $663 million, or 29% of total consolidated net revenues, in the same period in 2010.  Further, net revenues from digital online channels, excluding the impact of change in deferred net revenues (a non-GAAP financial measure), grew by 21% year-over-year, to $864 million, or 59% of total consolidated net revenues, for the six months ended June 30, 2011 as compared to $713 million, or 51% of total consolidated net revenues, in the same period in 2010.

Additional Highlights

On February 3, 2011, our Board of Directors approved a new stock repurchase program under which we may repurchase up to $1.5 billion of our common stock until the earlier of March 31, 2012 or a determination by the Board of Directors to discontinue the repurchase program. As of June 30, 2011, we have repurchased 43 million shares of common stock under this program for an aggregate purchase price of approximately $479 million. In addition, on February 9, 2011, the Board of Directors declared a cash dividend of $0.165 per common share to be paid on May 11, 2011 to shareholders of record as of March 16, 2011.  On May 11, 2011, the Company made a cash dividend payment of $192 million to such shareholders.

Product Release Highlights

During the six months ended June 30, 2011, we released a series of Call of Duty: Black Ops downloadable content packs: Call of Duty: Black Ops First Strike, Call of Duty: Black Ops Escalation, and for Xbox 360, Call of Duty: Black Ops Annihilation. In addition, we released Transformers: Dark of the Moon, as well as Nascar The Game 2011, Wipeout: In the Zone on Kinect for Xbox 360 and a selection of other casual titles. We also released Lucas Arts’ title Lego Star Wars III, which we publish on behalf of Lucas Arts in Europe and certain countries in Asia Pacific.

Activision Blizzard Upcoming Product Releases

During the third quarter 2011, we expect to release the Call of Duty: Black Ops Resurrection content pack for Xbox 360, PS3 and PC, X-Men Destiny, Cabela’s Big Game Hunter 2012 and Cabela’s Hunting Party, a Kinect-ready title for Xbox 360. On July 12, 2011, we launched World of Warcraft: Cataclysm in China.  On July 28, 2011, we released the Call of Duty: Black Ops Annihilation content pack for PS3 and PC.

Management’s Overview of Business Trends

We provide our products through both the retail channels and digital online delivery methods. Many of our video games that are available through retailers as physical “boxed” software products such as DVDs are also available by direct digital download through the Internet (both from websites that we own and from others owned by third parties). We also offer downloadable content as add-ons to our products (e.g., new multi-player content packs). Digital online-delivered content is generally offered to consumers for a one-time fee. Our subscription based services for World of Warcraft are digitally delivered and hosted by Blizzard Entertainment’s proprietary online-game related service, Battle.net. Digital revenues have become an increasingly important part of our business and we continue to focus on and develop digital products. We currently define digital online channel-related sales as revenues from subscriptions and licensing royalties, value added services, downloadable content, digitally distributed products, and wireless devices. This definition may differ from that used by our competitors or other companies.  For the quarter ended June 30, 2011, our sales through digital online channels grew by $91 million.  For the six months ended June 30, 2011, our sales through digital online channels grew by $188 million.

Conditions in the retail channels of the video games industry have remained challenging for the first six months of 2011. In the U.S. and Europe, retail sales within the industry experienced a combined overall decrease of 6% for the first six months of 2011, as compared to the same period in 2010, according to The NPD Group, Charttrack and Gfk.  This suggests a continuing downward pressure in the retail channels and an increasing shift towards digital distribution. Consistent with that, we experienced year-over-year growth of net revenues from digital online channels as a percentage of our total net revenues.

This digital revenue growth positively impacted operating margin, and helped the Company achieve favorable operating margins in the three and six months ended June 30, 2011.  We intend to continue to invest resources and capital in our higher-margin digital products for the remainder of 2011, as we seek to extend our digital leadership and expand our core brands in this channel. Please refer to the reconciliation between GAAP and non-GAAP net revenues by distribution channel and our non-GAAP financial measures disclosure below.

During the six months ended June 30, 2011, we saw continued growth in retail sales of software for high definition platforms (i.e., Xbox 360 and PS3), which grew by 3% as compared to the same period in 2010, while retail software sales for the Nintendo Wii and handheld platforms declined by 15% year-over-year, all according to The NPD Group, Charttrack and Gfk.

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Since our more focused slate of titles is concentrated on products for high definition platforms, our results have benefited from the industry growth of these platforms. Conversely, since we have limited our offerings in the music and casual genres, we have been less impacted by the continuing decline in sales for the Nintendo Wii and handheld platforms than the overall industry.  We expect this trend to continue for the industry for the remainder of 2011.

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Consolidated Statements of Operations Data

The following table sets forth consolidated statements of operations data for the periods indicated in dollars and as a percentage of total net revenues (amounts in millions):

	Three months ended June 30,								Six months ended June 30,
	2011				2010				2011				2010
Net revenues:
Product sales	$	768	67	%	$	643	66	%	$	1,829	70	%	$	1,629	72	%
Subscription, licensing, and other revenues	378		33		324		34		766		30		646		28
Total net revenues	1,146		100		967		100		2,595		100		2,275		100
Costs and expenses:
Cost of sales — product costs	213		19		235		25		512		19		572		25
Cost of sales — MMORPG	59		5		53		5		122		5		109		5
Cost of sales — software royalties and amortization	47		4		51		5		109		4		150		7
Cost of sales — intellectual property licenses	24		2		29		3		53		2		72		3
Product development	116		10		100		10		258		10		237		11
Sales and marketing	90		8		125		13		150		6		181		8
General and administrative	127		11		74		8		228		9		143		6
Restructuring	3		—		—		—		22		1		—		—
Total costs and expenses	679		59		667		69		1,454		56		1,464		65
Operating income	467		41		300		31		1,141		44		811		35
Investment and other income, net	2		—		1		—		5		—		1		—
Income before income tax expense	469		41		301		31		1,146		44		812		35
Income tax expense	134		12		82		8		308		12		212		9
Net income	$	335	29	%	$	219	23	%	$	838	32	%	$	600	26	%

Operating Segment Results

Our operating segments are consistent with our internal organizational structure, the manner in which our operations are reviewed and managed by our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), the manner in which operating performance is assessed and resources are allocated, and the availability of separate financial information. We do not aggregate operating segments.

The CODM reviews segment performance exclusive of the impact of the change in deferred net revenues and related cost of sales with respect to certain of our online-enabled games, stock-based compensation expense, restructuring expense, amortization of intangible assets, and impairment of intangible assets. The CODM does not review any information regarding total assets on an operating segment basis and, accordingly, no disclosure is made with respect thereto.  Information on the operating segments and reconciliations of total segment net revenues and total segment income (loss) from operations to consolidated net revenues and income before income tax expense from external customers for the three and six months ended June 30, 2011 and 2010 are presented below (amounts in millions):

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	Three months ended June 30,									Six months ended June 30,
	2011			2010			Increase (Decrease)			2011			2010			Increase (Decrease)
Segment net revenues:
Activision	$	323		$	333		$	(10	)	$	646		$	670		$	(24	)
Blizzard	313			299			14			671			605			66
Distribution	63			51			12			137			122			15
Operating segment net revenue total	699			683			16			1,454			1,397			57
Reconciliation to consolidated net revenues:
Net effect from deferral of net revenues	447			284						1,141			878
Consolidated net revenues	$	1,146		$	967					$	2,595		$	2,275
Segment income from operations:
Activision	$	31		$	(53	)	$	84		$	78		$	(46	)	$	124
Blizzard	135			155			(20		)	306			313			(7		)
Distribution	(1		)	(1		)	—			—			(1		)	1
Operating segment income from operations total	165			101			64			384			266			118
Reconciliation to consolidated operating income and consolidated income before income tax expense:
Net effect from deferral of net revenues and related cost of sales	332			227						838			637
Stock-based compensation expense	(20		)	(17		)				(43		)	(60		)
Restructuring	(3		)	(1		)				(22		)	(4		)
Amortization of intangible assets	(7		)	(10		)				(16		)	(28		)
Consolidated operating income	467			300						1,141			811
Investment and other income, net	2			1						5			1
Consolidated income before income tax expense	$	469		$	301					$	1,146		$	812

Segment Net Revenues

Activision

Activision’s net revenues decreased for the three and six months ended June 30, 2011 as compared to the same periods in 2010, primarily due to a more focused slate with the release of fewer key titles in 2011 than in 2010 and lower catalogue sales of games in the music and casual games genres. During the second quarter of 2011, Activision released one key title, Transformers: Dark of the Moon, whereas we released four key titles in the second quarter of 2010, Singularity, Transformers: War For Cybertron, Shrek Forever After and Blur.  During the six months ended June 30, 2011, Activision released two key titles compared to the release of five key titles in the same period in 2010.  These lower net revenues were partially offset by the continued strong catalogue performance from Call of Duty: Black Ops, which was released in November 2010, and the timing of the releases and greater success of the downloadable content packs associated with Call of Duty: Black Ops, as compared to the downloadable content packs associated with Call of Duty: Modern Warfare 2 in the prior year. We released Call of Duty: Black Ops First Strike in the first quarter of 2011, Call of Duty: Black Ops Escalation in the second quarter of 2011 and Call of Duty: Black Ops Annihilation for Xbox 360 on June 28, 2011. Further, the release in the first quarter of 2011 of Lego Star Wars III, which we publish on behalf of Lucas Arts in Europe and certain countries in Asia Pacific, partially offset the lower net revenues.

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Blizzard

Blizzard’s net revenues increased for the three and six months ended June 30, 2011 as compared to the same periods in 2010, primarily as a result of net revenues from World of Warcraft: Cataclysm, which was released in December 2010, StarCraft II: Wings of Liberty, which was released in July 2010, and favorable movement in foreign exchange rates. Additionally, net revenues increased due to the release of World of Warcraft: Wrath of the Lich King in China in August 2010 and the launch of certain value-added services in China in December 2010. Value-added services consist of transactions such as realm transfers, faction changes, and other character customizations within the World of Warcraft game play. As of June 30, 2011, World of Warcraft subscribers totaled 11.1 million.  Looking forward, the company’s objective is to deliver new game content in all regions to further appeal to the gaming community.

Distribution

Distribution’s net revenues increased for the three and six months ended June 30, 2011 as compared to the same periods in 2010, primarily due to several one-time sales opportunities.

Segment Income from Operations

Activision

Activision’s operating income increased for the three and six months ended June 30, 2011 as compared to the same periods in 2010 despite the decrease in Activision’s net revenues previously described. The increase was primarily attributable to a greater sales mix of products with higher margins, including products distributed through the digital online channels and cost savings realized from a restructuring plan approved by the Board of Directors of the Company on February 3, 2011. The execution of this restructuring plan has included a focus on the development and publication of a reduced slate of titles on a going-forward basis, including the discontinuation of the development of music-based games, the closure of the related business unit and the cancellation of other titles then in production, along with a related reduction in studio headcount and corporate overhead (the “2011 Restructuring”).  This increase in Activision’s operating income was also attributable to a decrease in amortization of capitalized software development costs and intellectual property license expenses as we have fewer titles released during the periods of 2011 as compared to the same periods of 2010, and decreases in sales and marketing and product development expenses.  These decreases in expenses were partially offset by an increase in legal expenses.

Blizzard

Blizzard’s operating income decreased for the three and six months ended June 30, 2011 as compared to the same periods in 2010, primarily as a result of Blizzard’s investment in customer services and data centers, higher product investments and lower capitalization of product development costs.  These increased expenses were partially offset by the increase in net revenues described above and the decrease in sales and marketing expenses as compared to the same periods in 2010, which were primarily incurred to support the release of StarCraft II: Wings of Liberty in the prior year.

Non-GAAP Financial Measures

The analysis of revenues by distribution channel is presented both on a GAAP (including the impact from change in deferred revenues) and non-GAAP (excluding the impact from change in deferred revenues) basis. We use this non-GAAP measure internally to monitor our operating performance.  We believe this is appropriate because this non-GAAP measure enables an analysis of performance based on the timing of actual transactions with our customers, which is consistent with the way the Company is measured by investment analysts and industry data sources. In addition, excluding the impact from change in deferred net revenue provides a much more timely indication of trends in our sales and other operating results. While we believe that this non-GAAP measure is useful in evaluating our business, this information should be considered as supplemental in nature and is not meant to be considered in isolation from or as a substitute for the related financial information prepared in accordance with GAAP. In addition, this non-GAAP financial measure may not be the same as non-GAAP measures presented by other companies.

We currently define digital online channels-related sales as revenues from subscriptions and licensing royalties, value added services, downloadable content, digitally distributed products, and wireless devices.

The following table provides a reconciliation between GAAP and non-GAAP net revenues by distribution channel for the three and six months ended June 30, 2011 and 2010 (amounts in millions):

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	Three months ended June 30,						Increase			Six months ended June 30,						Increase
	2011			2010			(Decrease)			2011			2010			(Decrease)
GAAP net revenues by distribution channel
Retail channels	$	660		$	584		$	76		$	1,607		$	1,490		$	117
Digital online channels	423			332			91			851			663			188
Total Activision and Blizzard	1,083			916			167			2,458			2,153			305
Distribution	63			51			12			137			122			15
Total consolidated GAAP net revenues	1,146			967			179			2,595			2,275			320
Change in deferred net revenues
Retail channels	(448		)	(326		)				(1,154		)	(928		)
Digital online channels	1			42						13			50
Total changes in deferred net revenues	(447		)	(284		)				(1,141		)	(878		)
Non-GAAP net revenues by distribution channel
Retail channels	212			258			(46		)	453			562			(109		)
Digital online channels	424			374			50			864			713			151
Total Activision and Blizzard	636			632			4			1,317			1,275			42
Distribution	63			51			12			137			122			15
Total non-GAAP net revenues (1)	$	699		$	683		$	16		$	1,454		$	1,397		$	57

(1) Total non-GAAP net revenues presented also represents our total operating segment net revenues.

The increases in non-GAAP net revenues from digital online channels for the three and six months ended June 30, 2011 as compared to the same periods of 2010 were attributable to the release of a series of Call of Duty: Black Ops downloadable content packs: Call of Duty: Black Ops First Strike released in the first quarter of 2011, Call of Duty: Black Ops Escalation released in the second quarter of 2011 and Call of Duty: Black Ops Annihilation released for Xbox 360 on June 28, 2011, as well as a higher number of digital downloads of games from the Call of Duty, World of Warcraft and StarCraft franchises. The decreases in non-GAAP net revenues from retail channels for the three and six months ended June 30, 2011 as compared to the same periods in 2010 were the result of our more focused slate with the release of fewer key titles and directionally consistent with the conditions in the retail channels of the video games industry. The decrease was partially offset by our continued strong performance of the Call of Duty and World of Warcraft franchises.

The increases in GAAP net revenues from digital online channels for the three and six months ended June 30, 2011 as compared to the same periods of 2010 were primarily due to the continuing success of the Call of Duty, World of Warcraft and StarCraft franchises, resulting in more deferred revenues recognized during the periods as compared to the same periods 2010.

Consolidated Results

Net Revenues by Geographic Region

The following table details our consolidated net revenues by geographic region for the three and six months ended June 30, 2011 and 2010 (amounts in millions):

	Three months ended June 30,				Increase		Six months ended June 30,				Increase
	2011		2010		(Decrease)		2011		2010		(Decrease)
Geographic region net revenues:
North America	$	580	$	567	$	13	$	1,328	$	1,270	$	58
Europe	467		337		130		1,061		861		200
Asia Pacific	99		63		36		206		144		62
Consolidated net revenues	$	1,146	$	967	$	179	$	2,595	$	2,275	$	320

The increase / (decrease) in deferred revenues recognized by geographic region for the three and six months ended June 30, 2011 and 2010 was as follows (amounts in millions):

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	Three months ended June 30,				Increase		Six months ended June 30,				Increase
	2011		2010		(Decrease)		2011		2010		(Decrease)
Increase/(decrease) in deferred revenues recognized by geographic region:
North America	$	249	$	192	$	57	$	632	$	504	$	128
Europe	181		79		102		452		333		119
Asia Pacific	17		13		4		57		41		16
Total impact on consolidated net revenues	$	447	$	284	$	163	$	1,141	$	878	$	263

Consolidated net revenues for all geographic regions increased for the three and six months ended June 30, 2011 as compared to the same periods in 2010, primarily due to the same reasons discussed in our segment net revenues analysis.  Further, in the Asia Pacific region, due to the transition to a distributor-based model with a third-party service provider in one of the countries in the region, there was an increase in revenues resulting from the one-time sale of inventories on-hand to the distributor in the second quarter of 2011. Net revenues also increased due to the favorable effect of foreign currency exchange rates in Europe and Asia Pacific.

The increase in deferred revenues recognized for the three and six months ended June 30, 2011 was primarily attributable to our Call of Duty and World of Warcraft franchises, particularly the success of the release of Call of Duty: Black Ops and of World of Warcraft: Cataclysm, both in the fourth quarter of 2010.  The launch of StarCraft II: Wings of Liberty in the third quarter of 2010 and the revenues from value-added services also contributed to the increase in deferred revenues recognized.  These increases were partially offset by our more focused slate with the release of fewer key titles in 2011 than in 2010 and lower catalogue sales of titles in the music and casual game genres.  Additionally, for the six months ended June 30, 2011, the increase in deferred revenues recognized was also partially offset by higher deferred revenues due to the timing of releases and greater success of the downloadable content packs associated with Call of Duty: Black Ops as compared to the downloadable content packs associated with Call of Duty: Modern Warfare 2 in the prior year.

Foreign Exchange Impact

Changes in foreign exchange rates are estimated to have a positive impact of approximately $60 million and $70 million on Activision Blizzard’s net revenues for the three and six months ended June 30, 2011 as compared to the same period in 2010.  The change is primarily due to the weakening of the U.S. dollar relative to the British pound, the euro, and the Australian dollar in 2011 compared to 2010.

Net Revenues by Platform

The following tables detail our net revenues by platform and as a percentage of total consolidated net revenues for the three and six months ended June 30, 2011 and 2010 (amounts in millions):

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	Three months ended June 30, 2011		% of total consolidated net revenues		Three months ended June 30, 2010		% of total consolidated net revenues		Increase(Decrease)
Platform net revenues:
Online subscriptions*	$	359	31	%	$	291	30	%	$	68
PC and other	80		7		79		8		1
Console
Sony PlayStation 3	239		21		182		19		57
Sony PlayStation 2	2		—		9		1		(7		)
Microsoft Xbox 360	300		26		240		24		60
Nintendo Wii	70		6		76		8		(6		)
Total console	611		53		507		52		104
Handheld	33		3		39		5		(6		)
Total platform net revenues	1,083		94		916		95		167
Distribution	63		6		51		5		12
Total consolidated net revenues	$	1,146	100	%	$	967	100	%	$	179

	Six months ended		% of total consolidated		Six months ended		% of total consolidated		Increase
	June 30, 2011		net revenues		June 30, 2010		net revenues		(Decrease)
Platform net revenues:
Online subscriptions*	$	754	29	%	$	602	26	%	$	152
PC and Other	205		8		127		7		78
Console
Sony PlayStation 3	581		22		486		22		95
Sony PlayStation 2	6		—		24		1		(18		)
Microsoft Xbox 360	697		27		624		27		73
Nintendo Wii	152		6		212		9		(60		)
Total console	1,436		55		1,346		59		90
Handheld	63		3		78		3		(15		)
Total platform net revenues	2,458		95		2,153		95		305
Distribution	137		5		122		5		15
Total consolidated net revenues	$	2,595	100	%	$	2,275	100	%	$	320

* Revenue from online subscriptions consists of revenue from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, and value-added services.

The increase / (decrease) in deferred revenues recognized by platform for the three and six months ended June 30, 2011 and 2010 was as follows (amounts in millions):

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	Three months ended June 30,					Increase			Six months ended June 30,				Increase
	2011		2010			(Decrease)			2011		2010		(Decrease)
Increase/(decrease) in deferred revenues recognized by platform:
Online subscriptions	$	67	$	(2	)	$	69		$	123	$	7	$	116
PC and other	35		37			(2		)	123		60		63
Console
Sony PlayStation 3	156		90			66			400		312		88
Microsoft Xbox 360	146		119			27			405		399		6
Nintendo Wii	39		40			(1		)	84		100		(16		)
Total console	341		249			92			889		811		78
Total handheld	4		—			4			6		—		6
Total impact on consolidated net revenues	$	447	$	284		$	163		$	1,141	$	878	$	263

Net revenues from online subscriptions increased for the three and six months ended June 30, 2011 as compared to the same periods in 2010, primarily driven by the recognition of deferred revenues from the release of World of Warcraft: Cataclysm in December 2010 and World of Warcraft’s value-added services.

Net revenues from Sony Playstation 3 and Microsoft Xbox 360 increased for the three and six months ended June 30, 2011 as compared to the same periods in 2010, primarily as a result of the continued success of the Call of Duty franchise, particularly the release of Call of Duty: Black Ops in the fourth quarter of 2010, which resulted in more deferred revenues recognized during the periods. Further, the increase in deferred revenues recognized during the six months ended June 30, 2011 for PC and other was due to the launch of StarCraft II: Wings of Liberty in the third quarter of 2010. The increase in net revenues was partially offset by higher deferred revenues due to the timing of releases and greater success of the downloadable content packs associated with Call of Duty: Black Ops, as compared to the downloadable content packs associated with Call of Duty: Modern Warfare 2, and by our more focused slate with the release of fewer key titles in 2011 than in 2010 and lower catalogue sales of titles in the music and casual game genres.

Net revenues from Nintendo Wii and handheld devices decreased for the three and six months ended June 30, 2011 as compared to the same periods in 2010, primarily as a result of the release of fewer key titles in 2011 than in 2010 and the impact of the lower catalogue sales of games in the casual game genre on the Nintendo platforms as consumers opt for high definition platform games and mobile games. Sony PlayStation 2 platform revenues continued to decline due to the aging lifecycle of the Sony PlayStation 2 platform as consumers are now fully transitioned to the current generation platforms.

Costs and Expenses

Cost of Sales

The following tables detail the components of cost of sales in dollars and as a percentage of total consolidated net revenues for the three and six months ended June 30, 2011 and 2010 (amounts in millions):

	Three months ended June 30, 2011		% of consolidated net revenues		Three months ended June 30, 2010		% of consolidated net revenues		Increase (Decrease)
Product costs	$	213	19	%	$	235	25	%	$	(22	)
MMORPG	59		5		53		5		6
Software royalties and amortization	47		4		51		5		(4		)
Intellectual property licenses	24		2		29		3		(5		)

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	Six months ended		% of		Six months ended		% of
	June 30, 2011		net revenues		June 30, 2010		net revenues		(Decrease)
Product costs	$	512	19	%	$	572	25	%	$	(60	)
MMORPG	122		5		109		5		13
Software royalties and amortization	109		4		150		7		(41		)
Intellectual property licenses	53		2		72		3		(19		)

Total cost of sales decreased for the three and six months ended June 30, 2011 as compared to the same periods in 2010, primarily due to the increasing portion of our net revenues from products with higher margins, including products distributed through the digital online channels, lower amortization from capitalized and deferred software development costs and intellectual property license expenses due to fewer title releases, and the decrease in amortization of intangible assets.  The decreases were partially offset by Blizzard’s increased investment in customer services for our subscribers and the increase in the deferred cost of sales which were recognized consistent with the increase in the deferred revenues recognized during the periods.

Product Development (amounts in millions)

			% of				% of
			consolidated				consolidated		Increase
	June 30, 2011		net revenues		June 30, 2010		net revenues		(Decrease)
Three Months Ended	$	116	10	%	$	100	10	%	$	16
Six Months Ended	258		10		237		11		21

Product development costs increased for the three and six months ended June 30, 2011 as compared to the same periods in 2010. This was primarily due to the lower capitalization of costs related to future titles, higher stock-based compensation expense and continuing investment in Call of Duty digital products. The increase was partially offset by the realization of cost savings from the 2011 Restructuring and a more focused release slate.

Sales and Marketing (amounts in millions)

			% of				% of
			consolidated				consolidated		Increase
	June 30, 2011		net revenues		June 30, 2010		net revenues		(Decrease)
Three Months Ended	$	90	8	%	$	125	13	%	$	(35	)
Six Months Ended	150		6		181		8		(31		)

Sales and marketing expenses decreased for the three and six months ended June 30, 2011 as compared to the same periods in 2010 due to the reduction in the number of major title releases in 2011 as compared to the same periods in 2010. This decrease was partially offset by our continued marketing support for Call of Duty and World of Warcraft franchises. Further, sales and marketing expenses were higher for the three months ended June 30, 2010 due to the release of StarCraft II: Wings of Liberty in the prior year.

General and Administrative (amounts in millions)

			% of				% of
			consolidated				consolidated		Increase
	June 30, 2011		net revenues		June 30, 2010		net revenues		(Decrease)
Three Months Ended	$	127	11	%	$	74	8	%	$	53
Six Months Ended	228		9		143		6		85

General and administrative expenses increased for the three and six months ended June 30, 2011 as compared to the same periods in 2010, primarily due to higher legal expenses, higher stock-based compensation expenses and the unfavorable revaluation impact from foreign currency exchange rates movement.

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Restructuring (amounts in millions)

			% of				% of
			consolidated				consolidated		Increase
	June 30, 2011		net revenues		June 30, 2010		net revenues		(Decrease)
Three Months Ended	$	3	—	%	$	—	—	%	$	3
Six Months Ended	22		1		—		—		22

As a result of the 2011 Restructuring, we incurred restructuring expenses during the three and six months ended June 30, 2011. We did not incur restructuring expenses during the three and six months ended June 30, 2010.  We have substantially completed the 2011 Restructuring and we expect to incur a maximum of approximately $6 million of additional restructuring expenses relating thereto. See Note 9 of the Notes to Condensed Consolidated Financial Statements for further details.

Investment and other income, net (amounts in millions)

			% of				% of
			consolidated				consolidated		Increase
	June 30, 2011		net revenues		June 30, 2010		net revenues		(Decrease)
Three Months Ended	$	2	—	%	$	1	—	%	$	1
Six Months Ended	5		—		1		—		4

Investment and other income, net increased for the three and six months ended June 30, 2011, as compared to the same periods in 2010, primarily as a result of change in our geographic investment mix with higher yield.

Income Tax Expense (amounts in millions)

			% of				% of
			Pretax				Pretax		Increase
	June 30, 2011		income		June 30, 2010		income		(Decrease)
Three Months Ended	$	134	28.6	%	$	82	27.2	%	$	52
Six Months Ended	308		26.9		212		26.1		96

The income tax expense of $134 million for the three months ended June 30, 2011 reflected an effective tax rate of 28.6%. The effective tax rate of 28.6% for the three months ended June 30, 2011 differed from the statutory rate of 35.0% primarily due to foreign income taxes levied at relatively lower rates, geographic mix in profitability, recognition of federal and California research and development credits and federal domestic production deductions.

For the six months ended June 30, 2011, the tax rate was based on our projected annual effective tax rate for 2011, and also included certain discrete tax items recorded during the period. Our tax expense of $308 million for the six months ended June 30, 2011 reflected an effective tax rate of 26.9% which differed slightly from the effective tax rate of 26.1% for the six months ended June 30, 2010, primarily due to a minor increase in the projected amount of domestic earnings with a higher statutory rate relative to earnings in foreign jurisdictions with a lower statutory rate.

The overall effective income tax rate for the year could be different from the effective tax rate for the three and six months ended June 30, 2011 and will be dependent, in part, on our profitability for the remainder of the year. In addition, our effective income tax rates for the remainder of 2011 and future periods will depend on a variety of factors, such as changes in the mix of income by tax jurisdiction, applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and other matters, and variations in the estimated and actual level of annual pre-tax income or loss. Further, the effective tax rate could fluctuate significantly on a quarterly basis and could be adversely affected by the extent that income (loss) before income tax expenses (benefit) is lower than anticipated in foreign regions where taxes are levied at lower statutory rates and/or higher than anticipated in our domestic region where taxes are levied at higher statutory rates.

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Liquidity and Capital Resources

Sources of Liquidity (amounts in millions)

							Increase
	At June 30, 2011			At December 31, 2010			(Decrease)
Cash and cash equivalents	$	2,334		$	2,812		$	(478	)
Short-term investments	610			696			(86		)
	$	2,944		$	3,508		$	(564	)
Percentage of total assets	25		%	26		%

	Six months ended June 30,						Increase
	2011			2010			(Decrease)
Cash flows provided by operating activities	$	56		$	201		$	(145	)
Cash flows provided by (used in) investing activities	63			(227		)	290
Cash flows used in financing activities	(663		)	(500		)	(163		)
Effect of foreign exchange rate changes	66			(28		)	94
Net decrease in cash and cash equivalents	$	(478	)	$	(554	)	$	76

Cash Flows Provided by Operating Activities

The primary drivers of cash flows provided by operating activities have typically included the collection of customer receivables generated by the sale of our products and our subscription revenues, partially offset by payments to vendors for the manufacturing, distribution and marketing of our products, payments to third-party developers and intellectual property holders, tax liabilities, and payments to our workforce. A significant operating use of our cash relates to our continued focus on customer service for our subscribers, and investment in software development and intellectual property licenses. Cash flows provided by operating activities were lower for the six months ended June 30, 2011 as compared to the same period in 2010.  The lower cash from operating activities was primarily attributable to the increasing use of cash in our operations, such as the payment of taxes and operating expenses for which we had previously accrued.

Cash Flows Provided by (Used in) Investing Activities

The primary drivers of cash flows from investing activities have typically included capital expenditures, acquisitions and the net effect of purchases and sales/maturities of short-term investments. Cash flows provided by investing activities during the six months ended June 30, 2011 mainly reflected the purchase of $300 million of short-term investments, capital expenditures of $18 million, primarily for property and equipment, and the receipt of $374 million in proceeds from maturity of investments, the majority of which consisted of U.S. treasury and government sponsored agency debt securities. Cash flows provided by investing activities were higher for the six months ended June 30, 2011 as compared to the same period in 2010.  The higher cash flows from investing activities were primarily attributable to increased proceeds from the maturities of our investments.

Cash Flows Used in Financing Activities

The primary drivers of cash flows used in financing activities have historically related to transactions involving our common stock, including the issuance of shares of common stock to employees, payment of dividends and the repurchase of our common stock.  We have not utilized debt financing as a source of cash flows. Cash flows used in financing activities during the six months ended June 30, 2011 primarily reflected payment of a cash dividend of $192 million to holders of our common stock and the repurchase of 43 million shares of our common stock for $479 million under the stock repurchase program authorized by our Board of Directors on February 3, 2011 (the “2011 Stock Repurchase Program”).  Under the 2011 Stock Repurchase Program, we may repurchase up to $1.5 billion of our common stock, on terms and conditions to be determined by the Company, until the earlier of March 31, 2012 and a determination by the Board of Directors to discontinue the program. It also reflected the purchase of 1.8 million shares of our common stock for $22 million under the stock repurchase program authorized by our Board of Directors on February 10, 2010 (the “2010 Stock Repurchase Program”). The 2010 Stock Repurchase Program expired on December 31, 2010. These purchases were partially offset by $26 million of proceeds from the issuance of shares of our common stock to employees in connection with stock option exercises. Cash flows used in financing activities were higher for the six months ended June 30, 2011 as compared to the

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same period in 2010. The higher use of cash in financing activities was primarily due to the increased share repurchase activities during the six months ended June 30, 2011.

Other Liquidity and Capital Resources

In addition to cash flows provided by operating activities, our primary source of liquidity was $2.9 billion of cash and cash equivalents and short-term investments at June 30, 2011. With our cash and cash equivalents and expected cash flows provided by operating activities, we believe that we have sufficient liquidity to meet daily operations in the foreseeable future. We also believe that we have sufficient working capital (specifically, $2.7 billion at June 30, 2011) to finance our operational requirements for at least the next twelve months, including purchases of inventory and equipment, the development, production, marketing and sale of new products, the provision of customer service for our subscribers, the acquisition of intellectual property rights for future products from third parties, and to fund our stock repurchase program and dividends.

As of June 30, 2011, the amount of cash and cash equivalents held outside of the U.S. by our foreign subsidiaries was $1.4 billion, compared with $1.2 billion as of December 31, 2010. If these funds are needed for our operations in the U.S., we would be required to accrue and pay U.S. taxes to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.

On February 9, 2011, the Board of Directors declared a cash dividend of $0.165 per common share to be paid on May 11, 2011 to shareholders of record as of March 16, 2011.  On May 11, 2011, the Company made a cash dividend payment of $192 million to such shareholders.

Capital Expenditures

For the year ending December 31, 2011, we anticipate total capital expenditures of approximately $100 million, primarily for property and equipment. Through the first six months of 2011, we made aggregate capital expenditures of $18 million.

Off-balance Sheet Arrangements

At June 30, 2011 and December 31, 2010, Activision Blizzard had no significant relationships with unconsolidated entities or financial parties, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes, that have or are reasonably likely to have a material future effect on our financial condition, changes in financial condition, revenues or expenses, results of operation, liquidity, capital expenditures, or capital resources.

Financial Disclosure

We maintain internal controls over financial reporting, which generally includes those controls relating to the preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). We also are focused on our “disclosure controls and procedures,” which as defined by the Securities and Exchange Commission (the “SEC”) are generally those controls and procedures designed to ensure that financial and non-financial information required to be disclosed in our reports filed with the SEC is reported within the time periods specified in the SEC’s rules and forms, and that such information is communicated to management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Our Disclosure Committee, which operates under the Board-approved Disclosure Committee Charter and Disclosure Controls & Procedures Policy, includes senior management representatives and assists executive management in its oversight of the accuracy and timeliness of our disclosures, as well as in implementing and evaluating our overall disclosure process. As part of our disclosure process, senior finance and operational representatives from all of our corporate divisions and business units prepare quarterly reports regarding their current quarter operational performance, future trends, subsequent events, internal controls, changes in internal controls and other accounting and disclosure relevant information. These quarterly reports are reviewed by certain key corporate finance executives. These corporate finance representatives also conduct quarterly interviews on a rotating basis with the preparers of selected quarterly reports. The results of the quarterly reports and related interviews are reviewed by the Disclosure Committee. Finance representatives also conduct reviews with our senior management team, our legal counsel and other appropriate personnel involved in the disclosure process, as appropriate. Additionally, senior finance and operational representatives provide internal certifications regarding the accuracy of information they provide that is utilized in the preparation of our periodic public reports filed with the SEC. Financial results and other financial information also are reviewed with the Audit Committee of the Board of Directors on a quarterly basis. As required by applicable regulatory requirements, the principal executive and financial officers

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review and make various certifications regarding the accuracy of our periodic public reports filed with the SEC, our disclosure controls and procedures, and our internal control over financial reporting. With the assistance of the Disclosure Committee, we will continue to assess and monitor, and make refinements to, our disclosure controls and procedures, and our internal controls over financial reporting.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

·Revenue Recognition

Revenue Arrangements with Multiple Deliverables

On January 1, 2011, we adopted amendments to an accounting standard related to revenue recognition for arrangements with multiple deliverables (which standard, as amended, is referred to herein as the “new accounting principles”).  The new accounting principles establish a selling price hierarchy for determining the selling price of a deliverable and require the application of the relative selling price method to allocate the arrangement consideration to each deliverable in a multiple deliverables revenue arrangement. Certain of our revenue arrangements have multiple deliverables and, as such, are accounted for under the new accounting principles. These revenue arrangements include product sales consisting of both software and hardware deliverables (such as peripherals or other ancillary collectors’ items sold together with physical “boxed” software) and our sales of World of Warcraft boxed products, expansion packs and value-added services, each of which is considered with the related subscription services for these purposes.  Our assessment of deliverables and units of accounting does not change under the new accounting principles.

Pursuant to the guidance of ASU 2009-13, when a revenue arrangement contains multiple elements, such as hardware and software products, licenses and/or services, we allocate revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor-specific-objective-evidence (“VSOE”) if it is available, third-party evidence (“TPE”) if VSOE is not available, or best estimated selling price (“BESP”) if neither VSOE nor TPE is available. In multiple element arrangements where more-than-incidental software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue.

As noted above, when neither VSOE nor TPE is available for a deliverable, we use BESP. We do not have significant revenue arrangements that require BESP for the three or six months ended June 30, 2011.  The inputs we use to determine the selling price of our significant deliverables include the actual price charged by the Company for a deliverable that the Company sells separately, which represents the VSOE, and the wholesale prices of the same or similar products, which represents TPE. The pattern and timing of revenue recognition for deliverables and allocation of the arrangement consideration did not change upon the adoption of the new accounting principles. Also, we do not expect the adoption of the new accounting principles to have a material effect on our financial statements in the periods after our initial adoption.

Product Sales

We recognize revenue from the sale of our products upon the transfer of title and risk of loss to our customers and once any performance obligations have been completed. Certain products are sold to customers with a street date (i.e., the earliest date these products may be sold by retailers). For these products, we recognize revenue on the later of the street date and the sale date. Revenue from product sales is recognized after deducting the estimated allowance for returns and price protection.

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For our software products with online functionality, we evaluate whether those features or functionality are more than an inconsequential separate deliverable in addition to the software product. This evaluation is performed for each software product and any online transaction, such as a digital download of a title or product add-ons, when the products are released.

When we determine that a software title contains online functionality that constitutes a more than inconsequential separate service deliverable in addition to the product, principally because of its importance to gameplay, we consider our performance obligations for this title to extend beyond the sale of the game. VSOE of fair value does not exist for the online functionality, as we do not separately charge for this component of the title. As a result, we recognize all of the software-related revenue from the sale of the title ratably over the estimated service period, which is estimated to begin the month after the later of the sale date and the street date of the title. In addition, we initially defer the costs of sales for the title (excluding intangible asset amortization), and recognize the costs of sales as the related revenues are recognized. Cost of sales includes manufacturing costs, software royalties and amortization, and intellectual property licenses costs.

We recognize revenues from World of Warcraft boxed product, expansion packs and value-added services, in each case with the related subscription service revenue, ratably over the estimated service periods beginning upon activation of the software and delivery of the related services. Revenues attributed to the sale of World of Warcraft boxed software and related expansion packs are classified as product sales and revenues attributable to subscriptions and other value-added services are classified as subscription, licensing and other revenues.

Revenues for software products with more-than-inconsequential separate service deliverables and World of Warcraft products are recognized over the estimated service periods, which range from a minimum of five months to a maximum of less than a year.

For our software products with features we consider to be incidental to the overall product offering and an inconsequential deliverable, such as products which provide limited online features at no additional cost to the consumer, we recognize the related revenue from them upon the transfer of title and risk of loss of the product to our customer.

With respect to online transactions, such as online downloads of titles or product add-ons that do not include a more-than-inconsequential separate service deliverable, revenue is recognized when the fee is paid by the online customer to purchase online content, the product is available for download and is activated for gameplay. In addition, persuasive evidence of an arrangement must exist and collection of the related receivable must be probable.

Sales incentives and other consideration given by us to our customers, such as rebates and product placement fees, are considered adjustments of the selling price of our products and are reflected as reductions to revenue. Sales incentives and other consideration that represent costs incurred by us for assets or services received, such as the appearance of our products in a customer’s national circular ad, are reflected as sales and marketing expenses when the benefit from the sales incentive is separable from sales to the same customer and we can reasonably estimate the fair value of the benefit.

·Accounting for Income Taxes

We record a tax provision for the anticipated tax consequences of the reported results of operations. In accordance with FASB income tax guidance (“ASC Topic 740”), the provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

Management believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining deferred tax assets. In the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of ASC Topic 740 and other complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.

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Further, the Company’s provision for taxes can fluctuate if estimated earnings are lower than anticipated in our foreign region with a lower tax rate and/or higher than anticipated in our domestic region with higher tax rates.

During the six months ended June 30, 2011, there were no significant changes in the following policies, which we also consider to be critical in fully understanding and evaluating our reported financial results. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2010 for a more complete discussion of our critical accounting policies and estimates, which also includes the areas listed below.

·Allowances for Returns, Price Protection, Doubtful Accounts, and Inventory Obsolescence

·Software Development Costs and Intellectual Property Licenses

·Fair Value Estimates

·Goodwill and Intangible Assets — Impairment Assessments

·Stock-Based Compensation

Recently Issued Accounting Pronouncements

In May 2011, the FASB issued an update to the accounting on fair value measurement to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards (“IFRS”). This update changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements. This update does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards within U.S. GAAP or IFRS. This update is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. Early adoption is prohibited. We are currently evaluating the impact, if any, of this new accounting update on our consolidated financial statements.

In June 2011, the FASB issued an update to the accounting on comprehensive income to increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS. This update requires that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This update does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. Further, this update does not affect how earnings per share is calculated or presented. This update is effective for interim and annual periods beginning after December 15, 2011 and is applied retrospectively. Early adoption is permitted. We do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential loss arising from fluctuations in market rates and prices.  Our market risk exposures primarily include fluctuations in interest rates, foreign currency exchange rates and market prices.

Foreign Currency Exchange Rate Risk

We transact business in many different foreign currencies and may be exposed to financial market risk resulting from fluctuations in foreign currency exchange rates. Revenues and related expenses generated from our international operations are generally denominated in their respective local currencies. Primary currencies include euros, British pounds, Australian dollars, South Korean won, and Swedish krona. Currency volatility is monitored throughout the year. To mitigate our foreign currency exchange rate exposure resulting from our foreign currency-denominated monetary assets, liabilities and earnings, we periodically enter into currency derivative contracts, principally swaps and forward contracts with maturities of twelve months or less. Vivendi is our principal counterparty and the risks of counterparty non-performance associated with these contracts are not considered to be material. We expect to continue to use economic hedge programs in the future to reduce foreign exchange-related volatility if it is determined that such hedging activities are appropriate to reduce risk. We do not hold or purchase any foreign currency contracts for trading or speculative purposes. All foreign currency economic hedging transactions are backed, in amount and by maturity, by an identified economic underlying item. Our foreign exchange forward contracts are not designated as hedging instruments and are accounted for as derivatives whereby the fair value of the contracts are reported as other current assets or other current liabilities in our condensed consolidated balance sheets, and the associated gains and losses from changes in fair value are reported in investment and other income, net and general and administrative expense in the condensed consolidated statements of operations.

The gross notional amount of outstanding foreign exchange swaps was $35 million and $138 million at June 30, 2011 and December 31, 2010, respectively. A pre-tax net unrealized gain of less than a million and $5 million for the three months ended June 30, 2011

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and 2010, respectively, and a pre-tax net unrealized loss of less than a million and unrealized gain of $4 million for the six months ended June 30, 2011 and 2010, respectively, resulted from the foreign exchange contracts and swaps with Vivendi and were recognized in the condensed consolidated statements of operations.

The consolidated statements of operations are translated into U.S. dollars at exchange rates indicative of market rates during each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency-denominated transactions results in reduced revenues, operating expenses, and net income from our international operations. Similarly, our revenues, operating expenses, and net income will increase for our international operations if the U.S. dollar weakens against foreign currencies. In the absence of the hedging activities described above, as of June 30, 2011, a hypothetical adverse foreign currency exchange rate movement of 10% would have resulted in potential declines in our net income of approximately $60 million. This sensitivity analysis assumes a parallel adverse shift of all foreign currency exchange rates against the U.S. dollar; however, all foreign currency exchange rates do not always move in such manner and actual results may differ materially.

Interest Rate Risk

Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio. We do not use derivative financial instruments to manage interest rate risk in our investment portfolio. Our investment portfolio consists primarily of debt instruments with high credit quality and relatively short average maturities and money market funds that invest in AAA-rated government-backed securities. Because short-term securities mature relatively quickly and must be reinvested at the then current market rates, interest income on a portfolio consisting of cash, cash equivalents or short-term securities is more subject to market fluctuations than a portfolio of longer term securities. Conversely, the fair value of such a portfolio is less sensitive to market fluctuations than a portfolio of longer term securities. At June 30, 2011, our $2.33 billion of cash and cash equivalents were comprised primarily of money market funds. At June 30, 2011, our $610 million of short-term investments included $596 million of U.S. treasury and government sponsored agency debt securities and $14 million of restricted cash. We had $25 million in auction rate securities at fair value classified as long-term investments at June 30, 2011. The Company has determined that, based on the composition of our investment portfolio as of June 30, 2011, there was no material interest rate risk exposure to the Company’s consolidated financial position, results of operations or cash flows as of that date.

Item 4. Controls and Procedures

Definition and Limitations of Disclosure Controls and Procedures.

Our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. A control system, no matter how well designed and operated, can provide only reasonable assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports. Inherent limitations to any system of disclosure controls and procedures include, but are not limited to, the possibility of human error and the circumvention or overriding of such controls by one or more persons. In addition, we have designed our system of controls based on certain assumptions, which we believe are reasonable, about the likelihood of future events, and our system of controls may therefore not achieve its desired objectives under all possible future events.

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures at June 30, 2011, the end of the period covered by this report.  Based on this evaluation, the principal executive officer and principal financial officer concluded that, at June 30, 2011, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized, and reported on a timely basis, and (ii) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting.

There have not been any changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

Legal Proceedings

After concluding an internal human resources inquiry into breaches of contract and insubordination by two senior employees at Infinity Ward, the Company terminated its employment of Jason West and Vince Zampella on March 1, 2010. On March 3, 2010, West and Zampella filed a complaint against the Company in Los Angeles Superior Court for breach of contract and wrongful termination, among other claims.   West and Zampella are seeking damages, including punitive damages, in excess of $36 million and declaratory relief.  On April 9, 2010, the Company filed a cross complaint against West and Zampella, asserting claims for breach of contract and fiduciary duty, among other claims.  The Company is seeking damages and declaratory relief.

In addition, 38 current and former employees of Infinity Ward filed a complaint against the Company in Los Angeles Superior Court on April 27, 2010 (Alderman et al. v. Activision Publishing, Inc. et al.).  An amended complaint was filed on July 8, 2010, which added seven additional plaintiffs.  On October 5, 2010, five plaintiffs, all current employees of Infinity Ward, filed dismissals without prejudice.  There are currently 40 plaintiffs in the case.  The plaintiffs have asserted claims for breach of contract, violation of the Labor Code of the State of California, conversion and other claims.  The plaintiffs claim that the Company failed to pay them bonuses and other compensation allegedly owed to them in an amount at least between $75 million and $125 million, plus punitive damages.  On October 12, 2010, the court consolidated this matter with the West and Zampella matter.

On January 18, 2011, the court granted the Company’s motion to amend its cross complaint against West and Zampella to add allegations with respect to them and to add Electronic Arts, Inc. as a party. On January 31, 2011, the case was transferred to the complex division. All parties have now responded to all of the governing pleadings in the case.  A status conference is set for August 9, 2011.

The Company does not expect this lawsuit to have a material impact on the Company.

In addition, we are party to other routine claims and suits brought by us and against us in the ordinary course of business, including disputes arising over intellectual property rights, contractual claims, employment laws, regulations and relationships, and collection matters. In the opinion of management, after consultation with legal counsel, the outcome of such routine claims and lawsuits will not have a material adverse effect on our business, financial condition, results of operations, or liquidity.

Item 1A.   Risk Factors

The reader should carefully consider, in connection with the other information in this report, the factors discussed in Part I, “Item 1A: Risk Factors” of the Company’s 2010 Annual Report on Form 10-K. These factors could cause our actual results to differ materially from those stated in forward-looking statements contained in this document and elsewhere.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchase of Equity Securities

The following table provides the number of shares purchased and average price paid per share during the quarter ended June 30, 2011, the total number of shares purchased as part of our publicly announced repurchase programs, and the approximate dollar value of shares that may yet be purchased under our stock repurchase program at June 30, 2011 (amounts in millions, except the number of shares and per share data).

41

				Total number of	Approximate dollar value
	Total number	Average		shares purchased as part	of shares that may
	of shares	price paid		of publicly announced	yet be purchased
Period	purchased (1)	per share		plans or programs (1)	under the plans or programs
April 1, 2011—April 30, 2011	9,459,445	$	11.11	9,459,445	$	1,074
May 1, 2011—May 31, 2011	4,338,103	11.40		4,338,103	1,024
June 1, 2011—June 30, 2011	291,900	11.42		291,900	1,021
Total	14,089,448	11.21		14,089,448

(1)  These purchases were made pursuant to the stock repurchase program (the “2011 Stock Repurchase Program”) approved by our Board of Directors on February 3, 2011 and announced on February 9, 2011 pursuant to which we may repurchase up to $1.5 billion of our common stock from time to time on the open market or in private transactions, including structured or accelerated transactions, on terms and conditions to be determined by the Company, until the earlier of March 31, 2012 and a determination by the Board of Directors to discontinue the repurchase program.

Item 6.  Exhibits

The exhibits listed on the accompanying index to exhibits are hereby incorporated by reference into this Quarterly Report on Form 10-Q.

42

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:  August 5, 2011

ACTIVISION BLIZZARD, INC.

/s/ THOMAS TIPPL	/s/ STEPHEN WEREB
Thomas Tippl	Stephen Wereb
Chief Operating Officer and Chief Financial Officer	Chief Accounting Officer and
Principal Financial Officer of	Principal Accounting Officer of
Activision Blizzard, Inc.	Activision Blizzard, Inc.

43

EXHIBIT INDEX

Exhibit Number	Exhibit
3.1	Amended and Restated Certificate of Incorporation of Activision Blizzard, Inc., dated July 9, 2008 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K, filed July 15, 2008).
3.2	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Activision Blizzard, Inc., dated August 15, 2008 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K, filed August 15, 2008).
3.3	Amended and Restated By-Laws of Activision Blizzard, Inc., as amended and restated as of February 2, 2010 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K, filed February 5, 2010).
31.1*	Certification of Robert A. Kotick pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Thomas Tippl pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Robert A. Kotick pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Thomas Tippl pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Document.

* Filed herewith

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at June 30, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2011 and June 30, 2010, (iii) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and June 30, 2010; (iv) Condensed Consolidated Statement of Changes in Shareholders’ Equity for the six months ended June 30, 2011; and (v) Notes to Condensed Consolidated Financial Statements.

In accordance with Rule 406T of Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections.

44

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Robert A. Kotick, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Activision Blizzard, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, at the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   August 5, 2011

/s/ ROBERT A. KOTICK

Robert A. Kotick

Chief Executive Officer of

Activision Blizzard, Inc.

1

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Thomas Tippl, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Activision Blizzard, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, at the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   August 5, 2011

/s/ THOMAS TIPPL

Thomas Tippl

Chief Operating Officer and Chief Financial Officer,

Principal Financial Officer of

Activision Blizzard, Inc.

1

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Activision Blizzard, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert A. Kotick, President and Chief Executive Officer of the Company, certify, to my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 5, 2011

/s/ ROBERT A. KOTICK

Robert A. Kotick

Chief Executive Officer of

Activision Blizzard, Inc.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

1

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Activision Blizzard, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas Tippl, Chief Operating Officer and Chief Financial Officer, Principal Financial Officer of the Company, certify, to my knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 5, 2011

/s/ THOMAS TIPPL

Thomas Tippl

Chief Operating Officer and Chief Financial Officer,

Principal Financial Officer of Activision Blizzard, Inc.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

1

XML



Computation of basic/diluted earnings per common share (Details) (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Numerator:
Consolidated net income	$ 335	$ 219	$ 838	$ 600
Less: Distributed earnings to unvested share-based awards that participate in earnings	0	0	(3)	(2)
Less: Undistributed earnings allocated to unvested share-based awards that participate in earnings	(5)	(2)	(9)	(3)
Numerator for basic earnings per common share - income available to common shareholders	$ 330	$ 217	$ 826	$ 595
Denominator:
Denominator for basic earnings per common share - weighted-average common shares outstanding (in shares)	1,141	1,232	1,157	1,239
Effect of potential dilutive common shares under the treasury stock method:
Employee stock options (in shares)	9	16	9	15
Denominator for diluted earnings per common share - weighted-average common shares outstanding plus dilutive effect of employee stock options (in shares)	1,150	1,248	1,166	1,254
Basic earnings per common share (in dollars per share)	$ 0.29	$ 0.18	$ 0.71	$ 0.48
Diluted earnings per common share (in dollars per share)	$ 0.29	$ 0.17	$ 0.71	$ 0.47
Common stock weighted-average shares, unvested restricted stock rights (in shares)	17	10	17	10
Antidilutive securities excluded from computation of diluted earnings per share (in shares)	31	23	31	23

XML



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Millions, except Per Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Net revenues
Product sales	$ 768	$ 643	$ 1,829	$ 1,629
Subscription, licensing, and other revenues	378	324	766	646
Total net revenues	1,146	967	2,595	2,275
Costs and expenses
Cost of sales - product costs	213	235	512	572
Cost of sales - massively multi-player online role-playing game ("MMORPG")	59	53	122	109
Cost of sales - software royalties and amortization	47	51	109	150
Cost of sales - intellectual property licenses	24	29	53	72
Product development	116	100	258	237
Sales and marketing	90	125	150	181
General and administrative	127	74	228	143
Restructuring	3	0	22	0
Total costs and expenses	679	667	1,454	1,464
Operating income	467	300	1,141	811
Investment and other income, net	2	1	5	1
Income before income tax expense	469	301	1,146	812
Income tax expense	134	82	308	212
Net income	$ 335	$ 219	$ 838	$ 600
Earnings per common share
Basic (in dollars per share)	$ 0.29	$ 0.18	$ 0.71	$ 0.48
Diluted (in dollars per share)	$ 0.29	$ 0.17	$ 0.71	$ 0.47
Weighted-average shares outstanding
Basic (in shares)	1,141	1,232	1,157	1,239
Diluted (in shares)	1,150	1,248	1,166	1,254
Dividends per common share (in dollars per share)	$ 0	$ 0	$ 0.165	$ 0.15

XML



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities:
Net income	$ 838	$ 600
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes	119	81
Depreciation and amortization	52	59
Amortization and write-off of capitalized software development costs and intellectual property licenses	124	142
Stock-based compensation expense	43	61
Excess tax benefits from stock option exercises	(4)	(6)
Changes in operating assets and liabilities:
Accounts receivable	518	525
Inventories	21	78
Software development and intellectual property licenses	(116)	(158)
Other assets	209	224
Deferred revenues	(1,164)	(936)
Accounts payable	(216)	(144)
Accrued expenses and other liabilities	(368)	(325)
Net cash provided by operating activities	56	201
Cash flows from investing activities:
Proceeds from maturities of investments	374	188
Payment of contingent consideration	(3)	(4)
Purchases of short-term investments	(300)	(388)
Capital expenditures	(18)	(39)
(Increase) decrease in restricted cash	10	16
Net cash used in investing activities	63	(227)
Cash flows from financing activities:
Proceeds from issuance of common stock to employees	26	30
Repurchase of common stock	(501)	(349)
Dividends paid	(192)	(187)
Excess tax benefits from stock option exercises	4	6
Net cash used in financing activities	(663)	(500)
Effect of foreign exchange rate changes on cash and cash equivalents	66	(28)
Net (decrease) increase in cash and cash equivalents	(478)	(554)
Cash and cash equivalents at beginning of period	2,812	2,768
Cash and cash equivalents at end of period	$ 2,334	$ 2,214

XML



Commitments and contingencies (Details) (USD $) In Millions	Dec. 31, 2010 Infinity Ward	Jun. 30, 2010 West and Zampella
Commitments and contingencies: [Line Items]
Minimum amount of damages sought by plaintiff, including punitive damages, and declaratory relief		$ 36
Bonuses and other compensation allegedly owed, minimum	75
Bonuses and other compensation allegedly owed, maximum	$ 125

XML



Summary of significant accounting policies (Policies)

6 Months Ended

Jun. 30, 2011

Summary of significant accounting policies

Revenue Recognition

Revenue Recognition

Revenue Arrangements with Multiple Deliverables

On January 1, 2011, we adopted amendments to an accounting standard related to revenue recognition for arrangements with multiple deliverables (which standard, as amended, is referred to herein as the “new accounting principles”). The new accounting principles establish a selling price hierarchy for determining the selling price of a deliverable and require the application of the relative selling price method to allocate the arrangement consideration to each deliverable in a multiple deliverables revenue arrangement. Certain of our revenue arrangements have multiple deliverables and, as such, are accounted for under the new accounting principles. These revenue arrangements include product sales consisting of both software and hardware deliverables (such as peripherals or other ancillary collectors' items sold together with physical “boxed” software)and our sales of World of Warcraft boxed products, expansion packs and value-added services, each of which is considered with the related subscription services for these purposes.  Our assessment of deliverables and units of accounting does not change under the new accounting principles.

Pursuant to the guidance of ASU 2009-13, when a revenue arrangement contains multiple elements, such as hardware and software products, licenses and/or services, we allocate revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor-specific-objective-evidence (“VSOE”) if it is available, third-party evidence (“TPE”) if VSOE is not available, or best estimated selling price (“BESP”) if neither VSOE nor TPE is available. In multiple element arrangements where more-than-incidental software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue.

As noted above, when neither VSOE nor TPE is available for a deliverable, we use BESP. We do not have significant revenue arrangements that require BESP for the three or six months ended June 30, 2011.  The inputs we use to determine the selling price of our significant deliverables include the actual price charged by the Company for a deliverable that the Company sells separately, which represents the VSOE, and the wholesale prices of the same or similar products, which represents TPE. The pattern and timing of revenue recognition for deliverables and allocation of the arrangement consideration did not change upon the adoption of the new accounting principles. Also, we do not expect the adoption of the new accounting principles to have a material effect on our financial statements in the periods after our initial adoption.

Product Sales

We recognize revenue from the sale of our products upon the transfer of title and risk of loss to our customers and once any performance obligations have been completed. Certain products are sold to customers with a street date (i.e., the earliest date these products may be sold by retailers). For these products, we recognize revenue on the later of the street date and the sale date. Revenue from product sales is recognized after deducting the estimated allowance for returns and price protection.

For our software products with online functionality, we evaluate whether those features or functionality are more than an inconsequential separate deliverable in addition to the software product. This evaluation is performed for each software product and any online transaction, such as a digital download of a title or product add-ons, when it is released.

When we determine that a software title contains online functionality that constitutes a more-than-inconsequential separate service deliverable in addition to the product, principally because of its importance to gameplay, we consider our performance obligations for this title to extend beyond the sale of the game. VSOE of fair value does not exist for the online functionality, as we do not separately charge for this component of the title. As a result, we recognize all of the software-related revenue from the sale of the title ratably over the estimated service period, which is estimated to begin the month after the later of the sale date and the street date of the title. In addition, we initially defer the costs of sales for the title (excluding intangible asset amortization), and recognize the costs of sales as the related revenues are recognized. Cost of sales includes manufacturing costs, software royalties and amortization, and intellectual property licenses costs.

We recognize revenues fromWorld of Warcraft boxed product, expansion packs and value-added services, in each case with the related subscription service revenue, ratably over the estimated service periods beginning upon activation of the software and delivery of the related services. Revenues attributed to the sale of World of Warcraft boxed software and related expansion packs are classified as product sales and revenues attributable to subscriptions and other value-added services are classified as subscription, licensing and other revenues.

Revenues for software products with more-than-inconsequential separate service deliverables and World of Warcraft products are recognized over the estimated service periods, which range from a minimum of five months to a maximum of less than a year.

For our software products with features we consider to be incidental to the overall product offering and an inconsequential deliverable, such as products which provide limited online features at no additional cost to the consumer, we recognize the related revenue from them upon the transfer of title and risk of loss of the product to our customer.

With respect to online transactions, such as online downloads of titles or product add-ons that do not include a more-than-inconsequential separate service deliverable, revenue is recognized when the fee is paid by the online customer to purchase online content, the product is available for download and is activated for gameplay. In addition, persuasive evidence of an arrangement must exist and collection of the related receivable must be probable.

Sales incentives and other consideration given by us to our customers, such as rebates and product replacement fees, are considered adjustments of the selling price of our productsand are reflected as reductions to revenue. Sales incentives and other consideration that represent costs incurred by us for assets or services received, such as the appearance of our products in a customer's national circular ad, are reflected as sales and marketing expenses when the benefit from the sales incentive is separable from sales to the same customer and we can reasonably estimate the fair value of the benefit.

Subscription Revenues

Subscription revenues are derived from World of Warcraft, a game that is playable through Blizzard's servers on a subscription-only basis. After the first month of free usage that is included with the World of Warcraft boxed software, the World of Warcraft end user may enter into a subscription agreement for additional future access. Revenues associated with the sale of subscriptions via boxed software and prepaid subscription cards, as well as prepaid subscriptions sales, are deferred until the subscription service is activated by the consumer and recognized ratably over the subscription period. Revenue from internet gaming rooms in Asia is recognized upon usage of the time packages sold. Value-added service revenues associated with subscriptions are recognized ratably over the estimated service periods.

Licensing Revenues

Third-party licensees in Russia, China and Taiwan distribute and host Blizzard's World of Warcraft game in their respective countries under license agreements with Blizzard. We receive royalties from the licensees as a result. We recognize these royalties as revenues based on the end users' activation of the underlying prepaid time, if all other performance obligations have been completed or based on usage by the end user when we have continuing service obligations. We recognize any upfront licensing fee received over the term of the contracts.

With respect to license agreements that provide customers the right to make multiple copies in exchange for guaranteed amounts, revenue is generally recognized upon delivery of a master copy. Per copy royalties on sales that exceed the guarantee are recognized as earned. In addition, persuasive evidence of an arrangement must exist and collection of the related receivable must be probable.

Breakage Revenues

World of Warcraft boxed product sales and subscription revenues are recognized upon activation of the game. We analyze historical activation patterns over time to determine when the likelihood of activation ever occurring becomes remote. We recognize revenues from subscriptions that have not yet been activated, prepaid subscription cards, as well as prepaid subscription sales, when the likelihood of future activation occurring is remote (defined as “breakage revenues”).

Other Revenues

Other revenues primarily include licensing activity of intellectual property other than software to third-parties. Revenue is recorded upon receipt of licensee statements, or upon the receipt of cash, provided the license period has begun.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 2,334	$ 2,812
Short-term investments	610	696
Accounts receivable, net of allowances of $251 million and $377 million at June 30, 2011 and December 31, 2010, respectively	140	640
Inventories	93	112
Software development	126	147
Intellectual property licenses	43	45
Deferred income taxes, net	511	648
Other current assets	97	299
Total current assets	3,954	5,399
Long-term investments	25	23
Software development	90	55
Intellectual property licenses	16	28
Property and equipment, net	163	169
Other assets	17	15
Intangible assets, net	144	160
Trademark and trade names	433	433
Goodwill	7,130	7,132
Total assets	11,972	13,414
Current liabilities:
Accounts payable	156	363
Deferred revenues	601	1,726
Accrued expenses and other liabilities	489	838
Total current liabilities	1,246	2,927
Deferred income taxes, net	97	120
Other liabilities	164	164
Total liabilities	1,507	3,211
Commitments and contingencies (Note 14)
Shareholders' equity:
Common stock, $.000001 par value, 2,400,000,000 shares authorized, 1,142,158,668 and 1,382,479,839 shares issued at June 30, 2011 and December 31, 2010, respectively	0	0
Additional paid-in capital	9,735	12,353
Less: Treasury stock, at cost, no shares and 199,159,987 shares at June 30, 2011 and December 31, 2010, respectively	0	(2,194)
Retained earnings	701	57
Accumulated other comprehensive income (loss)	29	(13)
Total shareholders' equity	10,465	10,203
Total liabilities and shareholders' equity	$ 11,972	$ 13,414

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Operating segments and geographic region (Details 2) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Operating income (loss)	$ 467	$ 300	$ 1,141	$ 811
Net effect from deferral of net revenues and related cost of sales	332	227	838	637
Stock-based compensation expense	(20)	(17)	(43)	(60)
Restructuring	(3)	(1)	(22)	(4)
Amortization of intangible assets and purchase price accounting related adjustments	(7)	(10)	(16)	(28)
Operating segments total
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Operating income (loss)	165	101	384	266
Activision
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Operating income (loss)	31	(53)	78	(46)
Blizzard
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Operating income (loss)	135	155	306	313
Distribution
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Operating income (loss)	$ (1)	$ (1)	$ 0	$ (1)

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Software development and intellectual property licenses (Tables)

6 Months Ended

Jun. 30, 2011

Software development and intellectual property licenses

Summarizes the components of software development and intellectual property licenses

	At		At
	June 30,		December 31,
	2011		2010
Internally developed software costs	$	141	$	142
Payments made to third-party software developers		75		60
Total software development costs	$	216	$	202
Intellectual property licenses	$	59	$	73

Amortization, write-offs and impairments

		Three months ended June 30,				Six months ended June 30,
		2011		2010		2011		2010
Amortization of capitalized software development costs
	and intellectual property licenses	$	57	$	67	$	130	$	168
Write-offs and impairments			---		---		---		15

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Operating segments and geographic region (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Operating Segments And Geographic Area Disclosure [Abstract]
Number of operating segments	3		3
No single customer accounted for more than, percentage of consolidated net revenue (in hundredths)	10.00%	10.00%	10.00%	10.00%
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	$ 1,146	$ 967	$ 2,595	$ 2,275
Net effect from deferral of net revenues	447	284	1,141	878
Operating segments total
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	699	683	1,454	1,397
Activision
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	323	333	646	670
Blizzard
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	313	299	671	605
Distribution
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	63	51	137	122
Total geographic region
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	1,146	967	2,595	2,275
North America
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	580	567	1,328	1,270
Europe
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	467	337	1,061	861
Asia Pacific
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	99	63	206	144
Total platform
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	1,083	916	2,458	2,153
Online subscriptions
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	359	291	754	602
Console
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	611	507	1,436	1,346
Hand-held
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	33	39	63	78
PC and Other
Revenue by Segment by Geographical Region by Platform [Line Items]
Net revenues	$ 80	$ 79	$ 205	$ 127

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Software development and intellectual property licenses

6 Months Ended

Jun. 30, 2011

Software development and intellectual property licenses

Software development and intellectual property licenses

6.       Software development and intellectual property licenses

The following table summarizes the components of our software development costs and intellectual property licenses (amounts in millions):

	At		At
	June 30,		December 31,
	2011		2010
Internally developed software costs	$	141	$	142
Payments made to third-party software developers		75		60
Total software development costs	$	216	$	202
Intellectual property licenses	$	59	$	73

Amortization, write-offs and impairments are comprised of the following (amounts in millions):

		Three months ended June 30,				Six months ended June 30,
		2011		2010		2011		2010
Amortization of capitalized software development costs
	and intellectual property licenses	$	57	$	67	$	130	$	168
Write-offs and impairments			---		---		---		15

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Comprehensive income and accumulated other comprehensive loss (Tables)

6 Months Ended

Jun. 30, 2011

Comprehensive income and accumulated other comprehensive income (loss)

Schedule of comprehensive income (loss)

			Three months ended June 30,				Six months ended June 30,
			2011		2010		2011		2010
Net income			$	335	$	219	$	838	$	600
Other comprehensive income (loss):
	Foreign currency translation adjustment			1		(13)		40		(33)
	Unrealized appreciation on
		investments, net of taxes		2		---		2		---
Other comprehensive income (loss)				3		(13)		42		(33)
Comprehensive income			$	338	$	206	$	880	$	567

Schedule of accumulated other comprehensive income (loss)

		At		At
		June 30,		December 31,
		2011		2010
Foreign currency translation adjustment		$	29	$	(11)
Unrealized depreciation on investments, net of deferred income taxes
	of $0 at June 30, 2011 and $(1) at December 31, 2010		---		(2)
Accumulated other comprehensive income (loss)		$	29	$	(13)

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Fair value measurements (Details 4) (USD $) In Millions	3 Months Ended
	Dec. 31, 2010
License agreements
Definite-Lived and Indefinite Lived Intangible Assets. [Line Items]
Impairment charges	$ 67
Game engines
Definite-Lived and Indefinite Lived Intangible Assets. [Line Items]
Impairment charges	9
Internally developed franchises
Definite-Lived and Indefinite Lived Intangible Assets. [Line Items]
Impairment charges	$ 250

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Software development and intellectual property licenses (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Software development and intellectual property licenses:
Internally developed software costs	$ 141		$ 141		$ 142
Payments made to third-party software developers	75		75		60
Total software development costs	216		216		202
Intellectual property licenses	59		59		73
Amortization, write-offs and impairments:
Amortization of capitalized software development costs and intellectual property licenses	57	67	130	168
Write-offs and impairments	$ 0	$ 0	$ 0	$ 15

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Intangible assets, net (Tables)

6 Months Ended

Jun. 30, 2011

Intangible assets, net

Schedule of finite lived and indefinite lived intangible assets by major class

		At June 30, 2011
		Estimated	Gross
		useful	carrying		Accumulated		Net carrying
		lives	amount		amortization		amount
Acquired definite-lived intangible assets:
	License agreements	3 - 10 years	$	88	$	(76)	$	12
	Game engines	2 - 5 years		32		(31)		1
	Internally-developed franchises	11 - 12 years		309		(180)		129
	Distribution agreements	4 years		18		(16)		2
Acquired indefinite-lived intangible assets:
	Activision trademark	Indefinite		386		---		386
	Acquired trade names	Indefinite		47		---		47
Total			$	880	$	(303)	$	577
		At December 31, 2010
		Estimated	Gross
		useful	carrying		Accumulated		Net carrying
		lives	amount		amortization		amount
Acquired definite-lived intangible assets:
	License agreements	3 - 10 years	$	88	$	(74)	$	14
	Game engines	2 - 5 years		32		(30)		2
	Internally-developed franchises	11 - 12 years		309		(167)		142
	Distribution agreements	4 years		18		(16)		2
Acquired indefinite-lived intangible assets:
	Activision trademark	Indefinite		386		---		386
	Acquired trade names	Indefinite		47		---		47
Total			$	880	$	(287)	$	593

Schedule of finite lived intangible assets, future amortization expense

2011 (remaining six months)	$	57
2012		35
2013		18
2014		9
2015		7
Thereafter		18
Total	$	144

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Goodwill

6 Months Ended

Jun. 30, 2011

Goodwill Disclosure [Abstract]

Goodwill

11.       Goodwill

The changes in the carrying amount of goodwill by operating segment for the six months ended June 30, 2011 are as follows (amounts in millions):

		Activision		Blizzard		Distribution		Total
Balance at December 31, 2010		$	6,942	$	178	$	12	$	7,132
	Tax benefit credited to goodwill		(4)		---		---		(4)
	Issuance of contingent consideration		3		---		---		3
	Foreign exchange		(1)		---		---		(1)
Balance at June 30, 2011		$	6,940	$	178	$	12	$	7,130

The tax benefit credited to goodwill represents the tax deduction resulting from the exercise of stock options that were outstanding and vested at the consummation of the Business Combination and included in the purchase price of the Company, to the extent that the tax deduction did not exceed the fair value of those options. Conversely, to the extent that the tax deduction did exceed the fair value of those options, the tax benefit is credited to additional paid-in capital.

Issuance of contingent consideration consists of additional purchase consideration paid during 2011 in relation to a previous acquisition.

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Summary of significant accounting policies

6 Months Ended

Jun. 30, 2011

Summary of significant accounting policies

Summary of significant accounting policies

2.       Summary of significant accounting policies

Revenue Recognition

Revenue Arrangements with Multiple Deliverables

On January 1, 2011, we adopted amendments to an accounting standard related to revenue recognition for arrangements with multiple deliverables (which standard, as amended, is referred to herein as the “new accounting principles”). The new accounting principles establish a selling price hierarchy for determining the selling price of a deliverable and require the application of the relative selling price method to allocate the arrangement consideration to each deliverable in a multiple deliverables revenue arrangement. Certain of our revenue arrangements have multiple deliverables and, as such, are accounted for under the new accounting principles. These revenue arrangements include product sales consisting of both software and hardware deliverables (such as peripherals or other ancillary collectors' items sold together with physical “boxed” software)and our sales of World of Warcraft boxed products, expansion packs and value-added services, each of which is considered with the related subscription services for these purposes.  Our assessment of deliverables and units of accounting does not change under the new accounting principles.

Pursuant to the guidance of ASU 2009-13, when a revenue arrangement contains multiple elements, such as hardware and software products, licenses and/or services, we allocate revenue to each element based on a selling price hierarchy. The selling price for a deliverable is based on its vendor-specific-objective-evidence (“VSOE”) if it is available, third-party evidence (“TPE”) if VSOE is not available, or best estimated selling price (“BESP”) if neither VSOE nor TPE is available. In multiple element arrangements where more-than-incidental software deliverables are included, revenue is allocated to each separate unit of accounting for each of the non-software deliverables and to the software deliverables as a group using the relative selling prices of each of the deliverables in the arrangement based on the aforementioned selling price hierarchy. If the arrangement contains more than one software deliverable, the arrangement consideration allocated to the software deliverables as a group is then allocated to each software deliverable using the guidance for recognizing software revenue.

As noted above, when neither VSOE nor TPE is available for a deliverable, we use BESP. We do not have significant revenue arrangements that require BESP for the three or six months ended June 30, 2011.  The inputs we use to determine the selling price of our significant deliverables include the actual price charged by the Company for a deliverable that the Company sells separately, which represents the VSOE, and the wholesale prices of the same or similar products, which represents TPE. The pattern and timing of revenue recognition for deliverables and allocation of the arrangement consideration did not change upon the adoption of the new accounting principles. Also, we do not expect the adoption of the new accounting principles to have a material effect on our financial statements in the periods after our initial adoption.

Product Sales

We recognize revenue from the sale of our products upon the transfer of title and risk of loss to our customers and once any performance obligations have been completed. Certain products are sold to customers with a street date (i.e., the earliest date these products may be sold by retailers). For these products, we recognize revenue on the later of the street date and the sale date. Revenue from product sales is recognized after deducting the estimated allowance for returns and price protection.

For our software products with online functionality, we evaluate whether those features or functionality are more than an inconsequential separate deliverable in addition to the software product. This evaluation is performed for each software product and any online transaction, such as a digital download of a title or product add-ons, when it is released.

When we determine that a software title contains online functionality that constitutes a more-than-inconsequential separate service deliverable in addition to the product, principally because of its importance to gameplay, we consider our performance obligations for this title to extend beyond the sale of the game. VSOE of fair value does not exist for the online functionality, as we do not separately charge for this component of the title. As a result, we recognize all of the software-related revenue from the sale of the title ratably over the estimated service period, which is estimated to begin the month after the later of the sale date and the street date of the title. In addition, we initially defer the costs of sales for the title (excluding intangible asset amortization), and recognize the costs of sales as the related revenues are recognized. Cost of sales includes manufacturing costs, software royalties and amortization, and intellectual property licenses costs.

We recognize revenues fromWorld of Warcraft boxed product, expansion packs and value-added services, in each case with the related subscription service revenue, ratably over the estimated service periods beginning upon activation of the software and delivery of the related services. Revenues attributed to the sale of World of Warcraft boxed software and related expansion packs are classified as product sales and revenues attributable to subscriptions and other value-added services are classified as subscription, licensing and other revenues.

Revenues for software products with more-than-inconsequential separate service deliverables and World of Warcraft products are recognized over the estimated service periods, which range from a minimum of five months to a maximum of less than a year.

For our software products with features we consider to be incidental to the overall product offering and an inconsequential deliverable, such as products which provide limited online features at no additional cost to the consumer, we recognize the related revenue from them upon the transfer of title and risk of loss of the product to our customer.

With respect to online transactions, such as online downloads of titles or product add-ons that do not include a more-than-inconsequential separate service deliverable, revenue is recognized when the fee is paid by the online customer to purchase online content, the product is available for download and is activated for gameplay. In addition, persuasive evidence of an arrangement must exist and collection of the related receivable must be probable.

Sales incentives and other consideration given by us to our customers, such as rebates and product replacement fees, are considered adjustments of the selling price of our productsand are reflected as reductions to revenue. Sales incentives and other consideration that represent costs incurred by us for assets or services received, such as the appearance of our products in a customer's national circular ad, are reflected as sales and marketing expenses when the benefit from the sales incentive is separable from sales to the same customer and we can reasonably estimate the fair value of the benefit.

Subscription Revenues

Subscription revenues are derived from World of Warcraft, a game that is playable through Blizzard's servers on a subscription-only basis. After the first month of free usage that is included with the World of Warcraft boxed software, the World of Warcraft end user may enter into a subscription agreement for additional future access. Revenues associated with the sale of subscriptions via boxed software and prepaid subscription cards, as well as prepaid subscriptions sales, are deferred until the subscription service is activated by the consumer and recognized ratably over the subscription period. Revenue from internet gaming rooms in Asia is recognized upon usage of the time packages sold. Value-added service revenues associated with subscriptions are recognized ratably over the estimated service periods.

Licensing Revenues

Third-party licensees in Russia, China and Taiwan distribute and host Blizzard's World of Warcraft game in their respective countries under license agreements with Blizzard. We receive royalties from the licensees as a result. We recognize these royalties as revenues based on the end users' activation of the underlying prepaid time, if all other performance obligations have been completed or based on usage by the end user when we have continuing service obligations. We recognize any upfront licensing fee received over the term of the contracts.

With respect to license agreements that provide customers the right to make multiple copies in exchange for guaranteed amounts, revenue is generally recognized upon delivery of a master copy. Per copy royalties on sales that exceed the guarantee are recognized as earned. In addition, persuasive evidence of an arrangement must exist and collection of the related receivable must be probable.

Breakage Revenues

World of Warcraft boxed product sales and subscription revenues are recognized upon activation of the game. We analyze historical activation patterns over time to determine when the likelihood of activation ever occurring becomes remote. We recognize revenues from subscriptions that have not yet been activated, prepaid subscription cards, as well as prepaid subscription sales, when the likelihood of future activation occurring is remote (defined as “breakage revenues”).

Other Revenues

Other revenues primarily include licensing activity of intellectual property other than software to third-parties. Revenue is recorded upon receipt of licensee statements, or upon the receipt of cash, provided the license period has begun.

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Inventories (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Inventories
Finished goods	$ 81	$ 98
Purchased parts and components	12	14
Inventories	$ 93	$ 112

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Fair value measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements Disclosure [Abstract]

Fair value measurements

8.       Fair value measurements

Fair Value Measurements on a Recurring Basis

Financial Accounting Standards Board (“FASB”) literature regarding fair value measurements for financial and non-financial assets and liabilities establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The three levels of inputs used to measure fair value are as follows:

• Level 1—Quoted prices in active markets for identical assets or liabilities.

• Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data.

• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The table below segregates all assets and liabilities that are measured at fair value on a recurring basis (which means they are so measured at least annually) into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date (amounts in millions):

				Fair Value Measurements at
				June 30, 2011 Using
				Quoted
				Prices in
				Active
				Markets for		Significant
				Identical		Other		Significant
		As of		Financial		Observable		Unobservable
		June 30,		Instruments		Inputs		Inputs		Balance Sheet
		2011		(Level 1)		(Level 2)		(Level 3)		Classification
Financial assets:
Money market funds		$	2,214	$	2,214	$	---	$	---	Cash and cash equivalents
U.S. treasuries and government
	agency securities		596		596		---		---	Short-term investments
ARS held through Morgan Stanley
	Smith Barney LLC		25		---		---		25	Long-term investments
Total financial assets at fair value		$	2,835	$	2,810	$	---	$	25

				Fair Value Measurements at
				December 31, 2010 Using
				Quoted
				Prices in
				Active
				Markets for		Significant
				Identical		Other		Significant
		As of		Financial		Observable		Unobservable
		December 31,		Instruments		Inputs		Inputs		Balance Sheet
		2010		(Level 1)		(Level 2)		(Level 3)		Classification
Financial assets:
Money market funds		$	2,216	$	2,216	$	---	$	---	Cash and cash equivalents
U.S. treasuries and foreign government
	bonds with original maturities of
	three months or less		332		332		---		---	Cash and cash equivalents
U.S. treasuries and government agency
	securities		672		672		---		---	Short-term investments
ARS held through Morgan Stanley
	Smith Barney LLC		23		---		---		23	Long-term investments
Foreign exchange contract derivatives			1		---		1		---	Other assets—current
Total financial assets at fair value		$	3,244	$	3,220	$	1	$	23

The following tables provide a reconciliation of the beginning and ending balances of our financial assets and financial liabilities classified as Level 3 by major categories (amounts in millions) at June 30, 2011 and 2010, respectively:

			Level 3
					Total
					financial
					assets at
			ARS		fair
			(a)		value
Balance at January 1, 2011			$	23	$	23
	Total unrealized gains included in
		other comprehensive income		2		2
Balance at June 30, 2011			$	25	$	25

			Level 3
							Total
							financial
					ARS rights		assets at
			ARS		from UBS		fair		Other financial
			(a)		(b)		value		liabilities
Balance at January 1, 2010			$	77	$	7	$	84	$	(23)
	Total gains (losses) (realized/unrealized)
		included in investment and other income, net		7		(7)		---		---
	Purchases of acquired sales, issuances and
		settlements		(61)		---		(61)		---
Balance at June 30, 2010			$	23	$	---	$	23	$	(23)

(a)       Fair value measurements of the auction rate securities (“ARS”) have been estimated using an income-approach model (specifically, discounted cash-flow analysis). When estimating the fair value, we consider both observable market data and non-observable factors, including credit quality, duration, insurance wraps, collateral composition, maximum rate formulas, comparable trading instruments and the likelihood of redemption. Significant assumptions used in the analysis include estimates for interest rates, spreads, cash flow timing and amounts, and holding periods of the securities. Assets measured at fair value using significant unobservable inputs (Level 3) represent 1% of our financial assets measured at fair value on a recurring basis at June 30, 2011.

In June 2010, we sold the remainder of our ARS held with UBS at par and recognized a gain of $7 million, which is included within investment and other income, net in our condensed consolidated statement of operations for the six months ended June 30, 2010.

(b)       ARS rights from UBS represented an offer from UBS providing us with the right to require UBS to purchase our ARS held through UBS at par value. To value the ARS rights, we considered the intrinsic value, time value of money, and our assessment of the credit worthiness of UBS. We exercised our ARS rights with UBS on June 30, 2010 and recorded a loss of $7 million, which is included within investment and other income, net in ourcondensed consolidated statement of operations for the six months ended June 30, 2010.

Foreign Currency Forward Contracts Not Designated as Hedges

We transact business in various currencies other than the U.S. dollar and have significant international sales and expenses denominated in currencies other than the U.S. dollar, subjecting us to currency exchange rate risks. To mitigate our risk from foreign currency fluctuations we periodically enter into currency derivative contracts, primarily swaps and forward contracts with maturities of twelve months or less, with Vivendi as our principal counterparty. We do not hold or purchase any foreign currency contracts for trading or speculative purposes and we do not designate these forward contracts or swaps as hedging instruments.  Accordingly, we report the fair value of these contracts in our condensed consolidated balance sheet with changes in fair value recorded in our condensed consolidated statement of operations. The fair value of foreign currency contracts is estimated based on the prevailing exchange rates of the various hedged currencies as of the end of the period.

Fair Value Measurements on a Non-Recurring Basis

We measure the fair value of certain assets on a non-recurring basis, generally annually or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. For the six-month period ended June 30, 2011, there were no impairment charges related to assets that are measured on a non-recurring basis.

The table below presents intangible assets that are not subject to recurring fair value measurement at December 31, 2010 (amounts in millions):

				Fair Value Measurements at
				December 31, 2010 Using
				Quoted
				Prices in
				Active
				Markets for		Significant
				Identical		Other		Significant
		As of		Financial		Observable		Unobservable
		December 31,		Instruments		Inputs		Inputs
		2010		(Level 1)		(Level 2)		(Level 3)		Total Losses
Non-financial assets:
Intangible assets, net		$	---	$	---	$	---	$	---	$	326
Total non-financial assets at fair
	value	$	---	$	---	$	---	$	---	$	326

We considered the continued economic downturn within our industry in 2010 and the change in the buying habits of casual consumers while planning for 2011 during the fourth quarter of 2010, resulting in a significant revision of our outlook for retail sales of software and a strategy change to, among other things, focus on fewer title releases in the casual genre and discontinue the development of music-based titles. As we considered this change in strategy to be an indicator of a potential impairment of our intangible assets, we updated our future projected revenue streams for certain franchises in the casual games and music genres. We performed recoverability tests and, where applicable, measured the impairment of the related intangible assets in accordance with ASC Subtopic 360-10.

Determining whether an impairment has occurred requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the estimated remaining useful life over which these cash flows will occur, the amount of these cash flows and the asset's residual value, if any. For intangible assets that do not pass the recoverability test, the measurement of an impairment loss requires a determination of fair value, which is based on the best information available. Based on the characteristics of the assets being valued and the availability of information, the Company used the income approach, which presumes that the value of an asset can be estimated by the net economic benefit to be received over the estimated remaining useful life of the asset, discounted to present value. We derived the required cash flow estimates from our historical experience and our internal business plans and applied an appropriate discount rate. Based on this analysis, we recorded impairment charges of $67 million, $9 million and $250 million to license agreements, game engines and internally-developed franchises intangible assets, respectively, for the year ended December 31, 2010 within our Activision Publishing Inc. segment.

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Capital transactions

6 Months Ended

Jun. 30, 2011

Capital Transactions Disclosure [Abstract]

Capital transactions

13.       Capital transactions

Repurchase Program

On February 10, 2010, our Board of Directors authorized a stock repurchase program (the “2010 Stock Repurchase Program”) under which we were authorized to repurchase up to $1 billion of our common stock.The 2010 Stock Repurchase Program expired on December 31, 2010. In January 2011, we settled a $22 million purchase of 1.8 million shares of our common stock that we had committed to repurchase in December 2010 pursuant to the 2010 Stock Repurchase Program.

On February 3, 2011, our Board of Directors authorized a new stock repurchase program (the “2011 Stock Repurchase Program”) under which we may repurchase up to $1.5 billion of our common stock, on terms and conditions to be determined by the Company, until the earlier of March 31, 2012 and a determination by the Board of Directors to discontinue the repurchase program. During the six months ended June 30, 2011, we repurchased 43 million shares of our common stock for $479 million pursuant to the 2011Stock Repurchase Program.

Dividend

On February 10, 2010, Activision Blizzard's Board of Directors declared a cash dividend of $0.15 per common share payable on April 2, 2010 to shareholders of record at the close of business on February 22, 2010, and on April 2, 2010, we made a cash dividend payment of $187 million to such shareholders. On October 22, 2010, the Company made dividend equivalent payments of $2 million related to this cash dividend to the holders of restricted stock units.

On February 9, 2011, our Board of Directors approved a cash dividend of $0.165per common share to be paid on May11, 2011 to shareholders of record as of March16, 2011, and on May 11, 2011, we made a cash dividend payment of $192 million to such shareholders.

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Restructuring

6 Months Ended

Jun. 30, 2011

Restructuring.

Restructuring

9. Restructuring

On February 3, 2011, the Board of Directors of the Company approved a restructuring plan (the “2011 Restructuring”) involving a focus on the development and publication of a reduced slate of titles on a going-forward basis, including the discontinuation of the development of music-based games, the closure of the related business unit and the cancellation of other titles then in production, along with a related reduction in studio headcount and corporate overhead.

The following table details the amount of the 2011 Restructuring reserves included in accrued expenses and other liabilities in the condensed consolidated balance sheet at June 30, 2011 (amounts in millions):

					Contract
			Facilities		termination
	Severance		costs		costs		Total
Balance at December 31, 2010	$	---	$	---	$	---	$	---
Costs charged to expense		17		4		1		22
Costs paid or otherwise settled		(10)		---		---		(10)
Balance at June 30, 2011	$	7	$	4	$	1	$	12

The 2011 Restructuring charges for the three and six months ended June 30, 2011 were $3million and $22 million, respectively.  These charges, as well as the 2011 Restructuring reserve balances at June 30, 2011, were recorded within our Activision Publishing, Inc. segment. We have substantially completed the 2011 Restructuring and we expect to incur a maximum of approximately $6 million ofadditional restructuring expenses relating thereto.

We have substantially completed our implementation of our organizational restructuring plan as a result of the business combination (the “Business Combination”) by and among the Company (then known as Activision, Inc.), Sego Merger Corporation, a wholly-owned subsidiary of the Company, Vivendi S.A. (“Vivendi”), VGAC LLC, a wholly-owned subsidiary of Vivendi, and Vivendi Games, Inc. (“Vivendi Games”), a wholly-owned subsidiary of VGAC LLC, consummated in July 2008. There wereminimal cash payments and no additional charges to the income statement for the three and six months ended June 30, 2011 relating to that restructuring.

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Computation of basic/diluted earnings per common share (Tables)

6 Months Ended

Jun. 30, 2011

Computation of basic/diluted earnings per common share.

Schedule of computation of earnings per share

				Three months ended June 30,				Six months ended June 30,
				2011		2010		2011		2010
Numerator:
	Consolidated net income			$	335	$	219	$	838	$	600
		Less: Distributed earnings to unvested
			stock-based awards that participate
			in earnings		---		---		(3)		(2)
		Less: Undistributed earnings allocated to
			unvested stock-based awards that
			participate in earnings		(5)		(2)		(9)		(3)
	Numerator for basic and diluted earnings per
		common share - net income available to
		common shareholders			330		217		826		595
Denominator:
	Denominator for basic earnings per common
		share - weighted-average common
		shares outstanding			1,141		1,232		1,157		1,239
	Effect of potential dilutive common shares
		under the treasury stock method:
		Employee stock options			9		16		9		15
		Denominator for diluted earnings per
			common share - weighted-average
			common shares outstanding plus
			dilutive effect of employee stock
			options		1,150		1,248		1,166		1,254
Basic earnings per common share				$	0.29	$	0.18	$	0.71	$	0.48
Diluted earnings per common share				$	0.29	$	0.17	$	0.71	$	0.47

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Comprehensive income and accumulated other comprehensive loss

6 Months Ended

Jun. 30, 2011

Comprehensive income and accumulated other comprehensive income (loss)

Comprehensive income and accumulated other comprehensive loss

7.       Comprehensive income and accumulated other comprehensive income (loss)

Comprehensive Income

The components of comprehensive income were as follows (amounts in millions):

			Three months ended June 30,				Six months ended June 30,
			2011		2010		2011		2010
Net income			$	335	$	219	$	838	$	600
Other comprehensive income (loss):
	Foreign currency translation adjustment			1		(13)		40		(33)
	Unrealized appreciation on
		investments, net of taxes		2		---		2		---
Other comprehensive income (loss)				3		(13)		42		(33)
Comprehensive income			$	338	$	206	$	880	$	567

The components of accumulated other comprehensive income (loss) were as follows (amounts in millions):

		At		At
		June 30,		December 31,
		2011		2010
Foreign currency translation adjustment		$	29	$	(11)
Unrealized depreciation on investments, net of deferred income taxes
	of $0 at June 30, 2011 and $(1) at December 31, 2010		---		(2)
Accumulated other comprehensive income (loss)		$	29	$	(13)

Income taxes were not provided for foreign currency translation items as these are considered indefinite investments in non-U.S. subsidiaries.

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Capital transactions (Details 2) (USD $) In Millions, except Per Share data	3 Months Ended			6 Months Ended
	Jun. 30, 2011	Dec. 31, 2010	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Share Repurchase Program [Abstract]
Dividends per common share (in dollars per share)	$ 0		$ 0	$ 0.165	$ 0.15
Cash dividend payment	$ 192	$ 2	$ 187	$ 192	$ 187

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (Parenthetical) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Dividends per common share (in dollars per share)	$ 0	$ 0	$ 0.165	$ 0.15

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Inventories

6 Months Ended

Jun. 30, 2011

Inventories

Inventories

3.       Inventories

Our inventories consist of the following (amounts in millions):

	At June 30, 2011		At December 31, 2010
Finished goods	$	81	$	98
Purchased parts and components		12		14
Inventories	$	93	$	112

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Fair value measurements (Details) (USD $) In Millions	Jun. 30, 2011	Dec. 31, 2010
Fair value measurements using quoted prices in active markets for identical financial instruments (Level 1)
Financial assets
Money market funds	$ 2,214	$ 2,216
U.S. treasuries with original maturities of three months or less		332
U.S. treasuries and government sponsored agency debt securities	596	672
ARS held through Morgan Stanley Smith Barney LLC	0	0
Foreign exchange contract derivatives, assets		0
Total financial assets at fair value	2,810	3,220
Fair value measurements using significant other observable inputs (Level 2)
Financial assets
Money market funds	0	0
U.S. treasuries with original maturities of three months or less		0
U.S. treasuries and government sponsored agency debt securities	0	0
ARS held through Morgan Stanley Smith Barney LLC	0	0
Foreign exchange contract derivatives, assets		1
Total financial assets at fair value	0	1
Fair value measurements using significant unobservable inputs (Level 3)
Financial assets
Money market funds	0	0
U.S. treasuries with original maturities of three months or less		0
U.S. treasuries and government sponsored agency debt securities	0	0
ARS held through Morgan Stanley Smith Barney LLC	25	23
Foreign exchange contract derivatives, assets		0
Total financial assets at fair value	25	23
Fair value
Financial assets
Money market funds	2,214	2,216
U.S. treasuries with original maturities of three months or less		332
U.S. treasuries and government sponsored agency debt securities	596	672
ARS held through Morgan Stanley Smith Barney LLC	25	23
Foreign exchange contract derivatives, assets		1
Total financial assets at fair value	$ 2,835	$ 3,244

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Goodwill (Tables)

6 Months Ended

Jun. 30, 2011

Goodwill Disclosure [Abstract]

Schedule of goodwill activity

		Activision		Blizzard		Distribution		Total
Balance at December 31, 2010		$	6,942	$	178	$	12	$	7,132
	Tax benefit credited to goodwill		(4)		---		---		(4)
	Issuance of contingent consideration		3		---		---		3
	Foreign exchange		(1)		---		---		(1)
Balance at June 30, 2011		$	6,940	$	178	$	12	$	7,130

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Capital transactions (Details) (USD $)	6 Months Ended	1 Months Ended		6 Months Ended
	Jun. 30, 2011	Jan. 31, 2011 Share Repurchase Program	Dec. 31, 2010 Share Repurchase Program	Jun. 30, 2011 New Share Repurchase Program	Feb. 03, 2011 New Share Repurchase Program
Share Repurchase Program [Line Items]
Share repurchase, cumulative amount authorized			$ 1,000,000,000		$ 1,500,000,000
Shares of common stock agreed to repurchase	$ 501,000,000	$ 22,000,000		$ 479,000,000
Shares of common stock agreed to repurchase (in shares)		1.8		43

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Intangible assets, net

6 Months Ended

Jun. 30, 2011

Intangible assets, net

Intangible assets, net

4.       Intangible assets, net

Intangible assets, net consist of the following (amounts in millions):

		At June 30, 2011
		Estimated	Gross
		useful	carrying		Accumulated		Net carrying
		lives	amount		amortization		amount
Acquired definite-lived intangible assets:
	License agreements	3 - 10 years	$	88	$	(76)	$	12
	Game engines	2 - 5 years		32		(31)		1
	Internally-developed franchises	11 - 12 years		309		(180)		129
	Distribution agreements	4 years		18		(16)		2
Acquired indefinite-lived intangible assets:
	Activision trademark	Indefinite		386		---		386
	Acquired trade names	Indefinite		47		---		47
Total			$	880	$	(303)	$	577
		At December 31, 2010
		Estimated	Gross
		useful	carrying		Accumulated		Net carrying
		lives	amount		amortization		amount
Acquired definite-lived intangible assets:
	License agreements	3 - 10 years	$	88	$	(74)	$	14
	Game engines	2 - 5 years		32		(30)		2
	Internally-developed franchises	11 - 12 years		309		(167)		142
	Distribution agreements	4 years		18		(16)		2
Acquired indefinite-lived intangible assets:
	Activision trademark	Indefinite		386		---		386
	Acquired trade names	Indefinite		47		---		47
Total			$	880	$	(287)	$	593

Amortization expense of intangible assets was $7 million and $16 million for the three and six months ended June 30,2011, respectively.Amortization expense of intangible assets was $11 million and $29 millionfor the three and six months ended June 30, 2010, respectively

The carrying amounts as of June 30, 2011 and December 31, 2010 in the tables above reflect a new cost basis for license agreements, game engines and internally-developed franchises due to impairment charges taken for the year ended December 31, 2010. The new cost basis includes the original gross carrying amount, less accumulated amortization and impairment charges of the impaired assets as of December 31, 2010.

At June 30, 2011, future amortization of definite-lived intangible assets is estimated as follows (amounts in millions):

2011 (remaining six months)	$	57
2012		35
2013		18
2014		9
2015		7
Thereafter		18
Total	$	144

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Fair value measurements (Details 3) (USD $) In Millions	Dec. 31, 2010
Fair value
Non-financial assets: [Line Item]
Intangible assets, net	$ 0
Total non-financial assets at fair value	0
Fair value measurements using quoted prices in active markets for identical financial instruments (Level 1)
Non-financial assets: [Line Item]
Intangible assets, net	0
Total non-financial assets at fair value	0
Fair value measurements using significant other observable inputs (Level 2)
Non-financial assets: [Line Item]
Intangible assets, net	0
Total non-financial assets at fair value	0
Fair value measurements using significant unobservable inputs (Level 3)
Non-financial assets: [Line Item]
Intangible assets, net	0
Total non-financial assets at fair value	0
Total Losses
Non-financial assets: [Line Item]
Intangible assets, net	326
Total non-financial assets at fair value	$ 326

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Fair value measurements (Tables)

6 Months Ended

Jun. 30, 2011

Fair Value Measurements Disclosure [Abstract]

Fair value, assets and liabilities measured on a recurring basis

				Fair Value Measurements at
				June 30, 2011 Using
				Quoted
				Prices in
				Active
				Markets for		Significant
				Identical		Other		Significant
		As of		Financial		Observable		Unobservable
		June 30,		Instruments		Inputs		Inputs		Balance Sheet
		2011		(Level 1)		(Level 2)		(Level 3)		Classification
Financial assets:
Money market funds		$	2,214	$	2,214	$	---	$	---	Cash and cash equivalents
U.S. treasuries and government
	agency securities		596		596		---		---	Short-term investments
ARS held through Morgan Stanley
	Smith Barney LLC		25		---		---		25	Long-term investments
Total financial assets at fair value		$	2,835	$	2,810	$	---	$	25

				Fair Value Measurements at
				December 31, 2010 Using
				Quoted
				Prices in
				Active
				Markets for		Significant
				Identical		Other		Significant
		As of		Financial		Observable		Unobservable
		December 31,		Instruments		Inputs		Inputs		Balance Sheet
		2010		(Level 1)		(Level 2)		(Level 3)		Classification
Financial assets:
Money market funds		$	2,216	$	2,216	$	---	$	---	Cash and cash equivalents
U.S. treasuries and foreign government
	bonds with original maturities of
	three months or less		332		332		---		---	Cash and cash equivalents
U.S. treasuries and government agency
	securities		672		672		---		---	Short-term investments
ARS held through Morgan Stanley
	Smith Barney LLC		23		---		---		23	Long-term investments
Foreign exchange contract derivatives			1		---		1		---	Other assets—current
Total financial assets at fair value		$	3,244	$	3,220	$	1	$	23

Fair value, assets and liabilities measured on a recurring basis, Level 3 reconciliation

			Level 3
					Total
					financial
					assets at
			ARS		fair
			(a)		value
Balance at January 1, 2011			$	23	$	23
	Total unrealized gains included in
		other comprehensive income		2		2
Balance at June 30, 2011			$	25	$	25

			Level 3
							Total
							financial
					ARS rights		assets at
			ARS		from UBS		fair		Other financial
			(a)		(b)		value		liabilities
Balance at January 1, 2010			$	77	$	7	$	84	$	(23)
	Total gains (losses) (realized/unrealized)
		included in investment and other income, net		7		(7)		---		---
	Purchases of acquired sales, issuances and
		settlements		(61)		---		(61)		---
Balance at June 30, 2010			$	23	$	---	$	23	$	(23)

Fair value, assets and liabilities measured on a nonrecurring basis

				Fair Value Measurements at
				December 31, 2010 Using
				Quoted
				Prices in
				Active
				Markets for		Significant
				Identical		Other		Significant
		As of		Financial		Observable		Unobservable
		December 31,		Instruments		Inputs		Inputs
		2010		(Level 1)		(Level 2)		(Level 3)		Total Losses
Non-financial assets:
Intangible assets, net		$	---	$	---	$	---	$	---	$	326
Total non-financial assets at fair
	value	$	---	$	---	$	---	$	---	$	326

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Description of Business and Business Combination (Details)	Jun. 30, 2011
Description Of Business And Basis Of Consolidation And Presentation [Line Items]
Percent of Activision Blizzard common stock owned by Vivendi (in hundredths)	63.00%

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Fair value measurements (Details 2) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Fair Value Assets and Fair Value Liabilities Measured on Recurring Basis Unobservable Input Reconciliation Asset and Liability [Line Items]
Level 3 measurement reconciliation, recurring basis, fair value assets beginning balance	$ 23	$ 84
Total gains or (losses) (realized/unrealized) included in investment and other income, net	2	0
Purchases or acquired sales, issuances and settlements		(61)
Level 3 measurement reconciliation, recurring basis, fair value assets ending balance	25	23
Percentage of assets measured on recurring basis at fair value using significant unobservable inputs (in hundredths)	1.00%
ARS
Fair Value Assets and Fair Value Liabilities Measured on Recurring Basis Unobservable Input Reconciliation Asset and Liability [Line Items]
Level 3 measurement reconciliation, recurring basis, fair value assets beginning balance	23	77
Total gains or (losses) (realized/unrealized) included in investment and other income, net	2	7
Purchases or acquired sales, issuances and settlements		(61)
Level 3 measurement reconciliation, recurring basis, fair value assets ending balance	25	23
ARS rights from UBS
Fair Value Assets and Fair Value Liabilities Measured on Recurring Basis Unobservable Input Reconciliation Asset and Liability [Line Items]
Level 3 measurement reconciliation, recurring basis, fair value assets beginning balance		7
Total gains or (losses) (realized/unrealized) included in investment and other income, net		(7)
Purchases or acquired sales, issuances and settlements		0
Level 3 measurement reconciliation, recurring basis, fair value assets ending balance		0
Other financial liabilities
Fair Value Assets and Fair Value Liabilities Measured on Recurring Basis Unobservable Input Reconciliation Asset and Liability [Line Items]
Level 3 measurement reconciliation, recurring basis, fair value assets beginning balance		(23)
Total gains or (losses) (realized/unrealized) included in investment and other income, net		0
Purchases or acquired sales, issuances and settlements		0
Level 3 measurement reconciliation, recurring basis, fair value assets ending balance		$ (23)

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Operating segments and geographic region (Tables)

6 Months Ended

Jun. 30, 2011

Operating Segments And Geographic Area Disclosure [Abstract]

Segment reporting information

			Three months ended June 30,
			2011		2010		2011		2010
							Income from operations
			Net revenues				before income tax expense
	Activision		$	323	$	333	$	31	$	(53)
	Blizzard			313		299		135		155
	Distribution			63		51		(1)		(1)
		Operating segments total		699		683		165		101
Reconciliation to consolidated net revenues / operating
income and consolidated income before income tax
expense:
	Net effect from deferral of net revenues and
		related cost of sales		447		284		332		227
	Stock-based compensation expense			---		---		(20)		(17)
	Restructuring			---		---		(3)		(1)
	Amortization of intangible assets			---		---		(7)		(10)
Consolidated net revenues / operating income			$	1,146	$	967		467		300
	Investment and other income, net							2		1
Consolidated income before income tax expense							$	469	$	301
			Six months ended June 30,
			2011		2010		2011		2010
							Income from operations
			Net revenues				before income tax expense
	Activision		$	646	$	670	$	78	$	(46)
	Blizzard			671		605		306		313
	Distribution			137		122		---		(1)
		Operating segments total		1,454		1,397		384		266
Reconciliation to consolidated net revenues / operating
income and consolidated income before income tax
expense:
	Net effect from deferral of net revenues and
		related cost of sales		1,141		878		838		637
	Stock-based compensation expense			---		---		(43)		(60)
	Restructuring			---		---		(22)		(4)
	Amortization of intangible assets			---		---		(16)		(28)
Consolidated net revenues / operating income			$	2,595	$	2,275	$	1,141	$	811
	Investment and other income, net							5		1
Consolidated income before income tax expense							$	1,146	$	812

Revenues by geographic region

		Three months ended June 30,				Six months ended June 30,
		2011		2010		2011		2010
Net revenues by geographic region:
	North America	$	580	$	567	$	1,328	$	1,270
	Europe		467		337		1,061		861
	Asia Pacific		99		63		206		144
Total consolidated net revenues		$	1,146	$	967	$	2,595	$	2,275

Revenues by platform

		Three months ended June 30,				Six months ended June 30,
		2011		2010		2011		2010
Net revenues by platform:
	Online subscriptions*	$	359	$	291	$	754	$	602
	Console		611		507		1,436		1,346
	Hand-held		33		39		63		78
	PC and Other		80		79		205		127
Total platform net revenues			1,083		916		2,458		2,153
Distribution			63		51		137		122
Total consolidated net revenues		$	1,146	$	967	$	2,595	$	2,275

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Computation of basic/diluted earnings per common share

6 Months Ended

Jun. 30, 2011

Computation of basic/diluted earnings per common share

Computation of basic/diluted earnings per common share

12.       Computation of basic/diluted earnings per common share

The following table sets forth the computation of basic and diluted earnings per common share (amounts in millions, except per share data):

				Three months ended June 30,				Six months ended June 30,
				2011		2010		2011		2010
Numerator:
	Consolidated net income			$	335	$	219	$	838	$	600
		Less: Distributed earnings to unvested
			stock-based awards that participate
			in earnings		---		---		(3)		(2)
		Less: Undistributed earnings allocated to
			unvested stock-based awards that
			participate in earnings		(5)		(2)		(9)		(3)
	Numerator for basic and diluted earnings per
		common share - net income available to
		common shareholders			330		217		826		595
Denominator:
	Denominator for basic earnings per common
		share - weighted-average common
		shares outstanding			1,141		1,232		1,157		1,239
	Effect of potential dilutive common shares
		under the treasury stock method:
		Employee stock options			9		16		9		15
		Denominator for diluted earnings per
			common share - weighted-average
			common shares outstanding plus
			dilutive effect of employee stock
			options		1,150		1,248		1,166		1,254
Basic earnings per common share				$	0.29	$	0.18	$	0.71	$	0.48
Diluted earnings per common share				$	0.29	$	0.17	$	0.71	$	0.47

Our unvested restricted stock rights are considered participating securities since these securities have non-forfeitable rights to dividends or dividend equivalents during the contractual period of the award. Since the unvested restricted stock rights are considered participating securities, we are required to use the two-class method in our computation of basic and diluted earnings per common share. For the three and six months ended June 30, 2011 and 2010, we had outstanding unvested restricted stock rights of 17 million and 10 million shares of common stock on a weighted-average basis, respectively.

Potential common shares are not included in the denominator of the diluted earnings per common share calculation when inclusion of such shares would be anti-dilutive. Therefore, options to acquire 31 millionshares of common stock were not included in the calculation of diluted earnings per common share for both thethree and six months ended June 30, 2011 andoptions to acquire 23 million shares of common stock were not included in the calculation of diluted earnings per common share for both the three and six months ended June 30, 2010 as the effect of their inclusion would be anti-dilutive.

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Income taxes

6 Months Ended

Jun. 30, 2011

Income taxes

Income taxes

5.       Income taxes

The income tax expense of $134 million for the three months ended June 30, 2011 reflected an effective tax rate of 28.6%. The effective tax rate of 28.6% for the three months ended June 30, 2011 differed from the statutory rate of 35.0% primarily due to foreign income taxes levied at relatively lower rates, geographic mix in profitability, recognition of federal and California research and development credits and federal domestic production deductions.

For the six months endedJune 30, 2011, the tax rate was based on our projected annual effective tax rate for 2011, and also included certain discrete tax items recorded during the period. Our tax expense of $308 million for the six months endedJune 30, 2011 reflected an effective tax rate of 26.9% which differedslightly from the effective tax rate of 26.1% for the six months ended June 30, 2010,primarily due to a minor increase in the projected amount of domestic earnings with a higher statutory rate, relative to earnings in foreign jurisdictions with a lower statutory rate.

The overall effective income tax rate for the year could be different from the effective tax rate for the three and six months ended June 30, 2011 and will be dependent, in part, on our profitability for the remainder of the year. In addition, our effective income tax rates for the remainder of 2011 and future periods will depend on a variety of factors, such as changes in the mix of income by tax jurisdiction, applicable accounting rules, applicable tax laws and regulations, rulings and interpretations thereof, developments in tax audit and other matters, and variations in the estimated and actual level of annual pre-tax income or loss. Further, the effective tax rate could fluctuate significantly on a quarterly basis and could be adversely affected by the extent that income (loss) before income tax expenses (benefit) is lower than anticipated in foreign regions where taxes are levied at lower statutory rates and/or higher than anticipated in our domestic region where taxes are levied at higher statutory rates.

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Related party transactions

6 Months Ended

Jun. 30, 2011

Related party transactions

Related party transactions

15.       Related party transactions

Treasury

Our foreign currency risk management program seeks to reduce risks arising from foreign currency fluctuations. We use derivative financial instruments, primarily currency forward contracts and swaps, with Vivendi as our principal counterparty. The gross notional amount of outstanding foreign exchange swaps was $35 million and $138 million at June 30, 2011 and December 31, 2010, respectively.A pre-tax net unrealized gain of less than a million and $5 million for the three months ended June 30, 2011 and 2010, respectively, resulted from the foreign exchange contracts and swaps with Vivendi and were recognized in the condensed consolidated statements of operations. A pre-tax net unrealized loss of less than a millionand unrealized gain of $4 millionforthe sixmonths ended June 30, 2011 and 2010,respectively, resulted from the foreign exchange contracts and swaps with Vivendi and were recognized in the condensed consolidated statements of operations.

Other

Activision Blizzard has entered into various transactions and agreements, including cash management services, investor agreement, and music royalty agreements with Vivendi and its subsidiaries and affiliates. None of these services, transactions and agreements with Vivendi and its subsidiaries and affiliates is material either individually or in the aggregate to the condensed consolidated financial statements as a whole.

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Comprehensive income and accumulated other comprehensive loss (Details) (USD $) In Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Comprehensive income and accumulated other comprehensive income (loss)
Net income	$ 335	$ 219	$ 838	$ 600
Other comprehensive income:
Foreign currency translation adjustment	1	(13)	40	(33)
Unrealized appreciation (depreciation) on investments, net of taxes	2	0	2	0
Other comprehensive income (loss)	3	(13)	42	(33)
Total comprehensive income	338	206	880	567
Accumulated other comprehensive income (loss).
Foreign currency translation adjustment	29		29		(11)
Unrealized depreciation on investments, net of deferred income taxes of $0 for June 30, 2011 and $(1) for December 31, 2010	0		0		(2)
Accumulated other comprehensive income (loss)	29		29		(13)
Deferred income taxes on gross unrealized appreciation (depreciation) on investments			$ 0		$ (1)

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Restructuring (Tables)

6 Months Ended

Jun. 30, 2011

Restructuring.

Restructuring reserve by type of cost

					Contract
			Facilities		termination
	Severance		costs		costs		Total
Balance at December 31, 2010	$	---	$	---	$	---	$	---
Costs charged to expense		17		4		1		22
Costs paid or otherwise settled		(10)		---		---		(10)
Balance at June 30, 2011	$	7	$	4	$	1	$	12

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (USD $) In Millions, except Share data	Total	Common Stock	Additional Paid-In Capital	Treasury Stock	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Comprehensive Income
Balance at Dec. 31, 2010	$ 10,203	$ 0	$ 12,353	$ (2,194)	$ 57	$ (13)
Balance (in shares) at Dec. 31, 2010		1,382		(199)
Components of comprehensive income:
Net income	838				838		838
Foreign currency translation adjustment	40					40	40
Unrealized appreciation (depreciation) on investments, net of taxes	2					2	2
Total comprehensive income	880						880
Issuance of common stock pursuant to employee stock options and restricted stock rights	26		26
Issuance of common stock pursuant to employee stock options and restricted stock rights (in shares)		4
Stock-based compensation expense related to employee stock options and restricted stock rights	51		51
Dividends ($0.165 per common share)	(194)				(194)
Shares repurchased	(501)			(501)
Shares repurchased (in shares)				(45)
Retirement of treasury shares			(2,695)	2,695
Retirement of treasury shares (in shares)		(244)		244
Balance at Jun. 30, 2011	$ 10,465	$ 0	$ 9,735	$ 0	$ 701	$ 29
Balance (in shares) at Jun. 30, 2011		1,142		0

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Recently issued accounting pronouncements

6 Months Ended

Jun. 30, 2011

Recently issued accounting pronouncements

Recently issued accounting pronouncements

16.       Recently issued accounting pronouncements

In May 2011, the FASB issued an update to the accounting onfair value measurement to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards (“IFRS”). This update changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements. This update does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards within U.S. GAAP or IFRS. This update is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. Early adoption is prohibited. We are currently evaluating the impact, if any, of this new accounting update on our consolidated financial statements.

In June 2011, the FASB issued an update to the accounting on comprehensive income to increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. GAAP and IFRS. This update requires that all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This update does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. Further, this update does not affect how earnings per share is calculated or presented. This update is effective for interim and annual periods beginning after December 15, 2011 and is applied retrospectively. Early adoption is permitted. We do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements.

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Restructuring (Details) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011
Restructuring Reserve Roll Forward
Balance at beginning of period	$ 0
Costs charged to expense	22
Costs paid or otherwise settled	(10)
Foreign exchange and other	0
Balance at end of period	12
Employee severance costs
Restructuring Reserve Roll Forward
Balance at beginning of period	0
Costs charged to expense	17
Costs paid or otherwise settled	(10)
Foreign exchange and other	0
Balance at end of period	7
Facilities costs
Restructuring Reserve Roll Forward
Balance at beginning of period	0
Costs charged to expense	4
Costs paid or otherwise settled	0
Foreign exchange and other	0
Balance at end of period	4
Contract Termination Member
Restructuring Reserve Roll Forward
Balance at beginning of period	0
Costs charged to expense	1
Costs paid or otherwise settled	0
Foreign exchange and other	0
Balance at end of period	$ 1

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Inventories (Tables)

6 Months Ended

Jun. 30, 2011

Inventories

Schedule of inventories

	At June 30, 2011		At December 31, 2010
Finished goods	$	81	$	98
Purchased parts and components		12		14
Inventories	$	93	$	112

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Description of Business and Business Combination

6 Months Ended

Jun. 30, 2011

Description Of Business And Business Combination Disclosure [Abstract]

Description of Business and Business Combination

1.Description of Business and Basis of Consolidation and Presentation

Description of Business

Activision Blizzard, Inc. is a worldwide online, personal computer (“PC”), console, handheld and mobile game publisher. The terms “Activision Blizzard,” the “Company,” “we,” “us,” and “our” are used to refer collectively to Activision Blizzard, Inc. and its subsidiaries.

The common stock of Activision Blizzard is traded on The NASDAQ Stock Market under the ticker symbol “ATVI.” Vivendi S.A. (“Vivendi”) owned approximately 63% of Activision Blizzard's outstanding common stock at June 30, 2011.

We maintain significant operations in the United States, Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea and China.

Basis of Consolidation and Presentation

Activision Blizzard prepared the accompanying unaudited condensed consolidated financial statements in accordance with the rules and regulations of the Securities and Exchange Commission for interim reporting. As permitted under those rules and regulations, certain notes or other information that are normally required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted if they substantially duplicate the disclosures contained in the annual audited consolidated financial statements. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair statement of our financial position and results of operations in accordance with U.S. GAAP have been included in the accompanying unaudited condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements include the accounts and operations of Activision Blizzard. All intercompany accounts and transactions have been eliminated. The condensed consolidated financial statements have been prepared in conformity with U.S. GAAP. The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements. Actual results could differ from these estimates and assumptions.

Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

The Company considers events or transactions that occur after the balance sheet date, but before the financial statements are issued, to provide additional evidence relative to certain estimates or to identify matters that require additional disclosures.

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Operating segments and geographic region

6 Months Ended

Jun. 30, 2011

Operating Segments And Geographic Area Disclosure [Abstract]

Operating segments and geographic region

10.       Operating segments and geographic region

Our operating segments are consistent with our internal organizational structure, the manner in which our operations are reviewed and managed by our Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”), the manner in which operating performance is assessed and resources are allocated, and the availability of separate financial information. We do not aggregate operating segments.

Currently, we operate under three operating segments:

Activision Publishing, Inc.

Activision Publishing, Inc. (“Activision”) is a leading international developer and publisher of interactive software products and content. Activision develops games based on both internally-developed and licensed intellectual property. Activision markets and sells games it develops and, through our affiliate label program, games developed by certain third-party publishers. We sell games both through retail channels and by digital download. Activision currently offers games that operate on the Sony Computer Entertainment, Inc. (“Sony”) PlayStation 3 (“PS3”), Nintendo Co. Ltd. (“Nintendo”) Wii (“Wii”), and Microsoft Corporation (“Microsoft”) Xbox 360 (“Xbox 360”) console systems; the Nintendo Dual Screen (“DS”) handheld game systems; the PC; the Apple iOS devices and other handheld and mobile devices.

Blizzard Entertainment, Inc.

Blizzard Entertainment, Inc. (“Blizzard”) develops, markets and sells role-playing action and strategy PC-based computer games, including games in the multiple-award winning Diablo and StarCraftfranchises. Blizzard also develops, hosts, and supports its online subscription-based games in the massively multi-player online role-playing game (“MMORPG”) category in which it is a leader in terms of both subscriber base and revenues generated through its World of Warcraft franchise. Blizzard also maintains a proprietary online-game related service, Battle.net. Blizzard distributes its products and generates revenues worldwide through various means, including: subscriptions (which consist of fees from individuals playing World of Warcraft, prepaid cards and other value-added service revenues such as realm transfers, faction changes, and other character customizations within the World of Warcraftgameplay); retail sales of physical “boxed” products; online download sales of PC products; and licensing of software to third-party or related party companies that distribute World of Warcraft and StarCraft II.

Activision Blizzard Distribution

Activision Blizzard Distribution (“Distribution”) consists of operations in Europe that provide warehousing, logistical and sales distribution services to third-party publishers of interactive entertainment software, our own publishing operations, and manufacturers of interactive entertainment hardware.

The CODM reviews segment performance exclusive of the impact of the change in deferred net revenues and related cost of sales with respect to certain of our online-enabled games, stock-based compensation expense, restructuring expense, amortization of intangible assets, and impairment of intangible assets. The CODM does not review any information regarding total assets on an operating segment basis, and accordingly, no disclosure is made with respect thereto. Information on the operating segments and reconciliations of total segment net revenues and total segment income (loss) from operations to consolidated net revenues and income before income tax expense from external customers for the three and six months ended June 30, 2011 and 2010 are presented below (amounts in millions):

			Three months ended June 30,
			2011		2010		2011		2010
							Income from operations
			Net revenues				before income tax expense
	Activision		$	323	$	333	$	31	$	(53)
	Blizzard			313		299		135		155
	Distribution			63		51		(1)		(1)
		Operating segments total		699		683		165		101
Reconciliation to consolidated net revenues / operating
income and consolidated income before income tax
expense:
	Net effect from deferral of net revenues and
		related cost of sales		447		284		332		227
	Stock-based compensation expense			---		---		(20)		(17)
	Restructuring			---		---		(3)		(1)
	Amortization of intangible assets			---		---		(7)		(10)
Consolidated net revenues / operating income			$	1,146	$	967		467		300
	Investment and other income, net							2		1
Consolidated income before income tax expense							$	469	$	301
			Six months ended June 30,
			2011		2010		2011		2010
							Income from operations
			Net revenues				before income tax expense
	Activision		$	646	$	670	$	78	$	(46)
	Blizzard			671		605		306		313
	Distribution			137		122		---		(1)
		Operating segments total		1,454		1,397		384		266
Reconciliation to consolidated net revenues / operating
income and consolidated income before income tax
expense:
	Net effect from deferral of net revenues and
		related cost of sales		1,141		878		838		637
	Stock-based compensation expense			---		---		(43)		(60)
	Restructuring			---		---		(22)		(4)
	Amortization of intangible assets			---		---		(16)		(28)
Consolidated net revenues / operating income			$	2,595	$	2,275	$	1,141	$	811
	Investment and other income, net							5		1
Consolidated income before income tax expense							$	1,146	$	812

Geographic information for the three and six months ended June 30, 2011 and 2010 is based on the location of the selling entity. Net revenues from external customers by geographic region were as follows (amounts in millions):

		Three months ended June 30,				Six months ended June 30,
		2011		2010		2011		2010
Net revenues by geographic region:
	North America	$	580	$	567	$	1,328	$	1,270
	Europe		467		337		1,061		861
	Asia Pacific		99		63		206		144
Total consolidated net revenues		$	1,146	$	967	$	2,595	$	2,275

Net revenues by platform were as follows (amounts in millions):

		Three months ended June 30,				Six months ended June 30,
		2011		2010		2011		2010
Net revenues by platform:
	Online subscriptions*	$	359	$	291	$	754	$	602
	Console		611		507		1,436		1,346
	Hand-held		33		39		63		78
	PC and Other		80		79		205		127
Total platform net revenues			1,083		916		2,458		2,153
Distribution			63		51		137		122
Total consolidated net revenues		$	1,146	$	967	$	2,595	$	2,275

*Revenue from online subscriptions consists of revenue from all World of Warcraft products, including subscriptions, boxed products, expansion packs, licensing royalties, and value-added services.

We did not have any single external customer that accounted for 10% or more of net revenues for the three or six months ended June 30, 2011 and 2010.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Jul. 29, 2011
Document and Entity Information
Entity Registrant Name	Activision Blizzard, Inc.
Entity Central Index Key	0000718877
Document Type	10-Q
Document Period End Date	Jun. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,142,815,142
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2

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Summary of significant accounting policies (Details)	6 Months Ended
	Jun. 30, 2011
Revenue Recognition
Estimated service period over which revenues are recognized, low end of range (in months)	5
Estimated service period over which revenues are recognized, high end of range (in years)	1

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Commitments and contingencies

6 Months Ended

Jun. 30, 2011

Commitments and contingencies

Commitments and contingencies

14.       Commitments and contingencies

At June 30, 2011, we did not have any significant changes to our commitments since December 31, 2010. See Note 18 of the Notes to Consolidated Financial Statements included in Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2010 for more information regarding our commitments.

Legal Proceedings

After concluding an internal human resources inquiry into breaches of contract and insubordination by two senior employees at Infinity Ward, the Company terminated its employment of Jason West and Vince Zampella on March 1, 2010. On March 3, 2010, West and Zampella filed a complaint against the Company in Los Angeles Superior Court for breach of contract and wrongful termination, among other claims. West and Zampella are seeking damages, including punitive damages, in excess of $36 million and declaratory relief. On April 9, 2010, the Company filed a cross complaint against West and Zampella, asserting claims for breach of contract and fiduciary duty, among other claims. The Company is seeking damages and declaratory relief.

In addition, 38 current and former employees of Infinity Ward filed a complaint against the Company in Los Angeles Superior Court on April 27, 2010 (Alderman et al. v. Activision Publishing, Inc. et al.). An amended complaint was filed on July 8, 2010, which added seven additional plaintiffs. On October 5, 2010, five plaintiffs, all current employees of Infinity Ward, filed dismissals without prejudice. There are currently 40 plaintiffs in the case. The plaintiffs have asserted claims for breach of contract, violation of the Labor Code of the State of California, conversion and other claims. The plaintiffs claim that the Company failed to pay them bonuses and other compensation allegedly owed to them in an amount at least between $75million and $125 million, plus punitive damages. On October 12, 2010, the court consolidated this matter with the West and Zampella matter.

On January 18, 2011, the court granted the Company's motion to amend its cross complaint against West and Zampella to add allegations with respect to them and to add Electronic Arts, Inc. as a party. On January 31, 2011, the case was transferred to the complex division.

All parties have now responded to all of the governing pleadings in the case. A status conference is set for August 9, 2011.

The Company has accrued and will continue to accrue appropriate amounts related to bonuses and other monies allegedly owed in connection with this matter. The Company does not expect this lawsuit to have a material impact on the Company.

In addition, we are party to other routine claims and suits brought by us and against us in the ordinary course of business, including disputes arising over intellectual property rights, contractual claims, employment laws, regulations and relationships, and collection matters. In the opinion of management, after consultation with legal counsel, the outcome of such routine claims and lawsuits will not have a material adverse effect on our business, financial condition, results of operations, or liquidity.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) In Millions, except Share data	Jun. 30, 2011	Dec. 31, 2010
CONDENSED CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowances	$ 251	$ 377
Common stock, par value (in dollars per share)	$ 0.000001	$ 0.000001
Common stock, shares authorized	2,400,000,000	2,400,000,000
Common stock, shares issued	1,142,158,668	1,382,479,839
Treasury stock, shares	0	199,159,987

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Intangible assets, net (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended			6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010	Jun. 30, 2011 License agreements	Dec. 31, 2010 License agreements	Jun. 30, 2011 Game engines	Dec. 31, 2010 Game engines	Jun. 30, 2011 Internally developed franchises	Dec. 31, 2010 Internally developed franchises	Jun. 30, 2011 Distribution agreements	Dec. 31, 2010 Distribution agreements	Jun. 30, 2011 Activision trademark	Dec. 31, 2010 Activision trademark	Jun. 30, 2011 Acquired trade names	Dec. 31, 2010 Acquired trade names
Definite-Lived and Indefinite Lived Intangible Assets
Estimated useful life, minimum (in years)						3	3	2	2	11	11	4	4
Estimated useful life, maximum (in years)						10	10	5	5	12	12	4	4
Gross carrying amount, definite-lived intangible assets						$ 88	$ 88	$ 32	$ 32	$ 309	$ 309	$ 18	$ 18
Accumulated amortization, definite-lived intangible assets	(303)		(303)		(287)	(76)	(74)	(31)	(30)	(180)	(167)	(16)	(16)
Net carrying amount, definite-lived intangible assets	144		144		160	12	14	1	2	129	142	2	2
Gross carrying amount, intangible assets excluding goodwill	880		880		880
Net carrying amount, intangible assets	577		577		593
Indefinite Lived Intangible Assets
Carrying amount, indefinite-lived intangible assets														386	386	47	47
Amortization expense disclosure
Amortization expense	7	11	16	29
Definite-lived intangible assets, future amortization expense disclosure
2011 (remaining six months)			57
2012			35
2013			18
2014			9
2015			7
Thereafter			18
Total			$ 144

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Goodwill (Details) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011
Changes in carrying amount of goodwill
Goodwill, balance at beginning of period	$ 7,132
Tax benefit credited to goodwill	(4)
Foreign exchange	(1)
Goodwill, balance at end of period	7,130
Issuance of contingent consideration	3
Activision
Changes in carrying amount of goodwill
Goodwill, balance at beginning of period	6,942
Tax benefit credited to goodwill	(4)
Foreign exchange	(1)
Goodwill, balance at end of period	6,940
Issuance of contingent consideration	3
Blizzard
Changes in carrying amount of goodwill
Goodwill, balance at beginning of period	178
Tax benefit credited to goodwill	0
Foreign exchange	0
Goodwill, balance at end of period	178
Issuance of contingent consideration	0
Distribution
Changes in carrying amount of goodwill
Goodwill, balance at beginning of period	12
Tax benefit credited to goodwill	0
Foreign exchange	0
Goodwill, balance at end of period	12
Issuance of contingent consideration	$ 0

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Restructuring (Details 2) (USD $) In Millions	6 Months Ended		3 Months Ended	6 Months Ended
	Jun. 30, 2011	Dec. 31, 2010	Jun. 30, 2011 Activision	Jun. 30, 2011 Activision
Restructuring Reserve [Line Items]
Restructuring Reserve	$ 12	$ 0
Costs charged to expense	$ 22		$ 3	$ 22

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Restructuring (Details 3) (USD $) In Millions	6 Months Ended
	Jun. 30, 2011
Restructuring.
Expected future restructuring costs	$ 6

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Related party transactions (Details) (USD $) In Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010	Dec. 31, 2010
Notional Amount Of Derivatives [Line Items]
Notional amount of foreign currency derivatives	$ 35		$ 35		$ 138
Pre-tax net unrealized gain (loss) on foreign exchange contracts and swaps with Vivendi	$ 1	$ 5	$ (1)	$ 4

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Income taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Income taxes.
Income tax expense	$ 134	$ 82	$ 308	$ 212
Effective income tax rate (percent in hundredths)	28.60%		26.90%	26.10%
Statutory income tax rate (percent in hundredths)	35.00%