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Activision Blizzard: A look at the gaming giant’s revenue streams

Activision Blizzard Inc. (NASDAQ: ATVI) generates its revenues mainly through product sales and subscription, licensing and other revenues. The leading video game company operates through three segments – Activision, Blizzard and King.

Apart from segments, the company’s revenue results are classified by distribution channel and platform. The distribution channel includes the digital online channel and the retail channel. Platform comprises of Console, PC, and Mobile and ancillary. Let’s take a look at how these two streams have performed over the past few quarters.

Distribution Channel

Digital Online

Looking at the trend over the past five quarters, after a 13% sequential decline in the second quarter of 2018, revenues in the digital online channel picked up slightly in the third quarter and then saw a growth of 40% in the fourth quarter. Following this, revenues dropped by 22% each in the first two quarters of 2019.

In Q2 2018, the company saw lower revenues from Overwatch and Call of Duty: Infinite Warfare. This trend continued in the third quarter but was partially offset by higher revenues from World of Warcraft.

The company benefited from higher revenues in Candy Crush, Call of Duty: Black Ops 4 and Call of Duty: WWII during the fourth quarter. In the first two quarters of 2019, Activision saw lower revenues from the Destiny franchise and from Overwatch.  

Activision Blizzard quarterly revenue trend by distribution channel

Retail

The retail channel saw sequential declines in four of the past five quarters with the exception of the fourth quarter of 2018. During the second and third quarters of 2018, revenues were hurt by declines in Overwatch, Crash Bandicoot N. Sane Trilogy, Call of Duty: Infinite Warfare and the Destiny franchise.

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In the fourth quarter, higher revenues from Call of Duty: WWII and Spyro Reignited Trilogy helped drive a massive growth in revenue results. In the first and second quarters of 2019, lower revenues from the Destiny franchise, Call of Duty: Black Ops 4 and Crash Bandicoot N. Sane Trilogy hurt retail results.

Platform

Console

In Console, revenues declined in four out of the past five quarters, barring Q4 2018. Revenues in Q2 2018 and Q3 2018 were hurt by decreases in Overwatch, Call of Duty: Infinite Warfare and Crash Bandicoot N. Sane Trilogy. The fourth quarter results benefited from increases in Call of Duty: WWII and the Destiny franchise, driven by Destiny 2.

In the first quarter of 2019, revenue results were hurt by lower revenues from the Destiny and Call of Duty franchises. Activision sold the publishing rights of Destiny to Bungie in December 2018. Console revenues in Q2 2019 were hurt by declines in Call of Duty: Black Ops 4, Crash Bandicoot N. Sane Trilogy as well as the Destiny and Call of Duty franchises.

Activision's quarterly revenue trend by platform

PC

PC revenues in the second quarter of 2018 declined 13% sequentially and were hurt by lower revenues in Overwatch and World of Warcraft. The 6% growth in the third quarter was driven by higher World of Warcraft revenues, driven by World of Warcraft: Battle for Azeroth.  

The momentum from World of Warcraft: Battle for Azeroth continued into the fourth quarter and this, combined with higher revenues from Destiny 2, allowed PC revenues to jump 50% sequentially. PC revenues declined in the first two quarters of 2019 due to lower revenues from Destiny, Overwatch and Hearthstone.

Also see: Activision Blizzard Q2 2019 Earnings Call Highlights

Mobile and ancillary

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Revenues in this platform fell 3% sequentially in the second quarter of 2018 with only a slight pickup in the third quarter of 2018. In the third quarter, revenues were hurt by decreases in various title offerings by King. Higher revenues from the Candy Crush franchise helped drive growth in the fourth quarter of 2018. In the first two quarters of 2019, the company saw sequential declines in this platform.

Looking ahead

Activision Blizzard is preparing to release Warcraft III: Reforged later this year. The company is also preparing for its most important release of the year, Modern Warfare, which is due in October.

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