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Activision-Blizzard SEC Financial Disclosure 2018
2019/03/01 시간 22:05
에 의해 작성됨
Blizzard Entertainment's parent company Activision-Blizzard released their annual
, which include a variety of company projections, interests, risk factors, financial data, and securities. It might be a bit of a dull read for those who aren't business savvy or financially inclined, but it may provide some insight into the greater company as a whole, beyond what any one particular studio is working on.
What is this report?
For those who are not aware, Securities and Exchange Commission filings are not new or unusual; they are a federally required disclosure of information which provide a comprehensive overview of the company's business and financial condition in order to create a clear view of a company's history, progress, and projected future, as well as help curtail stock manipulation and fraud. The 10-K is similar to, but distinct from the annual shareholders report, which is targeted toward investors and generally less complex.
In other words, this is a yearly report, which Activision-Blizzard has published every year since 1995. That said; it's also a fairly complex,
report full of financial information, which can be a bit of a slog! To save your eyes, we've highlighted some of the more interesting bits contrasted with previous years below.
Points of Interest
While there are a great many risk factors included in the report, most of them routine befitting any company in such a volatile industry, but one addition stands out from previous years:
This, of course, refers to their
of roughly 8% of their workforce, targeted at non-development departments including Community Management, Public Relations, Social Media, and Marketing. While this risk factor sounds alarming, it's not unanticipated; we've already seen a significant fallout in news and social media, as fans are quick to condemn the job losses, particularly those who were well engaged within various communities, so the company is right to warn investors that the immediate future is likely to be tumultuous as perception can have a dramatic effect on publicly traded stocks.
Despite the resulting intent to increase development staff by 20% for
World of Warcraft
and other key franchises, it will take time and success for the company to regain public trust. However, this isn't an admission of failure or regret, it's simply a risk factor; one of many intended to inform current and potential investors of the risks to the company success (and by extension their chances of making money by investing in it). Regardless of perception, what the company had wasn't working, so they're trying something new, but every decision in business carries risks. This goes hand in hand with one of their other risk factors carried over from previous years:
We depend on a relatively small number of franchises for a significant portion of our revenues and profits
"While our financial results for 2018 were the best in our history, we didn’t realize our full potential."
By now, everyone knows this line, and is appalled that it is followed by "but we're laying off a bunch of people", but what they don't know is
; how does a profitable year fail to meet expectations and how does success result in lost jobs? The answer is actually pretty simple - while 2018 may have been Activision-Blizzard's most profitable year, it also released multiple new titles as the culmination of several years of development, including Destiny 2:
Black Ops 4
Battle for Azeroth
Candy Crush Friends Saga
(which, by the way passed $10 million in net revenue within the first week!),
which doesn't happen every year
. Despite this, they still failed to meet expectations, meaning those releases didn't sell as well as they expected them to, which has very real implications on an industry that is largely driven by public investment and debt.
Speaking of debt, Activision-Blizzard reduced from approximately $4.4 billion of long-term debt outstanding by the end of 2017 to $2.7 billion in 2018. While historically the company has had little to no debt in previous years, it was necessitated by two important events in recent years - the first debt issued in 2013 to buyback Vivendi's controlling stake, and the second in 2016 to acquire King Digital Entertainment. Overall, the net result was positive, significantly increasing profits and stock prices.
Feel free to look at the numbers in the document, there's a lot to digest - revenue is up, as are development costs, the stock price down 42% from last year, and revenue is rather nicely split between PC, Console, and Mobile devices (see Net Revenues by Platform below). The question isn't how well they did in 2018, it's how well they'll fare in 2019 and beyond.
The Future of Mobile Development
If you didn't already know, mobile gaming is a juggernaut. It seems strange to hardcore PC or long term console enthusiasts, but smartphones outnumber personal computers and gaming consoles by a wide margin, and even wider audience, opening up an entirely new source of revenue. Statista reports around 650 million active
and roughly 1.25 billion active
, against approximately 2.5 billion
around the world. While certainly not all of those are self-characterized "gamers", it's an easier market to tap into, given that they already own smartphones for things other than games. The annual report correlates this idea, citing three times as many Monthly Active Users (in millions) from King (
) as Activision and Blizzard combined (including those from Hearthstone, which is also available on mobile devices):
While it's true that mobile gamers individually spend less on games, which are generally cheap or free and largely microtransaction based, the sheer volume of them can be quite competitive, especially when you consider how much cheaper mobile games are to develop and maintain. With just under 30% of Activision-Blizzard's revenue coming from mobile games, nearly matching that of PC gaming, it's hard to deny their value.
During BlizzCon 2018, Blizzard revealed they were actively developing
new mobile games across all of their IPs
, and that shouldn't come as a surprise. That doesn't mean that traditional game development will come to ruin, there are no announcements of sweeping changes to push mobile games and in fact the report in emphatic in pointing out that a great deal of their success is reliant on the performance of already established franchises like
Call of Duty
World of Warcraft
, but while diehard console or PC gatekeepers might want to believe that mobile games are an insult to their beloved pastime, mobile gaming is already here and has shown no signs of stopping.
of information to digest in these filings, from accounting practices to international tax information, balance sheets, and if you're an investor or shareholder or just really like finance, it's certainly worth a deeper read, but for the average gaming fan the takeaways are pretty simple:
2018 was a very successful year, backed by multiple high profile releases.
Despite that, they didn't meet their goals, and most of their revenue is dependent on well-established franchises.
Layoffs weren't because the company is out of money, they're shifting resources into more developers in order to keep those franchises successful.
2019 won't be nearly as profitable, due to fewer releases.
None of it is particularly alarming, nothing in the document pulls back a curtain to reveal that the wizard was really a
all along, nor should it convince you whether or not to play Activision-Blizzard games. That said, it can offer insight, some modicum of explanation to the realities of an inordinately complex world. Video game development is not a simple thing, and neither are multi-billion dollar companies that employ ten thousand people. Likewise, nobody is happy when jobs are lost or a new wave of development replaces the old, but innovating and adapting to a changing landscape is how companies, and people, survive.
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