UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, ~~2020~~2021

☐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.)

~~Delaware~~N/A

~~95-4803544~~N/A

~~(State or other jurisdiction of incorporation or organization)~~

~~(I.R.S. Employer Identification No.)~~

~~3100 Ocean Park Boulevard~~

~~Santa Monica,~~

~~90405~~

(Address of principal executive offices)

(Zip Code)

(~~310~~) (310) 255-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.000001 per share

ATVI

The Nasdaq Global Select Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large Accelerated Filer

☒

Non-accelerated Filer

☐

Accelerated Filer

☐

~~Large Accelerated Filer~~

☒

~~Non-accelerated Filer~~

☐

~~Accelerated Filer~~Smaller reporting company

☐

~~Smaller reporting company~~

☐

Emerging growth company

☐��

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares of the registrant’s Common Stock outstanding at April ~~28, 2020~~27, 2021 was ~~770,485,455.~~

777,016,759.

Table of Contents

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 March 31, ~~2020~~2021 and December 31, ~~2019~~2020	4

		Condensed Consolidated Statements of Operations for the three months ended March 31, ~~2020~~2021 and March 31, ~~2019~~2020	5

		Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, ~~2020~~2021 and March 31, ~~2019~~2020	6

		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2020~~2021 and March 31, ~~2019~~2020	7

		Condensed Consolidated Statement of Changes in Shareholders’ Equity for the three months ended March 31, ~~2020~~2021 and March 31, ~~2019~~2020	8

		Notes to Condensed Consolidated Financial Statements	9

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	3026

Item 3.		Quantitative and Qualitative Disclosures About Market Risk	5042

Item 4.		Controls and Procedures	5143

PART II.		OTHER INFORMATION	5343

Item 1.		Legal Proceedings	5343

Item 1A.		Risk Factors	5343



Item 5.6.		~~Other Information~~Exhibits	5443

~~Item 6.~~EXHIBIT INDEX			~~Exhibits~~44	54

~~EXHIBIT INDEX~~SIGNATURE			5545

~~SIGNATURE~~	56

Table of Contents

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 facts 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 related to releases of products or services and restructuring activities; (3) statements of future financial or operating performance, including the impact of tax items thereon; and (4) statements of assumptions underlying such statements. Activision Blizzard, Inc. generally uses words such as “outlook,” “forecast,” “will,” “could,” “should,” “would,” “to be,” “plan,” “aims,” “believes,” “may,” “might,” “expects,” “intends,” “seeks,” “anticipates,” “estimate,” “future,” “positioned,” “potential,” “project,” “remain,” “scheduled,” “set to,” “subject to,” “upcoming,” and other similar words and expressions to help identify forward-looking statements. Forward-looking statements are subject to business and economic risks, reflect management’s current expectations, estimates, and projections about our business, and are inherently uncertain and difficult to predict.

We caution that a number of important factors, many of which are beyond our control, could cause our actual future results and other future circumstances to differ materially from those expressed in any forward-looking statements. Such factors include, but are not limited to: the ongoing global impact of a novel strain of coronavirus which emerged in December 2019 (“COVID-19”) (including, without limitation, the potential for significant short- and long-term global unemployment and economic weakness and a resulting impact on global discretionary spending; potential strain on the retailers and distributors who sell our physical product to customers; effects on our ability to release our content in a timely manner; the impact of large-scale intervention by the Federal Reserve and other central banks around the world, including the impact on interest rates; and volatility in foreign exchange rates); our ability to consistently deliver popular, high-quality titles in a timely manner, which has been made more difficult as a result of the COVID-19 pandemic; concentration of revenue among a small number of franchises; our ability to satisfy the expectations of consumers with respect to our brands, games, services, and/or business practices; our ability to attract, retain and motivate skilled personnel; rapid changes in technology and industry standards; competition, including from other forms of entertainment; increasing importance of revenues derived from digital distribution channels; risks associated with the retail sales business model; the continued growth in the scope and complexity of our business, including the diversion of management time and attention to issues relating to the operations of our newly acquired or started businesses and the potential impact of our expansion into new businesses on our existing businesses; substantial influence of third-party platform providers over our products and costs; risks associated with transitions to next-generation consoles; success and availability of video game consoles manufactured by third parties; risks associated with the free-to-play business model, including dependence on a relatively small number of consumers for a significant portion of revenues and profits from any given game; our ability to realize the expected financial and operational benefits of, and effectively implement and manage, our ~~previously announced~~ restructuring actions; our ability to quickly adjust our cost structure in response to sudden changes in demand; risks and costs associated with legal proceedings; intellectual property claims; changes in tax rates or exposure to additional tax liabilities, as well as the outcome of current or future tax disputes; our ability to sell products at assumed pricing levels; reliance on external developers for development of some of our software products; the amount of our debt and the limitations imposed by the covenants in the agreements governing our debt; the seasonality in the sale of our products; counterparty risks relating to customers, licensees, licensors, and manufacturers, which have been magnified as a result of the COVID-19 pandemic; risks associated with our use of open source software; piracy and unauthorized copying of our products; insolvency or business failure of any of our partners, which has been magnified as a result of the COVID-19 pandemic; risks and uncertainties of conducting business outside the United States ~~(“U.S.~~(the “U.S.”); increasing regulation of our business, products, and distribution in key territories; compliance with continually evolving laws and regulations concerning data privacy; reliance on servers and networks to operate our games and our proprietary online gaming service; potential data breaches and other cybersecurity risks; and the other factors identified in “Risk Factors” included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2019 and this Quarterly Report on Form 10-Q.~~2020.

The forward-looking statements contained herein are based on information available to Activision Blizzard, Inc. as of the date of this filing 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, Inc.’s names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or trade names of Activision Blizzard, Inc. All other product or service names are the property of their respective owners. All dollar amounts referred to in, or contemplated by, this Quarterly Report on Form 10-Q refer to U.S. dollars, unless otherwise explicitly stated to the contrary.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in millions, except share data)


	At March 31, 2020			At December 31, 2019				At March 31, 2021		At December 31, 2020
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	5,906		$	5,794		Cash and cash equivalents	$	9,281	$	8,647
Accounts receivable, net of allowances of $87 and $132, at March 31, 2020 and December 31, 2019, respectively	590			848

Accounts receivable, net of allowances of $59 and $83, at March 31, 2021 and December 31, 2020, respectively							Accounts receivable, net of allowances of $59 and $83, at March 31, 2021 and December 31, 2020, respectively	773		1,052

Software development	293			322			Software development	283		352

Other current assets	330			328			Other current assets	585		514
Total current assets	7,119			7,292			Total current assets	10,922		10,565

Software development	90			54			Software development	207		160

Property and equipment, net	236			253			Property and equipment, net	192		209
Deferred income taxes, net	1,234			1,293			Deferred income taxes, net	1,250		1,318
Other assets	664			658			Other assets	643		641
Intangible assets, net	498			531			Intangible assets, net	446		451

Goodwill	9,763			9,764			Goodwill	9,765		9,765
Total assets	$	19,604		$	19,845		Total assets	$	23,425	$	23,109

Liabilities and Shareholders’ Equity							Liabilities and Shareholders’ Equity
Current liabilities:							Current liabilities:
Accounts payable	$	158		$	292		Accounts payable	$	225	$	295
Deferred revenues	1,064			1,375			Deferred revenues	1,459		1,689
Accrued expenses and other liabilities	1,338			1,248			Accrued expenses and other liabilities	1,497		1,116

Total current liabilities	2,560			2,915			Total current liabilities	3,181		3,100
Long-term debt, net	2,675			2,675			Long-term debt, net	3,606		3,605
Deferred income taxes, net	458			505			Deferred income taxes, net	365		418
Other liabilities	890			945			Other liabilities	942		949
Total liabilities	6,583			7,040			Total liabilities	8,094		8,072
Commitments and contingencies (Note 16)							Commitments and contingencies (Note 16)	0		0
Shareholders’ equity:							Shareholders’ equity:
Common stock, $0.000001 par value, 2,400,000,000 shares authorized, 1,199,021,144 and 1,197,436,644 shares issued at March 31, 2020 and December 31, 2019, respectively	—			—
Common stock, $0.000001 par value, 2,400,000,000 shares authorized, 1,205,570,562 and 1,202,906,087 shares issued at March 31, 2021 and December 31, 2020, respectively							Common stock, $0.000001 par value, 2,400,000,000 shares authorized, 1,205,570,562 and 1,202,906,087 shares issued at March 31, 2021 and December 31, 2020, respectively	0		0
Additional paid-in capital	11,213			11,174			Additional paid-in capital	11,549		11,531
Less: Treasury stock, at cost, 428,676,471 shares at March 31, 2020 and December 31, 2019	(5,563		)	(5,563		)
Less: Treasury stock, at cost, 428,676,471 shares at March 31, 2021 and December 31, 2020							Less: Treasury stock, at cost, 428,676,471 shares at March 31, 2021 and December 31, 2020	(5,563)		(5,563)
Retained earnings	7,999			7,813			Retained earnings	9,945		9,691
Accumulated other comprehensive loss	(628		)	(619		)	Accumulated other comprehensive loss	(600)		(622)
Total shareholders’ equity	13,021			12,805			Total shareholders’ equity	15,331		15,037
Total liabilities and shareholders’ equity	$	19,604		$	19,845		Total liabilities and shareholders’ equity	$	23,425	$	23,109

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

Table of Contents

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in millions, except per share data)


	For the Three Months Ended March 31,					For the Three Months Ended March 31,
	2020		2019				2021		2020
Net revenues					Net revenues
Product sales	$	543	$	656	Product sales		$	675	$	543
Subscription, licensing, and other revenues	1,245		1,169
In-game, subscription, and other revenues					In-game, subscription, and other revenues		1,600		1,245
Total net revenues	1,788		1,825		Total net revenues		2,275		1,788

Costs and expenses					Costs and expenses
Cost of revenues—product sales:					Cost of revenues—product sales:
Product costs	119		152		Product costs		140		119
Software royalties, amortization, and intellectual property licenses	82		111		Software royalties, amortization, and intellectual property licenses		112		82
Cost of revenues—subscription, licensing, and other revenues:
Cost of revenues—in-game, subscription, and other:					Cost of revenues—in-game, subscription, and other:
Game operations and distribution costs	258		239		Game operations and distribution costs		296		258
Software royalties, amortization, and intellectual property licenses	46		61		Software royalties, amortization, and intellectual property licenses		30		46
Product development	238		249		Product development		353		238
Sales and marketing	243		207		Sales and marketing		237		243
General and administrative	167		179		General and administrative		282		167
Restructuring and related costs	23		57		Restructuring and related costs		30		23
Total costs and expenses	1,176		1,255		Total costs and expenses		1,480		1,176

Operating income	612		570		Operating income		795		612

Interest and other expense (income), net (Note 12)	8		3		Interest and other expense (income), net (Note 12)		30		8

Income before income tax expense	604		567		Income before income tax expense		765		604

Income tax expense	99		120		Income tax expense		146		99

Net income	$	505	$	447	Net income		$	619	$	505

Earnings per common share					Earnings per common share
Basic	$	0.66	$	0.58	Basic		$	0.80	$	0.66
Diluted	$	0.65	$	0.58	Diluted		$	0.79	$	0.65

Weighted-average number of shares outstanding					Weighted-average number of shares outstanding
Basic	769		764		Basic		775		769
Diluted	774		770		Diluted		783		774

~~We measure the fair value~~

Table 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.~~Contents

During 2019, we recorded an upward adjustment of $38 million to an investment in equity securities, which had historically been carried at cost, based on an observable and orderly transaction in the common stock of the investee. As of both March 31, 2020 and December 31, 2019, the carrying value of the investment is $42 million, and is recorded in “Other assets” on our condensed consolidated balance sheet. We classify this investment as Level 3 in the fair value hierarchy as we estimated the value based on valuation methods using the observable transaction price in a market with limited activity.

~~For the three months ended March 31, 2020 and 2019, there were no impairment charges related to assets that are measured on a non-recurring basis.~~

7. Deferred revenues

We record deferred revenues when cash payments are received or due in advance of the fulfillment of our associated performance obligations. The ~~opening balance~~aggregate of the current and non-current balances of deferred revenues as of ~~January 1, 2020~~March 31, 2021 and ~~the ending balance as of March~~December 31, 2020, were ~~$1.4~~$1.5 billion and ~~$1.1~~$1.7 billion, ~~respectively, including our current and non-current balances.~~respectively. For the three months ended March 31, ~~2020,~~2021, the additions to our deferred revenues balance were primarily due to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenues balance were primarily due to the recognition of revenues upon fulfillment of our performance obligations, ~~both~~all of which were in the ordinary course of business. During the three months ended March 31, ~~2020 and March 31, 2019, $0.8 billion and $0.9~~2021, $1.1 billion of revenues ~~respectively,~~ were recognized that were included in the deferred revenues balance at December 31, 2020. During the ~~beginning~~three months ended March 31, 2020, $0.8 billion of revenues were recognized that were included in the ~~period.~~deferred revenues balance at December 31, 2019.

As of March 31, ~~2020,~~2021, the aggregate amount of contracted revenues allocated to our unsatisfied performance obligations ~~is $2.3~~was $2.2 billion, which ~~includes~~included our deferred revenues balances and amounts to be invoiced and recognized as revenue in future periods. We expect to recognize approximately ~~$1.2~~$1.7 billion over the next 12 months, $0.4 billion in the subsequent 12-month period, and the remainder thereafter. This balance ~~does~~did not include an estimate for variable consideration arising from sales-based royalty license revenue in excess of the contractual minimum ~~guarantee.~~guarantee or any estimated amounts of variable consideration that are subject to constraint in accordance with the revenue standard.

8. Debt

Credit Facilities

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we had $1.5 billion available under a revolving credit facility (the “Revolver”) pursuant to a credit agreement entered into on October 11, 2013 (as amended thereafter and from time to time, the “Credit Agreement”). To date, we have ~~not~~0t drawn on the Revolver and we were in compliance with the terms of the Credit Agreement as of March 31, ~~2020.~~2021.

Refer to Note 13 contained in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for further details regarding the Credit Agreement and its key ~~terms, and previous amendments made to it.~~terms.

Unsecured Senior Notes

AtAs of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~the following~~$3.7 billion of gross unsecured senior notes ~~outstanding:~~

~~$650 million~~outstanding. A summary of ~~2.3%~~our outstanding unsecured senior notes ~~due September 2021 (the “2021 Notes”);~~

~~$400 million of 2.6% unsecured senior notes due June 2022 (the “2022 Notes”);~~

~~$850 million of 3.4% unsecured senior notes due September 2026 (the “2026 Notes”);~~

~~$400 million of 3.4% unsecured senior notes due June 2027 (the “2027 Notes”); and~~

~~$400 million of 4.5% unsecured senior notes due June 2047 (the “2047 Notes”, and together with the 2021 Notes, the 2022 Notes, the 2026 Notes, and the 2027 Notes, the “Notes”).~~

is as follows (amounts in millions):

~~The Notes are general senior obligations of the Company and rank~~


				At March 31, 2021			At December 31, 2020
Unsecured Senior Notes	Interest Rate	Semi-Annual Interest Payments Due On	Maturity	Principal		Fair Value (Level 2)	Principal		Fair Value (Level 2)
2026 Notes	3.40%	Mar. 15 & Sept. 15	Sept. 2026	850		930	850		970
2027 Notes	3.40%	Jun. 15 & Dec. 15	Jun. 2027	400		438	400		454
2030 Notes	1.35%	Mar. 15 & Sept. 15	Sept. 2030	500		450	500		490
2047 Notes	4.50%	Jun. 15 & Dec. 15	Jun. 2047	400		469	400		525
2050 Notes	2.50%	Mar. 15 & Sept. 15	Sept. 2050	1,500		1,258	1,500		1,462
Total gross long-term debt				$	3,650		$	3,650
Unamortized discount and deferred financing costs				(44)			(45)
Total net carrying amount				$	3,606		$	3,605

~~pari passu~~
in right of payment to all of the Company’s existing and future senior indebtedness, including the Revolver described above. The Notes are not secured and are effectively junior to any of the Company’s existing and future indebtedness that is secured to the extent of the value of the collateral securing such indebtedness.

We were in compliance with the terms of the ~~Notes~~notes outstanding as of March 31, ~~2020.~~

Interest is payable semi-annually in arrears on March 15 and September 15 of each year for the 2021 Notes and the 2026 Notes, and payable semi-annually in arrears on June 15 and December 15 of each year for the 2022 Notes, the 2027 Notes, and the 2047 Notes. Accrued interest payable is recorded within “Accrued expenses and other liabilities” in our condensed consolidated balance sheets.2021. As of March 31, ~~2020 and December 31, 2019,~~2021, we ~~had accrued interest payable~~have no contractual principal repayments of ~~$14 million and $15 million, respectively, related to~~our long-term debt due within the ~~Notes.~~next five years.

Refer to Note 13 contained in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 for further details regarding key terms under our indentures that govern ~~the Notes.~~

~~A summary of~~ our outstanding ~~debt is as follows (amounts in millions):~~notes.

At March 31, 2020

Gross Carrying
Amount
Unamortized
Discount and Deferred Financing Costs Net Carrying
Amount
2021 Notes $ 650
$ (2 ) $ 648
2022 Notes 400
(2 ) 398
2026 Notes 850
(7 ) 843
2027 Notes 400
(5 ) 395
2047 Notes 400
(9 ) 391
Total long-term debt $ 2,700
$ (25 ) $ 2,675

At December 31, 2019
Gross Carrying
Amount Unamortized
Discount and Deferred Financing Costs Net Carrying
Amount
2021 Notes $ 650
$ (2 ) $ 648
2022 Notes 400
(2 ) 398
2026 Notes 850
(7 ) 843
2027 Notes 400
(5 ) 395
2047 Notes 400
(9 ) 391
Total long-term debt $ 2,700
$ (25 ) $ 2,675

Table of ~~March 31, 2020, the scheduled maturities and contractual principal repayments of our debt for each of the five succeeding years and thereafter are as follows (amounts in millions):~~

For the years ending December 31,
2020 (remaining nine months) $ —
2021 650
2022 400
2023 —
2024 —
Thereafter 1,650
Total $ 2,700

Contents

With the exception of the 2026 and the 2047 Notes, using Level 2 inputs (i.e., observable market prices in less-than-active markets) at March 31, 2020 and December 31, 2019, the carrying values of the Notes approximated their fair values, as the interest rates were similar to the current rates at which we could borrow funds over the selected interest periods. At March 31, 2020, based on Level 2 inputs, the fair values of the 2026 and 2047 Notes were $907 million and $501 million, respectively. At December 31, 2019, based on Level 2 inputs, the fair values of the 2026 Notes and the 2047 Notes were $893 million and $456 million, respectively.

9. Accumulated Other Comprehensive Income (Loss)

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

For the Three Months Ended March 31, 2020
Foreign currency translation adjustments Unrealized gain (loss) on forward contracts Unrealized gain (loss) on available-for-sale securities Total
Balance at December 31, 2019 $ (624 ) $ 8
$ (3 ) $ (619 )
Other comprehensive income (loss) before reclassifications (12 ) 10
4
2
Amounts reclassified from accumulated other comprehensive income (loss) into earnings (2 ) (9 ) —
(11 )
Balance at March 31, 2020 $ (638 ) $ 9
$ 1
$ (628 )

For the Three Months Ended March 31, 2019
Foreign currency translation adjustments Unrealized gain (loss) on forward contracts Unrealized gain (loss) on available-for-sale securities Total
Balance at December 31, 2018 $ (629 ) $ 23
$ 5
$ (601 )
Other comprehensive income (loss) before reclassifications 2
13
(6 ) 9
Amounts reclassified from accumulated other comprehensive income (loss) into earnings —
(11 ) 1
(10 )
Balance at March 31, 2019 $ (627 ) $ 25
$ —
$ (602 )


	For the Three Months Ended March 31, 2021
	Foreign currency translation adjustments		Unrealized gain (loss) on forward contracts		Unrealized gain (loss) on available-for-sale securities		Total
Balance at December 31, 2020	$	(589)	$	(28)	$	(5)	$	(622)
Other comprehensive income (loss) before reclassifications	(5)		20		(3)		12
Amounts reclassified from accumulated other comprehensive income (loss) into earnings	0		9		1		10
Balance at March 31, 2021	$	(594)	$	1	$	(7)	$	(600)


	For the Three Months Ended March 31, 2020
	Foreign currency translation adjustments		Unrealized gain (loss) on forward contracts		Unrealized gain (loss) on available-for-sale securities		Total
Balance at December 31, 2019	$	(624)	$	8	$	(3)	$	(619)
Other comprehensive income (loss) before reclassifications	(12)		10		4		2
Amounts reclassified from accumulated other comprehensive income (loss) into earnings	(2)		(9)		0		(11)
Balance at March 31, 2020	$	(638)	$	9	$	1	$	(628)

10. Operating Segments and Geographic Region

We have 3 reportable segments—Activision, Blizzard, and King. Our operating segments are consistent with the manner in which our operations are reviewed and managed by our Chief Executive Officer, who is our chief operating decision maker (“CODM”). The CODM reviews segment performance exclusive of: the impact of the change in deferred revenues and related cost of revenues with respect to certain of our online-enabled games; share-based compensation expense; amortization of intangible assets as a result of purchase price accounting; fees and other expenses (including legal fees, expenses, and accruals) related to acquisitions, associated integration activities, and financings; certain restructuring and related costs; and certain other non-cash charges. The CODM does not review any information regarding total assets on an operating segment basis, and accordingly, no disclosure is made with respect thereto.

Our operating segments are also consistent with our internal organizational structure, the way we assess operating performance and allocate resources, and the availability of separate financial information. We do not aggregate operating segments.

Table of Contents

Information on reportable segment net revenues and operating income for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, are presented below (amounts in millions):

Three Months Ended March 31, 2020
Activision Blizzard King Total
Segment Net Revenues
Net revenues from external customers $ 519
$ 437
$ 498
$ 1,454
Intersegment net revenues (1) —
15
—
15
Segment net revenues $ 519
$ 452
$ 498
$ 1,469

Segment operating income $ 184
$ 197
$ 156
$ 537

Three Months Ended March 31, 2019
Activision Blizzard King Total
Segment Net Revenues
Net revenues from external customers $ 317
$ 339
$ 529
$ 1,185
Intersegment net revenues (1) —
5
—
5
Segment net revenues $ 317
$ 344
$ 529
$ 1,190

Segment operating income $ 73
$ 55
$ 178
$ 306


	Three Months Ended March 31, 2021
	Activision		Blizzard		King		Total
Segment Net Revenues
Net revenues from external customers	$	891	$	458	$	609	$	1,958
Intersegment net revenues (1)	0		25		0		25
Segment net revenues	$	891	$	483	$	609	$	1,983

Segment operating income	$	442	$	208	$	203	$	853

	Three Months Ended March 31, 2020
	Activision		Blizzard		King		Total
Segment Net Revenues
Net revenues from external customers	$	519	$	437	$	498	$	1,454
Intersegment net revenues (1)	0		15		0		15
Segment net revenues	$	519	$	452	$	498	$	1,469

Segment operating income	$	184	$	197	$	156	$	537


~~(1)~~	~~Intersegment revenues reflect licensing and service fees charged between segments.~~

(1) Intersegment revenues reflect licensing and service fees charged between segments.

Reconciliations of total segment net revenues and total segment operating income to consolidated net revenues and consolidated income before income tax expense are presented in the table below (amounts in millions):


	Three Months Ended March 31,
		2021		2020
Reconciliation to consolidated net revenues:
Segment net revenues		$	1,983	$	1,469
Revenues from non-reportable segments (1)		108		68
Net effect from recognition (deferral) of deferred net revenues (2)		209		266
Elimination of intersegment revenues (3)		(25)		(15)
Consolidated net revenues		$	2,275	$	1,788

Reconciliation to consolidated income before income tax expense:
Segment operating income		$	853	$	537
Operating income (loss) from non-reportable segments (1)		(4)		3
Net effect from recognition (deferral) of deferred net revenues and related cost of revenues (2)		132		171
Share-based compensation expense		(151)		(43)
Amortization of intangible assets		(5)		(33)

Restructuring and related costs (Note 11)		(30)		(23)


Consolidated operating income		795		612
Interest and other expense (income), net		30		8

Consolidated income before income tax expense		$	765	$	604

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Three Months Ended March 31,
2020 2019
Reconciliation to consolidated net revenues:
Segment net revenues $ 1,469
$ 1,190
Revenues from non-reportable segments (1) 68
73
Net effect from recognition (deferral) of deferred net revenues (2) 266
567
Elimination of intersegment revenues (3) (15 ) (5 )
Consolidated net revenues $ 1,788
$ 1,825

Reconciliation to consolidated income before income tax expense:
Segment operating income $ 537
$ 306
Operating income (loss) from non-reportable segments (1) 3
(3 )
Net effect from recognition (deferral) of deferred net revenues and related cost of revenues (2) 171
441
Share-based compensation expense (43 ) (63 )
Amortization of intangible assets (33 ) (54 )
Restructuring and related costs (4) (23 ) (57 )
Consolidated operating income 612
570
Interest and other expense (income), net 8
3
Consolidated income before income tax expense $ 604
$ 567
(1)Includes other income and expenses outside of our reportable segments, including our Distribution business and unallocated corporate income and expenses.

(2)Reflects the net effect from recognition (deferral) of deferred net revenues, along with related cost of revenues, on certain of our online-enabled products.

(3)Intersegment revenues reflect licensing and service fees charged between segments.

~~(1)~~

~~Includes other income and expenses from operating segments managed outside the reportable segments, including our Distribution business. Also includes unallocated corporate income and expenses.~~

~~(2)~~

~~Reflects the net effect from recognition (deferral) of deferred net revenues, along with related cost of revenues, on certain of our online-enabled products.~~

~~(3)~~

~~Intersegment revenues reflect licensing and service fees charged between segments.~~

~~(4)~~

~~Reflects restructuring initiatives, which include severance and other restructuring-related costs.~~

Net revenues by distribution channel, including a reconciliation to each of our reportable segment’s revenues, for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, were as follows (amounts in millions):


	Three Months Ended March 31, 2021
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by distribution channel:
Digital online channels (1)	$	965	$	461	$	605	$	0	$	(25)	$	2,006
Retail channels	143		6		0		0		0		149
Other (2)	15		3		0		102		0		120
Total consolidated net revenues	$	1,123	$	470	$	605	$	102	$	(25)	$	2,275

Change in deferred revenues:
Digital online channels (1)	$	(162)	$	17	$	4	$	0	$	0	$	(141)
Retail channels	(70)		(4)		0		0		0		(74)
Other (2)	0		0		0		6		0		6
Total change in deferred revenues	$	(232)	$	13	$	4	$	6	$	0	$	(209)

Segment net revenues:
Digital online channels (1)	$	803	$	478	$	609	$	0	$	(25)	$	1,865
Retail channels	73		2		0		0		0		75
Other (2)	15		3		0		108		0		126
Total segment net revenues	$	891	$	483	$	609	$	108	$	(25)	$	2,066

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	Three Months Ended March 31, 2020																			Three Months Ended March 31, 2020
	Activision			Blizzard			King			Non-reportable segments			Elimination of intersegment revenues (3)			Total				Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by distribution channel:																			Net revenues by distribution channel:
Digital online channels (1)	$	548		$	409		$	499		$	—		$	(15	)	$	1,441		Digital online channels (1)	$	548	$	409	$	499	$	0	$	(15)	$	1,441
Retail channels	212			9			—			—			—			221			Retail channels	212		9		0		0		0		221
Other (2)	20			31			—			75			—			126			Other (2)	20		31		0		75		0		126
Total consolidated net revenues	$	780		$	449		$	499		$	75		$	(15	)	$	1,788		Total consolidated net revenues	$	780	$	449	$	499	$	75	$	(15)	$	1,788

Change in deferred revenues:																			Change in deferred revenues:
Digital online channels (1)	$	(93	)	$	8		$	(1	)	$	—		$	—		$	(86	)	Digital online channels (1)	$	(93)	$	8	$	(1)	$	0	$	0	$	(86)
Retail channels	(168		)	(4		)	—			—			—			(172		)	Retail channels	(168)		(4)		0		0		0		(172)
Other (2)	—			(1		)	—			(7		)	—			(8		)	Other (2)	0		(1)		0		(7)		0		(8)
Total change in deferred revenues	$	(261	)	$	3		$	(1	)	$	(7	)	$	—		$	(266	)	Total change in deferred revenues	$	(261)	$	3	$	(1)	$	(7)	$	0	$	(266)

Segment net revenues:																			Segment net revenues:
Digital online channels (1)	$	455		$	417		$	498		$	—		$	(15	)	$	1,355		Digital online channels (1)	$	455	$	417	$	498	$	0	$	(15)	$	1,355
Retail channels	44			5			—			—			—			49			Retail channels	44		5		0		0		0		49
Other (2)	20			30			—			68			—			118			Other (2)	20		30		0		68		0		118
Total segment net revenues	$	519		$	452		$	498		$	68		$	(15	)	$	1,522		Total segment net revenues	$	519	$	452	$	498	$	68	$	(15)	$	1,522

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

Three Months Ended March 31, 2019
Activision Blizzard King Non-reportable segments Elimination of intersegment revenues (3) Total
Net revenues by distribution channel:
Digital online channels (1) $ 466
$ 406
$ 526
$ —
$ (5 ) $ 1,393
Retail channels 297
16
—
—
—
313
Other (2) —
39
—
80
—
119
Total consolidated net revenues $ 763
$ 461
$ 526
$ 80
$ (5 ) $ 1,825

Change in deferred revenues:
Digital online channels (1) $ (217 ) $ (114 ) $ 3
$ —
$ —
$ (328 )
Retail channels (229 ) (4 ) —
—
—
(233 )
Other (2) —
1
—
(7 ) —
(6 )
Total change in deferred revenues $ (446 ) $ (117 ) $ 3
$ (7 ) $ —
$ (567 )

Segment net revenues:
Digital online channels (1) $ 249
$ 292
$ 529
$ —
$ (5 ) $ 1,065
Retail channels 68
12
—
—
—
80
Other (2) —
40
—
73
—
113
Total segment net revenues $ 317
$ 344
$ 529
$ 73
$ (5 ) $ 1,258

(2) Net revenues from “Other” include revenues from our Distribution business, the Overwatch League, and the Call of Duty League.

(3) Intersegment revenues reflect licensing and service fees charged between segments.

~~(1)~~

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

~~(2)~~

~~Net revenues from “Other” include revenues from our Distribution business, the Overwatch League, and the Call of Duty League.~~

~~(3)~~

~~Intersegment revenues reflect licensing and service fees charged between segments.~~

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Geographic information presented below is based on the location of the paying customer. Net revenues by geographic region, including a reconciliation to each of our reportable segment’s net revenues, for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, were as follows (amounts in millions):

Three Months Ended March 31, 2020
Activision Blizzard King Non-reportable segments Elimination of intersegment revenues (2) Total
Net revenues by geographic region:
Americas $ 472
$ 172
$ 311
$ —
$ (7 ) $ 948
EMEA (1) 239
121
136
75
(5 ) 566
Asia Pacific 69
156
52
—
(3 ) 274
Total consolidated net revenues $ 780
$ 449
$ 499
$ 75
$ (15 ) $ 1,788

Change in deferred revenues:
Americas $ (146 ) $ 2
$ 1
$ —
$ —
$ (143 )
EMEA (1) (96 ) 3
(1 ) (7 ) —
(101 )
Asia Pacific (19 ) (2 ) (1 ) —
—
(22 )
Total change in deferred revenues $ (261 ) $ 3
$ (1 ) $ (7 ) $ —
$ (266 )

Segment net revenues:
Americas $ 326
$ 174
$ 312
$ —
$ (7 ) $ 805
EMEA (1) 143
124
135
68
(5 ) 465
Asia Pacific 50
154
51
—
(3 ) 252
Total segment net revenues $ 519
$ 452
$ 498
$ 68
$ (15 ) $ 1,522

Three Months Ended March 31, 2019
Activision Blizzard King Non-reportable segments Elimination of intersegment revenues (2) Total
Net revenues by geographic region:
Americas $ 458
$ 207
$ 326
$ —
$ (3 ) $ 988
EMEA (1) 243
148
144
80
(1 ) 614
Asia Pacific 62
106
56
—
(1 ) 223
Total consolidated net revenues $ 763
$ 461
$ 526
$ 80
$ (5 ) $ 1,825

Change in deferred revenues:
Americas $ (267 ) $ (54 ) $ 3
$ —
$ —
$ (318 )
EMEA (1) (146 ) (47 ) —
(7 ) —
(200 )
Asia Pacific (33 ) (16 ) —
—
—
(49 )
Total change in deferred revenues $ (446 ) $ (117 ) $ 3
$ (7 ) $ —
$ (567 )

Segment net revenues:
Americas $ 191
$ 153
$ 329
$ —
$ (3 ) $ 670
EMEA (1) 97
101
144
73
(1 ) 414
Asia Pacific 29
90
56
—
(1 ) 174
Total segment net revenues $ 317
$ 344
$ 529
$ 73
$ (5 ) $ 1,258


	Three Months Ended March 31, 2021
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (2)		Total
Net revenues by geographic region:
Americas	$	725	$	210	$	386	$	0	$	(14)	$	1,307
EMEA (1)	311		167		160		102		(9)		731
Asia Pacific	87		93		59		0		(2)		237
Total consolidated net revenues	$	1,123	$	470	$	605	$	102	$	(25)	$	2,275

Change in deferred revenues:
Americas	$	(131)	$	5	$	5	$	0	$	0	$	(121)
EMEA (1)	(77)		7		(1)		6		0		(65)
Asia Pacific	(24)		1		0		0		0		(23)
Total change in deferred revenues	$	(232)	$	13	$	4	$	6	$	0	$	(209)

Segment net revenues:
Americas	$	594	$	215	$	391	$	0	$	(14)	$	1,186
EMEA (1)	234		174		159		108		(9)		666
Asia Pacific	63		94		59		0		(2)		214
Total segment net revenues	$	891	$	483	$	609	$	108	$	(25)	$	2,066


	Three Months Ended March 31, 2020
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (2)		Total
Net revenues by geographic region:
Americas	$	472	$	172	$	311	$	0	$	(7)	$	948
EMEA (1)	239		121		136		75		(5)		566
Asia Pacific	69		156		52		0		(3)		274
Total consolidated net revenues	$	780	$	449	$	499	$	75	$	(15)	$	1,788

Change in deferred revenues:
Americas	$	(146)	$	2	$	1	$	0	$	0	$	(143)
EMEA (1)	(96)		3		(1)		(7)		0		(101)
Asia Pacific	(19)		(2)		(1)		0		0		(22)
Total change in deferred revenues	$	(261)	$	3	$	(1)	$	(7)	$	0	$	(266)

Segment net revenues:
Americas	$	326	$	174	$	312	$	0	$	(7)	$	805
EMEA (1)	143		124		135		68		(5)		465
Asia Pacific	50		154		51		0		(3)		252
Total segment net revenues	$	519	$	452	$	498	$	68	$	(15)	$	1,522

(1) “EMEA” consists of the Europe, Middle East, and Africa geographic regions.

(2) Intersegment revenues reflect licensing and service fees charged between segments.

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~~(1)~~	~~“EMEA” consists of the Europe, Middle East, and Africa geographic regions.~~


~~(2)~~	~~Intersegment revenues reflect licensing and service fees charged between segments.~~

The Company’s net revenues in the U.S. were ~~47%~~50% and ~~49%~~47% of consolidated net revenues for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company’s net revenues in the United Kingdom (“U.K.”) were 9%11% and ~~10%~~9% of consolidated net revenues for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. No other country’s net revenues exceeded 10% of consolidated net revenues for either the three months ended March 31, ~~2020~~2021 or ~~2019.~~2020.

Net revenues by platform, including a reconciliation to each of our reportable segment’s net revenues, for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, were as follows (amounts in millions):


	Three Months Ended March 31, 2021
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by platform:
Console	$	774	$	25	$	0	$	0	$	0	$	799
PC	201		422		24		0		(25)		622
Mobile and ancillary (1)	133		20		581		0		0		734
Other (2)	15		3		0		102		0		120
Total consolidated net revenues	$	1,123	$	470	$	605	$	102	$	(25)	$	2,275

Change in deferred revenues:
Console	$	(167)	$	(6)	$	0	$	0	$	0	$	(173)
PC	(61)		17		(1)		0		0		(45)
Mobile and ancillary (1)	(4)		2		5		0		0		3
Other (2)	0		0		0		6		0		6
Total change in deferred revenues	$	(232)	$	13	$	4	$	6	$	0	$	(209)

Segment net revenues:
Console	$	607	$	19	$	0	$	0	$	0	$	626
PC	140		439		23		0		(25)		577
Mobile and ancillary (1)	129		22		586		0		0		737
Other (2)	15		3		0		108		0		126
Total segment net revenues	$	891	$	483	$	609	$	108	$	(25)	$	2,066

Three Months Ended March 31, 2020
Activision Blizzard King Non-reportable segments Elimination of intersegment revenues (3) Total
Net revenues by platform:
Console $ 567
$ 27
$ —
$ —
$ —
$ 594
PC 126
362
25
—
(15 ) 498
Mobile and ancillary (1) 67
29
474
—
—
570
Other (2) 20
31
—
75
—
126
Total consolidated net revenues $ 780
$ 449
$ 499
$ 75
$ (15 ) $ 1,788

Change in deferred revenues:
Console $ (223 ) $ (8 ) $ —
$ —
$ —
$ (231 )
PC (37 ) 19
(1 ) —
—
(19 )
Mobile and ancillary (1) (1 ) (7 ) —
—
—
(8 )
Other (2) —
(1 ) —
(7 ) —
(8 )
Total change in deferred revenues $ (261 ) $ 3
$ (1 ) $ (7 ) $ —
$ (266 )

Segment net revenues:
Console $ 344
$ 19
$ —
$ —
$ —
$ 363
PC 89
381
24
—
(15 ) 479
Mobile and ancillary (1) 66
22
474
—
—
562
Other (2) 20
30
—
68
—
118
Total segment net revenues $ 519
$ 452
$ 498
$ 68
$ (15 ) $ 1,522

Three Months Ended March 31, 2019
Activision Blizzard King Non-reportable segments Elimination of intersegment revenues (3) Total
Net revenues by platform:
Console $ 635
$ 42
$ —
$ —
$ —
$ 677
PC 124
342
33
—
(5 ) 494
Mobile and ancillary (1) 4
38
493
—
—
535
Other (2) —
39
—
80
—
119
Total consolidated net revenues $ 763
$ 461
$ 526
$ 80
$ (5 ) $ 1,825

Change in deferred revenues:
Console $ (386 ) $ (12 ) $ —
$ —
$ —
$ (398 )
PC (59 ) (90 ) —
—
—
(149 )
Mobile and ancillary (1) (1 ) (16 ) 3
—
—
(14 )
Other (2) —
1
—
(7 ) —
(6 )
Total change in deferred revenues $ (446 ) $ (117 ) $ 3
$ (7 ) $ —
$ (567 )

Segment net revenues:
Console $ 249
$ 30
$ —
$ —
$ —
$ 279
PC 65
252
33
—
(5 ) 345
Mobile and ancillary (1) 3
22
496
—
—
521
Other (2) —
40
—
73
—
113
Total segment net revenues $ 317
$ 344
$ 529
$ 73
$ (5 ) $ 1,258

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	Three Months Ended March 31, 2020
	Activision		Blizzard		King		Non-reportable segments		Elimination of intersegment revenues (3)		Total
Net revenues by platform:
Console	$	567	$	27	$	0	$	0	$	0	$	594
PC	126		362		25		0		(15)		498
Mobile and ancillary (1)	67		29		474		0		0		570
Other (2)	20		31		0		75		0		126
Total consolidated net revenues	$	780	$	449	$	499	$	75	$	(15)	$	1,788

Change in deferred revenues:
Console	$	(223)	$	(8)	$	0	$	0	$	0	$	(231)
PC	(37)		19		(1)		0		0		(19)
Mobile and ancillary (1)	(1)		(7)		0		0		0		(8)
Other (2)	0		(1)		0		(7)		0		(8)
Total change in deferred revenues	$	(261)	$	3	$	(1)	$	(7)	$	0	$	(266)

Segment net revenues:
Console	$	344	$	19	$	0	$	0	$	0	$	363
PC	89		381		24		0		(15)		479
Mobile and ancillary (1)	66		22		474		0		0		562
Other (2)	20		30		0		68		0		118
Total segment net revenues	$	519	$	452	$	498	$	68	$	(15)	$	1,522

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


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

(2) Net revenues from “Other” primarily includes revenues from our Distribution business, the Overwatch League, and the Call of Duty League.


~~(2)~~	~~Net revenues from “Other” include revenues from our Distribution business, the Overwatch League, and the Call of Duty League.~~

(3) Intersegment revenues reflect licensing and service fees charged between segments.


~~(3)~~	~~Intersegment revenues reflect licensing and service fees charged between segments.~~

Long-lived assets by geographic region were as follows (amounts in millions):

At March 31, 2020 At December 31, 2019
Long-lived assets (1) by geographic region:

Americas $ 312
$ 322
EMEA 133
142
Asia Pacific 18
21
Total long-lived assets by geographic region $ 463
$ 485


~~(1)~~	The only long-lived assets that we classify by region are our long-term tangible fixed assets, which consist of property, plant, and equipment assets, and our lease ROU assets; all other long-term assets are not allocated by location.


	At March 31, 2021		At December 31, 2020
Long-lived assets (1) by geographic region:
Americas	$	259	$	270
EMEA	156		166
Asia Pacific	14		17
Total long-lived assets by geographic region	$	429	$	453

(1) The only long-lived assets that we classify by region are our long-term tangible fixed assets, which consist of property, plant, and equipment assets and lease right-of-use assets. All other long-term assets are not allocated by location.

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11. Restructuring

During 2019, we began implementing ~~our previously announced restructuring~~a plan aimed at refocusing our resources on our largest opportunities and removing unnecessary levels of complexity from certain parts of our business. We have been:

•increasing our investment in development for our largest, internally-owned franchises—across upfront releases, in-game content, mobile, and geographic expansion;

•reducing certain non-development and administrative-related costs across our business; and

•integrating our global and regional sales and “go-to-market,” partnerships, and sponsorships capabilities across the business, which we believe will enable us to provide better opportunities for talent, and greater expertise and scale on behalf of our business units.

The restructuring actions remain in progress as we continue to focus on these ~~goals and execute against our plan in 2020.~~goals.

The following table summarizes accrued restructuring and related costs included in “Accrued expenses and other liabilities” in our condensed consolidated balance sheet and the cumulative charges incurred (amounts in millions):


	Severance and employee-related costs		Facilities and related costs		Other costs		Total
Balance at December 31, 2020	$	88	$	0	$	3	$	91
Costs charged to expense	24		1		2		27
Cash payments	(9)		0		(1)		(10)
Non-cash charge adjustment	(2)		(1)		(1)		(4)
Balance at March 31, 2021	$	101	$	0	$	3	$	104









Cumulative charges incurred through March 31, 2021	$	176	$	36	$	34	$	246

Severance and employee-related costs Facilities and related costs Other costs Total
Balance at December 31, 2019 $ 32
$ —
$ 3
$ 35
Costs charged to expense 23
—
—
23
Cash payments (6 ) —
(2 ) (8 )
Balance at March 31, 2020 $ 49
$ —
$ 1
$ 50

Cumulative charges incurred through March 31, 2020 $ 99
$ 29
$ 32
$ 160

Total restructuring and related costs by segment are (amounts in millions):


	Three Months Ended March 31,
		2021		2020
Activision		$	1	$	2
Blizzard		23		21
King		1		(1)
Other segments (1)		2		1
Total		$	27	$	23

(1) Includes charges outside of our reportable segments, including charges for our corporate and administrative functions.

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Three Months Ended March 31,
2020 2019
Activision $ 2
$ 9
Blizzard 21
26
King (1 ) 8
Other segments (1) 1
14
Total $ 23
$ 57
During the three months ended March 31, 2021, we incurred additional restructuring charges that are not included in the plan discussed above. Such amounts were not material.


~~(1)~~	Includes charges related to operating segments managed outside the reportable segments, including our Distribution business. Also includes restructuring charges for our corporate and administrative functions.

We expect to incur total aggregate pre-tax restructuring charges of approximately ~~$190~~$310 million associated with the ~~restructuring plan. Approximately $50 million~~plan, of ~~these~~which we expect the remaining charges that have not yet been recognized to largely be incurred by the end of 2021. The charges associated with the plan are expected to ~~be incurred in 2020 as we complete the execution of the restructuring plan, as discussed above. These charges will primarily~~ relate to severance and employee-related costs (approximately 60% of the aggregate charge), ~~including, in many cases, amounts above those that are legally required,~~ facilities and related costs (approximately 20% of the aggregate charge), and other costs (approximately 20% of the aggregate charge), including charges for restructuring related fees and the write-down of ~~assets from canceled projects.~~assets. A substantial majority (approximately 70%) of the total pre-tax charge associated with the restructuring ~~will~~is expected to be paid in cash using amounts on hand, and ~~the~~such cash outlays are largely expected to ~~continue throughout 2020.~~be completed by the end of 2021. We do not expect to realize significant net savings in our total operating expenses as a result of our plan, as cost reductions in our selling, general and administrative activities is expected to be offset by increased investment in product development.

The total charges incurred through March 31, ~~2020~~2021 and total expected pre-tax restructuring charges related to the ~~restructuring~~ plan, by segment, inclusive of amounts already incurred and inclusive of certain inventory write-downs in prior years, are presented below (amounts in millions):


	Total Charges Incurred Through March 31, 2021		Total Charges Expected as of March 31, 2021
Activision	$	33	$	44
Blizzard	167		205
King	20		22
Other segments (1)	31		39
Total	$	251	$	310

(1) Includes charges outside of our reportable segments, including charges for our corporate and administrative functions.

12. Interest and Other Expense (Income), Net

Total Charges Incurred Through March 31, 2020 Total Expected Charges
Activision $ 21
$ 25
Blizzard 94
105
King 19
20
Other segments (1) 26
40
Total $ 160
$ 190


~~(1)~~	Includes charges related to operating segments managed outside the reportable segments, including our Distribution business. Also includes restructuring charges for our corporate and administrative functions.


~~12.~~	~~Interest and Other Expense (Income), Net~~

Interest and other expense (income), net is comprised of the following (amounts in millions):

For the Three Months Ended March 31,
2020 2019
Interest income $ (16 ) $ (21 )
Interest expense from debt and amortization of debt discount and deferred financing costs 23
23
Other expense (income), net 1
1
Interest and other expense (income), net $ 8
$ 3


	For the Three Months Ended March 31,
		2021		2020
Interest income		$	(1)	$	(16)
Interest expense from debt and amortization of debt discount and deferred financing costs		28		23

Other expense (income), net		3		1
Interest and other expense (income), net		$	30	$	8

13. Income Taxes

We account for our provision for income taxes in accordance with ASC 740, Income Taxes, which requires an estimate of the annual effective tax rate for the full year to be applied to the interim period, taking into account year-to-date amounts and projected results for the full year. The provision for income taxes represents federal, foreign, state, and local income taxes. Our effective tax rate could be different from the statutory U.S. income tax rate due to: the effect of state and local income taxes; tax rates that apply to our foreign income (including U.S. tax on foreign income); research and development credits; and certain nondeductible expenses. Our effective tax rate could fluctuate significantly from quarter to quarter based on recurring and nonrecurring factors including, but not limited to: variations in the estimated and actual level of pre-tax income or loss by jurisdiction; changes in enacted tax laws and regulations, and interpretations thereof, including with respect to tax credits and state and local income taxes; developments in tax audits and other matters; recognition of excess tax benefits and tax deficiencies from share-based payments; and certain nondeductible expenses. Changes in judgment from the evaluation of new information resulting in the recognition, derecognition, or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of the change.

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The income tax expense of ~~$99~~$146 million for the three months ended March 31, ~~2020~~2021, reflects, an effective tax rate of ~~16%~~19%, which is ~~lower~~higher than the effective tax rate of ~~21%~~16% for the three months ended March 31, ~~2019.~~2020. The ~~decrease~~increase is primarily due to a ~~discrete tax~~ benefit recognized in the ~~current~~prior year in connection with the remeasurement of a U.S. deferred tax asset, ~~related to foreign earnings resulting~~partially offset by higher excess tax benefits from ~~an intra-group asset transfer.~~share-based payments in the current year.

The effective tax rate of ~~16%~~19% for the three months ended March 31, ~~2020~~2021, is lower than the U.S. statutory rate of 21%, primarily due to ~~lower U.S. taxes on foreign earnings,~~excess tax benefits from share-based payments in the ~~remeasurement of a U.S. deferred tax asset related to foreign earnings, and the recognition of federal research and development credits.~~current year.

Activision Blizzard’s tax years after 2008 remain open to examination by certain major taxing jurisdictions to which we are subject. The ~~IRS~~Internal Revenue Service is currently examining our federal tax returns for the 2012 through 2016 tax years. We also have several state and non-U.S. audits pending. In addition, King’s pre-acquisition tax returns remain open in various jurisdictions, primarily as a result of transfer pricing matters. We anticipate resolving King’s transfer pricing for both pre- and post-acquisition tax years through a collaborative multilateral process with the tax authorities in the relevant jurisdictions, which include the U.K. and Sweden. While the outcome of this process remains uncertain, it could result in an agreement that changes the allocation of profits and losses between these and other relevant jurisdictions or a failure to reach an agreement that results in unilateral adjustments to the amount and timing of taxable income in the jurisdictions in which King operates.

In December 2018, we received a decision from the Swedish Tax Agency (“STA”) informing us of an audit assessment of a Swedish subsidiary of King for the 2016 tax year (“Initial Decision”). The Initial Decision described the basis for issuing a transfer pricing assessment of approximately 3.5kr billion (approximately $352 million), primarily concerning an alleged intercompany asset transfer. On June 17, 2019, we received a reassessment from the STA (the “Reassessment”) which changed the Initial Decision based on a revision of the transfer pricing approach reflected in King’s 2016 Swedish tax return and removal of the alleged intercompany asset transfer that was the basis of the Initial Decision. The STA also, at the same time, reassessed the 2017 tax year on the same transfer pricing basis as 2016. The transfer pricing approach reflected in the Reassessment for both 2016 and 2017 remains subject to further review by taxing authorities in other jurisdictions. In July 2019, the Company made a payment to the STA for the Reassessment for the 2016 and 2017 tax years, which did not result in a significant impact to our condensed consolidated financial statements.

In December 2017, we received a Notice of Reassessment from the French Tax Authority (“FTA”) related to transfer pricing for intercompany transactions involving one of our French subsidiaries for the 2011 through 2013 tax years. The total assessment, including penalties and interest, was approximately €571 million (approximately $632 million). In December 2019, the Company reached a settlement with the FTA for the 2011 through 2018 tax years, resulting in the recognition of $54 million of tax expense in the period ended December 31, 2019, and a tax payment of €161 million (approximately $178 million), including interest and penalties, in January 2020.

In addition, certain of our subsidiaries are under examination or investigation, or may be subject to examination or investigation, by tax authorities in various jurisdictions. These proceedings may lead to adjustments or proposed adjustments to our taxes or provisions for uncertain tax positions. Such proceedings may have a material adverse effect on the Company’s consolidated financial position, liquidity, or results of operations in the earlier of the period or periods in which the matters are resolved and in which appropriate tax provisions are taken into account in our financial statements. If we were to receive a materially adverse assessment from a taxing jurisdiction, we would plan to vigorously contest it and consider all of our options, including the pursuit of judicial remedies.

We regularly assess the likelihood of adverse outcomes resulting from these examinations and monitor the progress of ongoing discussions with tax authorities in determining the appropriateness of our tax provisions. The final resolution of the Company’s global tax disputes is uncertain. There is significant judgment required in the analysis of disputes, including the probability determination and estimation of the potential exposure. Based on current information, in the opinion of the Company’s management, the ultimate resolution of these matters is not expected to have a material adverse effect on the Company’s consolidated financial position, liquidity or results of ~~operations, except as noted above.~~operations.

14. 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):

For the Three Months Ended March 31,
2020 2019
Numerator:
Consolidated net income $ 505
$ 447
Denominator:

Denominator for basic earnings per common share—weighted-average common shares outstanding 769
764
Effect of potential dilutive common shares under the treasury stock method—employee stock options and awards 5
6
Denominator for basic earnings per common share—weighted-average dilutive common shares outstanding 774
770

Basic earnings per common share $ 0.66
$ 0.58
Diluted earnings per common share $ 0.65
$ 0.58


	For the Three Months Ended March 31,
		2021		2020
Numerator:
Consolidated net income		$	619	$	505
Denominator:
Denominator for basic earnings per common share—weighted-average common shares outstanding		775		769
Effect of dilutive stock options and awards under the treasury stock method		8		5
Denominator for basic earnings per common share—weighted-average dilutive common shares outstanding		783		774

Basic earnings per common share		$	0.80	$	0.66
Diluted earnings per common share		$	0.79	$	0.65

The vesting of certain of our employee-related restricted stock units ~~and options~~ is contingent upon the satisfaction of ~~pre-defined~~predefined performance measures. The shares underlying these equity awards are included in the weighted-average dilutive common shares only if the performance measures are met as of the end of the reporting period. Additionally, potential common shares are not included in the denominator of the diluted earnings per common share calculation when the inclusion of such shares would be anti-dilutive.

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Weighted-average shares excluded from the computation of diluted earnings per share were as follows (amounts in millions):

For the Three Months Ended March 31,
2020 2019
Restricted stock units and options with performance measures not yet met 3
3
Anti-dilutive employee stock options 6
6


	For the Three Months Ended March 31,
		2021	2020
Restricted stock units with performance measures not yet met		3	3
Anti-dilutive employee stock options		2	6

15. Capital Transactions

Repurchase Program

On January ~~31, 2019,~~27, 2021, our Board of Directors authorized a stock repurchase program under which we are authorized to repurchase up to ~~$1.5~~$4.0 billion of our common stock during the two-year period from February 14, ~~2019,~~2021 until the earlier of February 13, ~~2021,~~2023 and a determination by the Board of Directors to discontinue the repurchase program. As of March 31, ~~2020,~~2021, we have ~~not~~0t repurchased any shares under this program.

Dividends

On February ~~6, 2020,~~4, 2021, our Board of Directors declared a cash dividend of ~~$0.41~~$0.47 per common share. Such dividend is payable on May 6, ~~2020,~~2021, to shareholders of record at the close of business on April 15, ~~2020.~~2021. We have recorded ~~$316~~$365 million of dividends payable in “Accrued expenses and other liabilities” on our condensed consolidated balance sheet as of March 31, ~~2020.~~2021.

On February ~~12, 2019,~~6, 2020, our Board of Directors declared a cash dividend of ~~$0.37~~$0.41 per common share. On May ~~9, 2019,~~6, 2020, we made an aggregate cash dividend payment of ~~$283~~$316 million to shareholders of record at the close of business on ~~March 28, 2019.~~April 15, 2020.

16. Commitments and Contingencies

Legal Proceedings

We are party to routine claims, suits, investigations, audits, and other proceedings arising from the ordinary course of business, including with respect to intellectual property rights, contractual claims, labor and employment matters, regulatory matters, tax matters, unclaimed property matters, compliance matters, and collection matters. In the opinion of management, after consultation with legal counsel, such routine claims and lawsuits are not significant, and we do not expect them to have a material adverse effect on our business, financial condition, results of operations, or liquidity.

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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 leading global developer and publisher of interactive entertainment content and services. We develop and distribute content and services on video game consoles, personal computers (“PC”s), and mobile devices. We also operate esports leagues and offer digital advertising within some of our content. The terms “Activision Blizzard,” the “Company,” “we,” “us,” and “our” are used to refer collectively to Activision Blizzard, Inc. and its subsidiaries.

~~The~~ For a discussion of the history of the formation of our Company, ~~was originally incorporated in California in 1979~~including our year and ~~was reincorporated in Delaware in~~form of incorporation, refer to Part I, Item 1 “Business” of our Annual Report on Form 10-K for the year ended December 1992. In connection with the 2008 business combination by and among the Company (then known as Activision, Inc.), Vivendi S.A, and Vivendi Games, Inc., pursuant to which we acquired Blizzard Entertainment, Inc. (“Blizzard”), we were renamed Activision Blizzard, Inc. On February 23, 2016, we acquired King Digital Entertainment plc, a leading interactive mobile entertainment company ("King"), by purchasing all of its outstanding shares.31, 2019.

Our Segments

Based onupon our organizational structure, we conduct our business through three reportable segments, ~~as follows:~~each of which is a leading global developer and publisher of interactive entertainment content and services based primarily on our internally developed intellectual properties.

(i) Activision Publishing, Inc.

Activision Publishing, Inc. (“Activision”) ~~is a leading global developer and publisher of interactive software products and entertainment content, particularly for the console platform. Activision primarily~~ delivers content through ~~retail~~both premium and ~~digital channels, including~~free-to-play offerings and primarily generates revenue from full-game and in-game sales, as well as by licensing software to third-party or related-party companies that distribute Activision products. ~~Activision develops, markets, and sells products primarily based on our internally developed intellectual properties.~~Activision’s key product franchise is Call of Duty®, a first-person action franchise. Activision also includes the activities of the Call of Duty ~~League~~^TMLeague™, a global professional esports league with city-based teams.

~~Activision’s key product franchise is Call of Duty~~^®~~, a first-person action title for the console and PC platforms and, following the October 1, 2019 launch of~~ ~~Call of Duty: Mobile,~~ ~~the mobile platform, including for Google Inc.’s (“Google”) Android and Apple Inc.’s (“Apple”) iOS.~~

(ii) Blizzard Entertainment, Inc.

Blizzard ~~is a leading global developer and publisher of interactive software products and entertainment content, particularly for the PC platform. Blizzard primarily~~Entertainment, Inc. (“Blizzard”) delivers content through ~~retail~~both premium and ~~digital channels, including subscriptions,~~free-to-play offerings and primarily generates revenue from full-game and in-game sales, ~~as well as~~subscriptions, and by licensing software to third-party or related-party companies that distribute Blizzard products. Blizzard also maintains a proprietary online gaming service, Blizzard Battle.net^®, which facilitates digital distribution of Blizzard content and selected Activision content, online social connectivity, and the creation of user-generated content. Blizzard’s key product franchises include: World of Warcraft®, a subscription-based massive multi-player online role-playing franchise; Hearthstone®, an online collectible card franchise based in the Warcraft universe; Diablo®, an action role-playing franchise; and Overwatch®, a team-based first-person action franchise. Blizzard also includes the activities of the Overwatch ~~League~~^TMLeague™, a global professional esports league with city-based teams.

~~Blizzard’s key product franchises include: World of Warcraft~~^®~~, a subscription-based massive multi-player online role-playing game for the PC platform; Diablo~~^®~~, an action role-playing franchise for the PC and console platforms; Hearthstone~~^®~~, an online collectible card franchise for the PC and mobile platforms; and Overwatch~~^®~~, a team-based first-person action title for the PC and console platforms.~~

(iii) King Digital Entertainment

King ~~is a leading global developer~~Digital Entertainment (“King”) delivers content primarily through free-to-play offerings and ~~publisher of interactive entertainment content~~primarily generates revenue from in-game sales and ~~services, particularly for~~in-game advertising on the mobile platform, including for Google’s Android and Apple’s iOS. King also distributes its content and services on the PC platform, primarily via Facebook. King’s games are free to play; however, players can acquire in-game items, either with virtual currency or real currency, and we continue to focus on in-game advertising as a growing source of revenue.

platform. King’s key product franchise is Candy ~~Crush~~^TMCrush™, ~~which features~~a “match three” ~~games for the mobile and PC platforms.~~franchise.

Other

We also engage in other businesses that do not represent reportable segments, including the Activision Blizzard Distribution (“Distribution”) business, which consists of operations in Europe that provide warehousing, logistics, and sales distribution services to third-party publishers of interactive entertainment software, our own publishing operations, and manufacturers of interactive entertainment hardware.

Impacts of the Global COVID-19 Pandemic

In December 2019, a novel strain of coronavirus (“COVID-19”) emerged and has since extensively impacted global health and the economic environment. On ~~February 28,~~March 11, 2020, the World Health Organization (“WHO”) ~~raised its assessment of the COVID-19 threat from high to very high at a global level due to the continued increase in the number of cases and affected countries, and on March 11, 2020, the WHO~~ characterized COVID-19 as a pandemic. In an effort to contain the spread of COVID-19, domestic and international governments around the world enacted various measures, including orders to close all businesses not deemed “essential,” ~~and~~ quarantine orders for individuals to stay in their homes or places of residence, and to practice social distancing when engaging in essential activities. We anticipate that these actions and the ongoing global health crisis caused by COVID-19 will continue to negatively impact many business activities and financial markets across the globe.

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During the early stages of the COVID-19 pandemic, our business experienced an increase in demand for certain of our products and services as a result of the stay-at-home orders enacted in various regions as players had more time to engage with our games. We have, however, seen a moderation in these trends in some regions since the stay-at-home orders were originally enacted earlier in 2020 and it is uncertain at this time how our business could be impacted as stay-at-home orders continue to be reduced or are lifted completely.

In an effort to protect the health and safety of our employees, the majority of our workforce continues to work from home and we have placed restrictions on non-essential business travel. Additionally, thus far, our business has been able to operate with minimal disruption to our game titles’ published release dates.

The full extent of the impact of the COVID-19 pandemic on our business, reputation, financial condition, results of operations, income, revenue, profitability, cash flows, liquidity, or stock price will depend on numerous evolving factors that we are not able to fully predict at this time. However, we believe that given our strong balance sheet, with cash and cash equivalents and short-term investments of $6.0 billion as of March 31, 2020, and the fact that our business has increasingly shifted to digital channels, we have substantial flexibility as we navigate through the uncertain environment and near-term implications of COVID-19. Further, we anticipate in the near term that our business could see an increase in demand for our products and services as a result of the stay-at-home orders enacted in various regions, as players have more time to engage with our games. We began to see early indications of this trend towards the end of the first quarter of 2020, with the performance from some of our franchises further strengthening in March as populations sheltered at home in many regions of the world and turned to our content for entertainment and social connection. For instance, in the latter part of the quarter, we noted an even greater demand for ~~Call of Duty: Modern Warfare~~^® ~~and its associated content, which was also benefiting from the launch of~~ ~~Call of Duty: Warzone~~ in March 2020. Additionally, our Blizzard and King operating segments experienced an increase in monthly active users for certain franchises during the month of March. The sustainability of these early trends and long-term implications to our business is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which are uncertain and cannot be predicted at this time. See Item 1A “Risk Factors” within Part II of this Quarterly Report on Form 10-Q for additional details on risks and uncertainties regarding the impacts of the global COVID-19 pandemic on our business, reputation, financial condition, results of operations, income, revenue, profitability, cash flows, liquidity, and stock price.

In an effort to protect the health and safety of our employees, the majority of our workforce is currently working from home and we have placed restrictions on non-essential business travel. We have implemented business continuity plans and have increased support and resources to enable our employees to work remotely and thus far our business has been able to operate with minimal disruption. The global COVID-19 pandemic remains a rapidly evolving situation. We will continue to actively monitor the developments of the COVID-19 pandemic and may take further actions that could alter our business operations as may be required by federal, state, local, or foreign authorities, or that we determine are in the best interests of our employees, customers, partners, and shareholders. ~~It is not clear what effects any such potential actions may have~~

Refer to Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020 for additional details on risks and uncertainties regarding the impacts of the global COVID-19 pandemic on our business, ~~including the effects on our employees, players and consumers, customers, partners, game development and content pipelines, or on our~~ reputation, financial condition, results of operations, income, revenue, profitability, cash flows, liquidity, orand stock ~~price~~.price.

Business Results and Highlights

Financial Results

For the three months ended March 31, ~~2020:~~2021:

•consolidated net revenues ~~decreased 2%~~increased 27% to ~~$1.79~~$2.28 billion, while consolidated operating income increased 7%30% to ~~$612~~$795 million, as compared to consolidated net revenues of ~~$1.83~~$1.79 billion and consolidated operating income of ~~$570~~$612 million for the three months ended March 31, ~~2019;~~2020;

~~revenues from digital online channels were $1.44 billion, or 81% of consolidated net revenues,~~•diluted earnings per common share increased 22% to $0.79, as compared to ~~$1.39 billion, or 76% of consolidated net revenues,~~$0.65 for the three months ended March 31, ~~2019;~~2020; and

•cash flows from operating ~~margin was 34.2%, which includes $23~~activities were $844 million, ~~in restructuring and related costs,~~an increase of 470%, as compared to ~~31.2%, which included $57 million in restructuring and related costs, for the three months ended March 31, 2019;~~

~~consolidated net income increased 13% to $505 million, as compared to $447~~$148 million for the three months ended March 31, ~~2019;~~2020.

~~diluted earnings per common share increased 12% to $0.65, as compared to $0.58 for the three months ended March 31, 2019; and~~

~~cash flows from operating activities were $148 million, a decrease of 67%, as compared to $450 million for the three months ended March 31, 2019.~~

Since certain of our games are hosted online or include significant online functionality that represents a separate performance obligation, we defer the transaction price allocable to the online functionality from the sale of these games and recognize the attributable revenues over the relevant estimated service periods, which are generally less than a year. Net revenues and operating income for the three months ended March 31, ~~2020,~~2021, include a net effect of ~~$266~~$209 million and ~~$171~~$132 million, respectively, from the recognition of deferred net revenues and related cost of revenues.

Additionally, for the both three months ended March 31, 2021 and 2020, ~~and 2019,~~ 11% ~~and 14%, respectively,~~ of total net revenues recognized were from revenue sources that were recognized at a “point-in-time,” while “over-time and other” revenues were the remaining 89% ~~and 86%, respectively,~~ of total net revenues. ~~Revenues~~Revenue recognized at a “point-in-time” ~~are~~is primarily comprised of the portion of revenue from software products that is recognized when the customer takes control of the product (i.e., upon delivery of the software product) and revenues from our Distribution business. “Over-time and other ~~revenues” are~~revenue” is primarily comprised of revenue associated with the online functionality of our games, in-game purchases, and subscriptions.

~~Content Release and Event Highlights~~

~~Games and other major content releases during the three months ended March 31, 2020, include Activision’s~~ ~~Call of Duty: Warzone, an all-new free-to-play experience from the world of~~ ~~Call of Duty:Modern Warfarefor the console and PC platforms, and Blizzard’s~~ ~~Warcraft~~^® ~~III: Reforged~~^TM, ~~a re-imagining of Blizzard’s real-time strategy game. Additionally, the Call of Duty League began its first season in January 2020, and the Overwatch League began its third season in February 2020.~~

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Operating Metrics

The following operating metrics are key performance indicators that we use to evaluate our business. The key drivers of changes in our operating metrics are presented in the order of significance.

Net bookings and In-game net bookings

We monitor net bookings and in-game net bookings as a key operating ~~metric~~metrics in evaluating the performance of our business because ~~it enables~~they enable an analysis of performance based on the timing of actual transactions with our customers and ~~provides~~provide a more timely ~~indications~~indication of trends in our operating results. Net bookings is the net amount of products and services sold digitally or sold-in physically in the period, and includes license fees, merchandise, and publisher incentives, among others. Net bookings is equal to net revenues excluding the impact from deferrals. In-game net bookings primarily includes the net amount of microtransactions and downloadable content ~~and microtransactions~~ sold during the period, and is equal to in-game net revenues excluding the impact from deferrals.

Net bookings and in-game net bookings were as follows (amounts in millions):


	For the Three Months Ended March 31,
		2021		2020		Increase (Decrease)
Net bookings		$	2,066	$	1,522	$	544


In-game net bookings		$	1,343	$	956	$	387

March 31, 2020 March 31, 2019 Increase (Decrease)
Net bookings $ 1,522
$ 1,258
$ 264
In-game net bookings $ 956
$ 794
$ 162

Net bookings

The increase in net bookings for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due to:

•

~~a $202~~

•a $372 million increase in Activision net bookings, driven by higher net bookings from (1) Call of Duty: Black Ops Cold War (which was released in November 2020, and when referred to herein, is inclusive of Call of Duty: Warzone™ following the release of Call of Duty: Black Ops Cold War Season 1 content on December 16, 2020) as compared to Call of Duty: Modern Warfare (which was released on October 2019, and when referred to herein, is inclusive of Call of Duty: Warzone from its release in March 2020 through December 16, 2020), (2) Call of Duty: Modern Warfare, as compared to Call of Duty: Black Ops 4, which was released in October 2018, and (3) Call of Duty: Mobile,which was released in October 2019;

•an $111 million increase ~~in Activision net bookings primarily driven by (1) higher net bookings from~~ ~~Call of Duty: Modern Warfare~~ ~~(which was released in October 2019, and when referred to herein, is inclusive of~~ ~~Call of Duty: Warzone~~,~~which was released in March 2020) as compared to~~ ~~Call of Duty: Black Ops 4~~,~~which was released in October 2018 and (2) net bookings from~~ ~~Call of Duty: Mobile, which was released in October 2019, partially offset by lower net bookings from~~ ~~Sekiro: Shadows Die Twice~~^TM,~~which was released in March 2019, with no comparable release in 2020; and~~

•

~~a $108 million increase in Blizzard net bookings driven by higher net bookings from~~ ~~World of Warcraft~~,~~primarily from higher subscription net bookings due to the release of~~ ~~World of WarcraftClassic~~ ~~in August 2019, and revenues associated with in-game content delivered to customers upon pre-purchase of~~ ~~World of Warcraft:Shadowlands, with no comparable net bookings in the prior period.~~

~~The increase was partially offset by a $31 million decrease~~ in King net bookings driven by higher net bookings from in-game player purchases and advertising, primarily ~~due to~~in the Candy Crush franchise; and

•a $31 million increase in Blizzard net bookings, driven by higher net bookings from World of Warcraft, which includes the November 2020 release of World of Warcraft: Shadowlands, partially offset by lower net bookings from ~~player purchases, driven by the Candy Crush franchise, partially offset by an increase~~Warcraft III: Reforged™,which was released in ~~advertising net bookings.~~January 2020.

In-game net bookings

The increase in in-game net bookings for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due to a ~~$182~~$243 million increase in Activision in-game net bookings, ~~driven by (1) higher in-game net bookings from~~ ~~Call of Duty: Modern Warfare~~,~~as compared to~~ ~~Call of Duty: Black Ops 4~~ ~~and (2) in-game net bookings from~~ ~~Call of Duty: Mobile.~~

~~The~~an $81 million increase ~~was partially offset by a $50 million decrease~~ in King in-game net bookings, ~~due to lower~~and a $63 million increase in Blizzard in-game net bookings, primarily driven by the ~~Candy Crush franchise.~~same factors as noted for net bookings above.

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Monthly Active Users

We monitor monthly active users (“MAUs”) as a key measure of the overall size of our user base. MAUs are the number of individuals who accessed a particular game in a given month. We calculate average MAUs in a period by adding the total number of MAUs in each of the months in a given period and dividing that total by the number of months in the period. An individual who accesses two of our games would be counted as two users. In addition, due to technical limitations, for Activision and King, an individual who accesses the same game on two platforms or devices in the relevant period would be counted as two users. For Blizzard, an individual who accesses the same game on two platforms or devices in the relevant period would generally be counted as a single user. In certain instances, we rely on third parties to publish our games. In these instances, MAU data is based on information provided to us by those third parties, or, if final data is not available, reasonable estimates of MAUs for these third-party published games.

The number of MAUs for a given period can be significantly impacted by the timing of new content releases, since new releases may cause a temporary surge in MAUs. Accordingly, although we believe that overall trending in the number of MAUs can be a meaningful performance metric, period-to-period fluctuations may not be indicative of longer-term trends. The following table details our average MAUs on a sequential quarterly basis for each of our reportable segments (amounts in millions):


	March 31, 2020	December 31, 2019	September 30, 2019	June 30, 2019	March 31, 2019	December 31, 2018		March 31, 2021	December 31, 2020	September 30, 2020	June 30, 2020	March 31, 2020
Activision	102	128	36	37	41	53	Activision	150	128	111	125	102
Blizzard	32	32	33	32	32	35	Blizzard	27	29	30	32	32
King	273	249	247	258	272	268	King	258	240	249	271	273
Total	407	409	316	327	345	356	Total	435	397	390	428	407

Table of ~~Duty: Mobile, as well as our plans for~~ ~~Diablo Immortal~~^TM~~, which is currently in development.~~Contents

Overall, we do expect that a limited number of popular franchises will continue to produce a disproportionately high percentage of our, and the industry’s, revenues and profits in the near future. Accordingly, our ability to maintain our top franchises and our ability to successfully compete against our competitors’ top franchises can significantly impact our performance.

~~Recurring Revenue Business Models and Seasonality~~

Increased consumer online connectivity has allowed us to offer players new investment opportunities and to shift our business further towards a more consistently recurring and year-round model. Offering downloadable content and microtransactions, in addition to full games, allows our players to access and invest in new content throughout the year. This incremental content not only provides additional high-margin revenues, it can also increase player engagement. Also, mobile games, and free-to-play games more broadly, are generally less seasonal than premium games developed primarily for the console or PC platforms.

While our business is shifting toward a year-round engagement model, the interactive entertainment industry remains somewhat seasonal. We have historically experienced our highest sales volume, particularly for Activision, in the calendar year-end holiday buying season.

Consolidated Statements of Operations Data

The following table sets forth condensed consolidated statements of operations data for the periods indicated (amounts in millions) and as a percentage of total net revenues, except for cost of revenues, which are presented as a percentage of associated revenues:


	For the Three Months Ended March 31,
		2021			2020
Net revenues
Product sales			$	675	30	%	$	543	30	%
In-game, subscription, and other revenues			1,600		70		1,245		70
Total net revenues			2,275		100		1,788		100

Costs and expenses
Cost of revenues—product sales:
Product costs			140		21		119		22
Software royalties, amortization, and intellectual property licenses			112		17		82		15
Cost of revenues—in-game, subscription, and other:
Game operations and distribution costs			296		19		258		21
Software royalties, amortization, and intellectual property licenses			30		2		46		4
Product development			353		16		238		13
Sales and marketing			237		10		243		14
General and administrative			282		12		167		9
Restructuring and related costs			30		1		23		1
Total costs and expenses			1,480		65		1,176		66

Operating income			795		35		612		34
Interest and other expense (income), net			30		1		8		—

Income before income tax expense			765		34		604		34
Income tax expense			146		6		99		6
Net income			$	619	27	%	$	505	28	%

For the Three Months Ended March 31,
2020 2019
Net revenues

Product sales $ 543
30 % $ 656
36 %
Subscription, licensing, and other revenues 1,245
70
1,169
64
Total net revenues 1,788
100
1,825
100

Costs and expenses

Cost of revenues—product sales:
Product costs 119
22
152
23
Software royalties, amortization, and intellectual property licenses 82
15
111
17
Cost of revenues—subscription, licensing, and other revenues:
Game operations and distribution costs 258
21
239
20
Software royalties, amortization, and intellectual property licenses 46
4
61
5
Product development 238
13
249
14
Sales and marketing 243
14
207
11
General and administrative 167
9
179
10
Restructuring and related costs 23
1
57
3
Total costs and expenses 1,176
66
1,255
69

Operating income 612
34
570
31
Interest and other expense (income), net 8
—
3
—
Income before income tax expense 604
34
567
31
Income tax expense 99
6
120
7
Net income $ 505
28 % $ 447
24 %

Consolidated Net Revenues

The key drivers of changes in our consolidated ~~net revenues,~~results, operating segment ~~results, consolidated~~ results, and sources of liquidity are presented in the order of significance.

The following table summarizes our consolidated net revenues and in-game net revenues ~~and increase (decrease) in deferred net revenues recognized~~ (amounts in millions):


	For the Three Months Ended March 31,
		2021		2020		Increase (Decrease)		% Change
Consolidated net revenues		$	2,275	$	1,788	$	487	27	%


In-game net revenues (1)		1,323		935		388		41

(1) In-game net revenues primarily includes the net amount of revenue recognized for microtransactions and downloadable content during the period.

For the Three Months Ended March 31,
2020 2019 Increase (Decrease) % Change
Consolidated net revenues $ 1,788
$ 1,825
$ (37 ) (2 )%
Net effect from recognition (deferral) of deferred net revenues 266
567
(301 )

In-game net revenues (1) 935
943
(8 ) (1 )%

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~~(1)~~	~~In-game net revenues primarily includes the net amount of revenue recognized for downloadable content and microtransactions during the period.~~

Consolidated Net Revenues

The ~~decrease~~increase in consolidated net revenues for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily driven ~~by a decrease in revenues of $121 million due to:~~


•	~~lower revenues from~~ ~~Sekiro: Shadows Die Twice~~,~~which was released in March 2019, with no comparable release in 2020; and~~

~~the absence of revenues recognized from the Destiny franchise in 2019 (reflecting our sale of the publishing rights for Destiny to Bungie in December 2018).~~

~~The decrease was partially offset~~ by an increase in revenues of ~~$65~~$524 million due to higher revenues ~~recognized from~~ from:

~~Call of Duty: Mobile, which was released in October 2019, as well as a net increase in revenues of $19 million from various other franchises and titles.~~

~~Change in Deferred Revenues Recognized~~

The decrease in net deferred revenues recognized for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, was driven by (1) a decrease of $185 million in net deferred revenues recognized from Activision, primarily due to lower net revenues recognized from •Call of Duty: Modern Warfare, which was released in October 2019, as compared toCall of Duty: Black Ops 4,which was released in October ~~2018 and (2) a decrease of $120 million in net deferred revenues recognized from Blizzard, primarily due to lower net deferred revenues recognized from~~ 2018;

•World of Warcraft, ~~driven by revenues recognized in~~which includes the ~~prior period from~~November 2020 release of World of Warcraft: ~~Battle for Azeroth~~Shadowlands^®;

•the Candy Crush franchise;

•Call of Duty: Mobile,which was released in October 2019; and

•Call of Duty: Black Ops Cold War, which was released in ~~August 2018, with no comparable recognition~~November 2020, as compared to Call of ~~deferred~~Duty: Modern Warfare.

This increase was partially offset by a net decrease in revenues ~~in the current period given no comparable release in 2019.~~of $37 million, driven by various other franchises and titles.

In-game Net Revenues

~~In-game~~The increase in in-game net revenues for the three months ended March 31, ~~2020, were slightly lower than for~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily ~~due to a decrease in in-game net revenues of $89 million~~ driven ~~by:~~

~~lower in-game revenues from King, primarily due to lower revenues from player purchases, driven by the Candy Crush franchise;~~


•	~~lower in-game revenues recognized from~~ ~~World of Warcraft~~;~~and~~


•	~~lower in-game revenues recognized from~~ ~~Overwatch~~.

~~The decrease was offset~~ by an increase in in-game net revenues of ~~$117~~$380 million due ~~to:~~to higher in-game revenues from:


•	~~in-game revenues recognized from~~ •Call of Duty: Modern Warfare, as compared to Call of Duty: Black Ops 4; •the Candy Crush franchise; •Call of Duty: Mobile; and •World of Warcraft. ~~Call of Duty: Mobile; and~~


•	~~higher in-game revenues recognized from~~ ~~Call of Duty: Modern Warfare, which was released in October 2019, as compared to~~ ~~Call of Duty: Black Ops 4, which was released in October 2018.~~

The remaining net ~~decrease~~increase of ~~$36~~$8 million was driven by various other franchises and titles.

Foreign Exchange Impact

Changes in foreign exchange rates had a ~~negative~~positive impact of ~~$10~~approximately $78 million on our consolidated net revenues for the three months ended March 31, ~~2020,~~2021, as compared to the same ~~period~~periods in the previous year. The changes are primarily due to changes in the value of the U.S. dollar relative to the euro and the British pound.

Operating Segment Results

We have three reportable segments—Activision, Blizzard, and King. Our operating segments are consistent with the manner in which our operations are reviewed and managed by our Chief Executive Officer, who is our chief operating decision maker (“CODM”). The CODM reviews segment performance exclusive of: the impact of the change in deferred revenues and related cost of revenues with respect to certain of our online-enabled games; share-based compensation expense; amortization of intangible assets as a result of purchase price accounting; fees and other expenses (including legal fees, expenses, and accruals) related to acquisitions, associated integration activities, and financings; certain restructuring and related costs; and certain other non-cash charges. The CODM does not review any information regarding total assets on an operating segment basis, and accordingly, no disclosure is made with respect thereto.

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Information on the reportable segment net revenues and segment operating income ~~for the three months ended March 31, 2020 and 2019,~~ are presented below (amounts in millions):

Three Months Ended March 31, 2020 Increase / (Decrease)
Activision Blizzard King Total Activision Blizzard King Total
Segment Net Revenues
Net revenues from external customers $ 519
$ 437
$ 498
$ 1,454
$ 202
$ 98
$ (31 ) $ 269
Intersegment net revenues (1) —
15
—
15
—
10
—
10
Segment net revenues $ 519
$ 452
$ 498
$ 1,469
$ 202
$ 108
$ (31 ) $ 279

Segment operating income $ 184
$ 197
$ 156
$ 537
$ 111
$ 142
$ (22 ) $ 231

Three Months Ended March 31, 2019
Activision Blizzard King Total
Segment Net Revenues
Net revenues from external customers $ 317
$ 339
$ 529
$ 1,185

Intersegment net revenues (1) —
5
—
5

Segment net revenues $ 317
$ 344
$ 529
$ 1,190

Segment operating income $ 73
$ 55
$ 178
$ 306

~~(1)~~

~~Intersegment revenues reflect licensing and service fees charged between segments.~~


	Three Months Ended March 31, 2021								Increase / (Decrease)
	Activision		Blizzard		King		Total		Activision		Blizzard		King		Total
Segment Net Revenues
Net revenues from external customers	$	891	$	458	$	609	$	1,958	$	372	$	21	$	111	$	504
Intersegment net revenues (1)	—		25		—		25		—		10		—		10
Segment net revenues	$	891	$	483	$	609	$	1,983	$	372	$	31	$	111	$	514

Segment operating income	$	442	$	208	$	203	$	853	$	258	$	11	$	47	$	316

	Three Months Ended March 31, 2020
	Activision		Blizzard		King		Total
Segment Net Revenues
Net revenues from external customers	$	519	$	437	$	498	$	1,454
Intersegment net revenues (1)	—		15		—		15
Segment net revenues	$	519	$	452	$	498	$	1,469

Segment operating income	$	184	$	197	$	156	$	537

(1) Intersegment revenues reflect licensing and service fees charged between segments.


	For the Three Months Ended March 31,
		2021		2020
Reconciliation to consolidated net revenues:
Segment net revenues		$	1,983	$	1,469
Revenues from non-reportable segments (1)		108		68
Net effect from recognition (deferral) of deferred net revenues (2)		209		266
Elimination of intersegment revenues (3)		(25)		(15)
Consolidated net revenues		$	2,275	$	1,788

Reconciliation to consolidated income before income tax expense:
Segment operating income		$	853	$	537
Operating income (loss) from non-reportable segments (1)		(4)		3
Net effect from recognition (deferral) of deferred net revenues and related cost of revenues		132		171
Share-based compensation expense		(151)		(43)
Amortization of intangible assets		(5)		(33)

Restructuring and related costs (No te 11)		(30)		(23)


Consolidated operating income		795		612
Interest and other expense (income), net		30		8

Consolidated income before income tax expense		$	765	$	604

(1)Includes other income and expenses outside of our reportable segments, including our Distribution business and unallocated corporate income and expenses.

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For the Three Months Ended March 31,
2020 2019
Reconciliation to consolidated net revenues:
Segment net revenues $ 1,469
$ 1,190
Revenues from non-reportable segments (1) 68
73
Net effect from recognition (deferral) of deferred net revenues (2) 266
567
Elimination of intersegment revenues (3) (15 ) (5 )
Consolidated net revenues $ 1,788
$ 1,825

Reconciliation to consolidated income before income tax expense:
Segment operating income $ 537
$ 306
Operating income (loss) from non-reportable segments (1) 3
(3 )
Net effect from recognition (deferral) of deferred net revenues and related cost of revenues 171
441
Share-based compensation expense (43 ) (63 )
Amortization of intangible assets (33 ) (54 )
Restructuring and related costs (4) (23 ) (57 )
Consolidated operating income 612
570
Interest and other expense (income), net 8
3
Consolidated income before income tax expense $ 604
$ 567
(2)Reflects the net effect from recognition (deferral) of deferred net revenues, along with related cost of revenues, on certain of our online-enabled products.


~~(1)~~	~~Includes other income and expenses from operating segments managed outside the reportable segments, including our Distribution business. Also includes unallocated corporate income and expenses.~~


~~(2)~~	~~Reflects the net effect from recognition (deferral) of deferred net revenues, along with related cost of revenues, on certain of our online-enabled products.~~


~~(3)~~	~~Intersegment revenues reflect licensing and service fees charged between segments.~~


~~(4)~~	~~Reflects restructuring initiatives, which include severance and other restructuring-related costs.~~

(3)Intersegment revenues reflect licensing and service fees charged between segments.

Segment Net Revenues

Activision

The increase in Activision’s segment net revenues for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due ~~to:~~to higher revenues from:


•	~~higher revenues from~~ ~~Call of Duty: Modern Warfare, which was released in October 2019, as compared to~~ ~~Call of Duty: Black Ops 4, which was released in October 2018;~~


•	~~revenues from~~ ~~Call of Duty: Mobile, which was released in October 2019; and~~

~~revenues from the~~ Call of ~~Duty League,~~Duty: Black Ops Cold War, which ~~began its first season~~was released in ~~January 2020.~~November 2020, as compared to Call of Duty: Modern Warfare, which was released in October 2019;

~~The increase~~•Call of Duty: Modern Warfare, as compared to Call of Duty: Black Ops 4, which was ~~partially offset by:~~released in October 2018; and


•	~~lower revenues from~~ ~~Sekiro: Shadows Die Twice~~,~~which was released in March 2019, with no comparable release in 2020; and~~

~~the absence~~•Call of ~~revenues from the Destiny franchise~~Duty: Mobile,which was released in ~~2019 (reflecting our sale of the publishing rights for Destiny to Bungie in December 2018).~~October 2019.

Blizzard

The increase in Blizzard’s segment net revenues for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due ~~to:~~to higher revenues from World of Warcraft, which includes the November 2020 release of World of Warcraft: Shadowlands.


•	~~higher revenues from~~ ~~World of Warcraft~~,~~primarily driven by higher subscription revenues due to the release of~~ ~~World of WarcraftClassic~~ ~~in August 2019, and revenues associated with in-game content delivered to customers upon pre-purchase of~~ ~~World of Warcraft:Shadowlands, with no comparable revenues in the prior period; and~~


•	~~revenues from~~ ~~WarcraftIII: Reforged~~,~~which was released in January 2020.~~

The increase was partially offset by lower revenues from:

•Warcraft III: Reforged,which was released in January 2020; and

•The Overwatch League, whose current season commenced in April 2021 while the 2020 season commenced in February 2020.

King

The ~~decrease~~increase in King’s segment net revenues for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due to ~~lower~~higher revenues from in-game player purchases ~~driven by~~and advertising, primarily in the Candy Crush ~~franchise, partially offset by an increase in advertising revenues.~~franchise.

Segment Income from Operations

Activision

The increase in Activision’s segment operating income for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due to:

•higher ~~revenues,~~segment net revenues; and

•lower marketing cost for the Call of Duty franchise, as ~~discussed above;~~the prior year included additional spending to support the release of Call of Duty: Warzone in March 2020, as well as Call of Duty: Mobile, which was released in October 2019.


•	~~lower cost of revenues and marketing costs for~~ ~~Sekiro: Shadows Die Twice~~ ~~given the launch of the title in the prior year~~; ~~and~~

~~lower bad debt provisions.~~

~~These increases were~~This increase was partially offset by:


•higher cost of revenues driven by the higher segment net revenues; and •	~~marketing costs, service provider fees such as digital storefront fees (e.g. fees retained by Apple and Google for our sales on their platforms) and server bandwidth fees, and software royalties for~~ ~~Call of Duty: Mobile~~ ~~in the current quarter with no such costs in the prior-year quarter; and~~

higher product development costs driven by increased personnel costs to support the Call of Duty franchise, including higher ~~personnel~~ bonuses as a result of strong business performance.

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Blizzard

The increase in Blizzard’s segment operating income for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due ~~to:~~

to higher segment net revenues, ~~as discussed above; and~~

~~lower~~partially offset by an increase in product development costs ~~driven by higher capitalization of software development costs from the timing of~~to support game development ~~cycles and higher personnel costs.~~efforts.

King

The ~~decrease~~increase in King’s segment operating income for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due ~~to:~~to higher segment net revenues.

~~lower revenues, as discussed above; and~~

~~higher sales and marketing costs for the Candy Crush franchise.~~

~~These decreases were~~This increase was partially offset ~~by lower~~by:

•higher marketing costs;

•higher service provider fees, primarily digital storefront fees (e.g. fees retained by Google Inc. (“Google”) and Apple ~~and Google~~Inc. (“Apple”) for our sales on their platforms)., driven by the higher in-game player purchases; and

•higher product development costs.

Foreign Exchange Impact

Changes in foreign exchange rates had a ~~negative~~positive impact of ~~$19~~approximately $57 million on reportable segment net revenues for the three months ended March 31, ~~2020,~~2021, as compared to the same period in the previous year. The changes are primarily due to changes in the value of the U.S. dollar relative to the euro and the British pound.

Consolidated Results

Net Revenues by Distribution Channel

The following table details our consolidated net revenues by distribution channel (amounts in millions):


	For the Three Months Ended March 31,
		2021		2020		Increase (Decrease)
Net revenues by distribution channel:
Digital online channels (1)		$	2,006	$	1,441	$	565
Retail channels		149		221		(72)
Other (2)		120		126		(6)
Total consolidated net revenues		$	2,275	$	1,788	$	487

For the Three Months Ended March 31,
2020 2019 Increase (Decrease)
Net revenues by distribution channel:

Digital online channels (1) $ 1,441
$ 1,393
$ 48
Retail channels 221
313
(92 )
Other (2) 126
119
7
Total consolidated net revenues $ 1,788
$ 1,825
$ (37 )

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


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

(2) Net revenues from “Other” primarily includes revenues from our Distribution business, the Overwatch League, and the Call of Duty League.


~~(2)~~	~~Net revenues from “Other” include revenues from our Distribution business, the Overwatch League, and the Call of Duty League.~~

Digital Online Channel Net Revenues

The increase in net revenues from digital online channels for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due ~~to:~~to higher revenues from:


•	~~higher revenues recognized from~~ ~~Call of Duty: Modern Warfare, which was released in October 2019, as compared to~~ Call of Duty: Modern Warfare, which was released in October 2019, as compared toCall of Duty: Black Ops 4~~, which was released in October 2018; and~~


•	~~revenues recognized from~~ ~~Call of Duty: Mobile, which was released in October 2019.~~

~~The increase was partially offset by lower revenues from~~ ~~Sekiro: Shadows Die Twice~~, which was released in ~~March 2019, with no comparable~~October 2018;

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•Call of Duty: Black Ops Cold War, which was released in November 2020, as compared to Call of Duty: Modern Warfare;

•World of Warcraft, which includes the November 2020 release ~~in 2020.~~of World of Warcraft: Shadowlands;

•the Candy Crush franchise; and

•Call of Duty: Mobile,which was released in October 2019.

Retail Channel Net Revenues

The decrease in net revenues from retail channels for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019, was primarily due to:~~


•	~~lower revenues from~~ ~~Sekiro: Shadows Die Twice; and~~


•	~~lower revenues recognized from~~ ~~Call of Duty: Modern Warfare~~ ~~as compared to~~ ~~Call of Duty: Black Ops 4~~.

~~Net Revenues by Geographic Region~~

~~The following table details our consolidated net revenues by geographic region (amounts in millions):~~

For the Three Months Ended March 31,
2020 2019 Increase (Decrease)
Net revenues by geographic region:

Americas $ 948
$ 988
$ (40 )
EMEA (1) 566
614
(48 )
Asia Pacific 274
223
51
Consolidated net revenues $ 1,788
$ 1,825
$ (37 )


~~(1)~~	~~“EMEA” consists of the Europe, Middle East, and Africa geographic regions.~~

~~Americas~~

~~The decrease in net revenues in the Americas region for the three months ended March 31,~~ 2020, ~~as compared to the three months ended March 31, 2019,~~ was primarily due to lower revenues from ~~Sekiro: Shadows Die Twice~~Call of Duty: Black Ops Cold War,~~which was released in March 2019, with no comparable release in 2020.~~

~~EMEA~~

~~The decrease in net revenues in the EMEA region for the three months ended March 31, 2020,~~ as compared to ~~the three months ended March 31, 2019, was primarily due to lower revenues from~~ ~~Sekiro: Shadows Die Twice.~~ Call of Duty: Modern Warfare.

~~Asia Pacific~~

~~The increase in net revenues in the Asia Pacific region for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, was primarily due to:~~


•	~~higher subscription revenues from~~ ~~World of Warcraft, primarily driven by the release of~~ ~~World of WarcraftClassic~~ ~~in August 2019;~~


•	~~revenues from~~ ~~WarcraftIII: Reforged~~,~~which was released in January 2020; and~~


•	~~revenues recognized from~~ ~~Call of Duty: Mobile, which was released in October 2019.~~

Net Revenues by Platform

The following table details our consolidated net revenues by platform (amounts in millions):


	For the Three Months Ended March 31,
		2021		2020		Increase (Decrease)
Net revenues by platform:
Console		$	799	$	594	$	205
PC		622		498		124
Mobile and ancillary (1)		734		570		164
Other (2)		120		126		(6)
Total consolidated net revenues		$	2,275	$	1,788	$	487

For the Three Months Ended March 31,
2020 2019 Increase (Decrease)
Net revenues by platform:
Console $ 594
$ 677
$ (83 )
PC 498
494
4
Mobile and ancillary (1) 570
535
35
Other (2) 126
119
7
Total consolidated net revenues $ 1,788
$ 1,825
$ (37 )

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


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

(2) Net revenues from “Other” primarily includes revenues from our Distribution business, the Overwatch League, and the Call of Duty League.


~~(2)~~	~~Net revenues from “Other” include revenues from our Distribution business, the Overwatch League, and the Call of Duty League.~~

Console

The ~~decrease~~increase in net revenues from the console platform for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was ~~primarily due to lower revenues from~~ ~~Sekiro: Shadows Die Twice~~,~~which was released in March 2019, with no comparable release in 2020.~~

~~Net revenues from the PC platform for the three months ended March 31, 2020, were roughly equal to the three months ended March 31, 2019,~~ primarily due to higher revenues ~~recognized from~~ from:

•Call of Duty: Modern Warfare, which was released in October 2019, as compared toCall of Duty: Black Ops 4,which was released in October ~~2018. This~~2018; and

•Call of Duty: Black Ops Cold War, which was released in November 2020, as compared to Call of Duty: Modern Warfare.

The increase in net revenues from the PC platform for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020, was primarily due to higher revenues from:

•World of Warcraft, which includes the November 2020 release of World of Warcraft: Shadowlands; and

•Call of Duty: Modern Warfare, as compared to Call of Duty: Black Ops 4.

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The increase was ~~largely~~partially offset by lower revenues from ~~Sekiro: Shadows Die Twice.~~Hearthstone.

Mobile and Ancillary

The increase in net revenues from mobile and ancillary for the three months ended March 31, ~~2020,~~2021, as compared to net revenues for the three months ended March 31, ~~2019,~~2020, was primarily due to higher revenues ~~recognized from~~ from:

•the Candy Crush franchise; and

•Call of Duty: Mobile,which was released in October 2019.

Costs and Expenses

Cost of Revenues

The following table details the components of cost of revenues in dollars (amounts in millions) and as a percentage of associated net revenues:











	Three Months Ended March 31, 2021		% of associated net revenues		Three Months Ended March 31, 2020		% of associated net revenues		Increase (Decrease)
Cost of revenues—product sales:
Product costs	$	140	21	%	$	119	22	%	$	21
Software royalties, amortization, and intellectual property licenses	112		17		82		15		30
Cost of revenues—in-game, subscription, and other:
Game operations and distribution costs	296		19		258		21		38
Software royalties, amortization, and intellectual property licenses	30		2		46		4		(16)
Total cost of revenues	$	578	25	%	$	505	28	%	$	73

Three Months Ended March 31, 2020 % of associated net revenues Three Months Ended March 31, 2019 % of associated net revenues Increase (Decrease)
Cost of revenues—product sales:
Product costs $ 119
22 % $ 152
23 % $ (33 )
Software royalties, amortization, and intellectual property licenses 82
15
111
17
(29 )
Cost of revenues—subscription, licensing, and other revenues:
Game operations and distribution costs 258
21
239
20
19
Software royalties, amortization, and intellectual property licenses 46
4
61
5
(15 )
Total cost of revenues $ 505
28 % $ 563
31 % $ (58 )

Cost of Revenues—Product Sales:

The ~~decrease~~increase in product costs for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due to a $43 million increase in ~~line with the~~product costs for our Distribution business as a result of higher revenues, partially offset by an $11 million decrease in product ~~revenues.~~costs from Call of Duty: Black Ops Cold War, which was released in November 2020, as compared to Call of Duty: Modern Warfare,which was released in October 2019.

The ~~decrease~~increase in software royalties, amortization, and intellectual property licenses related to product sales for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due ~~to:~~to a $28 million increase in software amortization and royalties from Blizzard, driven by higher software amortization and royalties from World of Warcraft given the November 2020 release of World of Warcraft: Shadowlands with no comparable amortization in the prior year.


•	~~a $20 million decrease in software amortization and royalties from Activision, driven by lower software amortization and royalties from~~ ~~Sekiro: Shadows Die Twice, which was released in March 2019, with no comparable release in 2020; and~~


•	~~an $8 million decrease in software amortization and royalties from Blizzard, driven by lower software amortization and royalties from~~ ~~World of Warcraft, as the prior year included software amortization from the August 2018 release of~~ ~~World of Warcraft: Battle for Azeroth~~ ~~with no comparable amortization in the current year.~~

Cost of Revenues—In-game, Subscription, ~~Licensing,~~ and Other ~~Revenues~~:

The increase in game operations and distribution costs for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due to ana $36 million increase in service provider fees, such as digital storefront fees (e.g., fees retained by Apple and Google for our sales on their platforms) and payment processor fees, as a result of ~~$13 million~~ ~~in esports broadcast costs, driven by the Call of Duty League, which began its first season in January 2020.~~higher revenues.

The decrease in software royalties, amortization, and intellectual property licenses related to in-game, subscription, ~~licensing,~~ and other revenues for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due to a decrease of ~~$22~~$27 million in amortization of internally-developed franchise and developed software intangible assets acquired as part of our 2016 acquisition of King. The decrease was partially offset by an increase in software amortization and royalties from Activision of $7$12 million, driven by ~~software royalties on~~ Call of Duty: Mobile, which was released in October 2019.

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Product Development (amounts in millions)


	March 31, 2021		% of consolidated net revenues		March 31, 2020		% of consolidated net revenues		Increase (Decrease)

Three Months Ended	$	353	16	%	$	238	13	%	$	115

March 31, 2020 % of consolidated net revenues March 31, 2019 % of consolidated net revenues Increase (Decrease)
Three Months Ended $ 238
13 % $ 249
14 % $ (11 )

The ~~decrease~~increase in product development costs for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due to ~~a $40 million increase in capitalization of development costs, driven by the timing of Blizzard’s game development cycles. The decrease was partially offset by~~ higher ~~product~~ development costs of ~~$29~~$115 million, driven by increased personnel costs to support our franchises, as well as higher ~~personnel~~ bonuses as a result of strong business performance.

Sales and Marketing (amounts in millions)

March 31, 2020 % of consolidated net revenues March 31, 2019 % of consolidated net revenues Increase (Decrease)
Three Months Ended $ 243
14 % $ 207
11 % $ 36


	March 31, 2021		% of consolidated net revenues		March 31, 2020		% of consolidated net revenues		Increase (Decrease)

Three Months Ended	$	237	10	%	$	243	14	%	$	(6)

~~The increase in sales~~

Sales and marketing expenses for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019, was driven by an increase of $51 million in marketing spending~~2020, were comparable, as lower sales and ~~personnel costs, primarily associated with higher~~ marketing costs for the Call of ~~Duty: Mobile~~ Duty franchise were largely offset by higher sales and marketing costs for the Candy Crush ~~franchise, partially offset by lower marketing costs for~~ ~~Sekiro: Shadows Die Twice~~ ~~and a decrease in bad debt provisions.~~franchise.

General and Administrative (amounts in millions)


	March 31, 2021		% of consolidated net revenues		March 31, 2020		% of consolidated net revenues		Increase (Decrease)

Three Months Ended	$	282	12	%	$	167	9	%	$	115

March 31, 2020 % of consolidated net revenues March 31, 2019 % of consolidated net revenues Increase (Decrease)
Three Months Ended $ 167
9 % $ 179
10 % $ (12 )

The ~~decrease~~increase in general and administrative expenses for the three months ended March 31, ~~2020,~~2021, as compared to the three months ended March 31, ~~2019,~~2020, was primarily due to a ~~$10~~$106 million ~~decrease~~increase in personnel costs ~~and professional service fees.~~as a result of higher share-based compensation.

Restructuring and related costs (amounts in millions)


	March 31, 2021		% of consolidated net revenues		March 31, 2020		% of consolidated net revenues		Increase (Decrease)

Three Months Ended	$	30	1	%	$	23	1	%	$	7

March 31, 2020 % of consolidated net revenues March 31, 2019 % of consolidated net revenues Increase (Decrease)
Three Months Ended $ 23
1 % $ 57
3 % $ (34 )

During 2019, we ~~implemented our previously announced restructuring~~began implementing a plan ~~which was~~ aimed at refocusing our resources on our largest opportunities and ~~removing~~to remove unnecessary levels of complexity and duplication from certain parts of our business. Since ~~the roll out of the plan,~~then, we have been, and will continue focusing on these goals as we ~~continue to~~ execute against our ~~plan into 2020.~~plan. The restructuring and related costs incurred during ~~the three months ended March 31, 2020, relates~~2021 relate primarily to severance ~~costs for actions under this~~costs. We do not expect to realize significant net savings in our total operating expenses as a result of our plan, ~~being executed~~as cost reductions in ~~2020.~~our selling, general and administrative activities is expected to be offset by increased investment in product development. Refer to Note 11 of the notes to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for further discussion.

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Interest and Other Expense (Income), Net (amounts in millions)

March 31, 2020 % of consolidated net revenues March 31, 2019 % of consolidated net revenues Increase (Decrease)
Three Months Ended $ 8
— % $ 3
— % $ 5


	March 31, 2021		% of consolidated net revenues		March 31, 2020		% of consolidated net revenues		Increase (Decrease)

Three Months Ended	$	30	1	%	$	8	—	%	$	22

~~Interest~~The increase in interest and other expense (income), net, for the three months ended March 31, ~~2020, was comparable~~2021, as compared to the three months ended March 31, ~~2019.~~ 2020 was primarily due to a $15 million decrease in interest income driven by lower returns on our investment portfolio as a result of lower interest rates.

As of March 31, ~~2020,~~2021, based on the composition of our investment portfolio, ~~and as a result of the COVID-19 pandemic and recent actions by central banks around the world, including the interest rate cuts by the U.S. Federal Reserve,~~ we anticipate investment yields may remain low, which would ~~lower~~continue to negatively impact our future interest income. Such impact is not expected to be material to the Company’s liquidity.

Income Tax Expense (amounts in millions)

March 31, 2020 % of pretax income March 31, 2019 % of pretax income Increase (Decrease)
Three Months Ended $ 99
16 % $ 120
21 % $ (21 )


	March 31, 2021		% of pretax income		March 31, 2020		% of pretax income		Increase (Decrease)

Three Months Ended	$	146	19	%	$	99	16	%	$	47

The income tax expense of ~~$99~~$146 million for the three months ended March 31, ~~2020~~2021, reflects an effective tax rate of ~~16%~~19%, which is ~~lower~~higher than the effective tax rate of ~~21%~~16% for the three months ended March 31, ~~2019.~~ 2020. The ~~decrease~~increase is primarily due to a ~~discrete tax~~ benefit recognized in the ~~current~~prior year in connection with the remeasurement of a U.S. deferred tax asset, ~~related to foreign earnings~~ ~~resulting~~partially offset by higher excess tax benefits from ~~an intra-group asset transfer~~share-based payments in the current year.

The effective tax rate of ~~16%~~19% for the three months ended March 31, ~~2020~~2021, is lower than the U.S. statutory rate of 21%, primarily due to ~~lower U.S. taxes on foreign earnings, the remeasurement of a U.S. deferred~~excess tax ~~asset related to foreign earnings, and the recognition of federal research and development credits.~~

The overall effective income tax rate in future periods will depend on a variety of factors, such as changes in pre-tax income or loss by jurisdiction, applicable accounting rules, applicable tax laws and regulations, and rulings and interpretations thereof, developments in tax audits and other matters, and variationsbenefits from share-based payments in the ~~estimated and actual level of annual pre-tax income or loss.~~current year.

Further information about our income taxes is provided in Note 13 of the notes to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

We believe our ability to generate cash flows from operating activities is one of our fundamental financial strengths. Despite the impacts of the COVID-19 pandemic on the global economy, in the near term, we expect our business and financial condition to remain strong and to continue to generate significant operating cash flows, which, we believe, in combination with our existing balance of cash and cash equivalents and short-term investments of ~~$6.0~~$9.5 billion, our access to capital, and the availability of our $1.5 billion revolving credit facility, will be sufficient to finance our operational and financing requirements for the next 12 months. Our primary sources of liquidity, which are available to us to fund our operations and other cash outflows such as potential dividend payments or share repurchases and scheduled debt maturities (the next of which is in 2026), include our cash and cash equivalents, short-term investments, and cash flows provided by operating activities.

As of March 31, ~~2020,~~2021, the amount of cash and cash equivalents held outside of the U.S. by our foreign subsidiaries was ~~$2.0~~$2.6 billion, as compared to ~~$2.8~~$2.5 billion as of December 31, ~~2019.~~2020. These cash balances are generally available for use in the U.S., subject in some cases to certain restrictions.

Our cash provided from operating activities is somewhat impacted by seasonality. Working capital needs are impacted by ~~weekly~~ sales, which are generally highest in the fourth quarter due to seasonal and holiday-related sales patterns. We consider, on a continuing basis, various transactions to increase shareholder value and enhance our business results, including acquisitions, divestitures, joint ventures, share repurchases, and other structural changes. These transactions may result in future cash proceeds or payments.

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Sources of Liquidity (amounts in millions)


	March 31, 2020			December 31, 2019			Increase (Decrease)			March 31, 2021			December 31, 2020			Increase (Decrease)
Cash and cash equivalents	$	5,906		$	5,794		$	112	Cash and cash equivalents	$	9,281		$	8,647		$	634
Short-term investments	78			69			9		Short-term investments	234			170			64
	$	5,984		$	5,863		$	121		$	9,515		$	8,817		$	698
Percentage of total assets	31		%	30		%			Percentage of total assets	41		%	38		%


	For the Three Months Ended March 31,
	2021		2020		Increase (Decrease)
Net cash provided by operating activities	$	844	$	148	$	696
Net cash used in investing activities	(86)		(28)		(58)
Net cash provided by (used in) financing activities	(95)		7		(102)
Effect of foreign exchange rate changes	(28)		(15)		(13)
Net increase in cash and cash equivalents and restricted cash	$	635	$	112	$	523

For the Three Months Ended March 31,
2020 2019 Increase (Decrease)
Net cash provided by operating activities $ 148
$ 450
$ (302 )
Net cash used in investing activities (28 ) (5 ) (23 )
Net cash provided by financing activities 7
24
(17 )
Effect of foreign exchange rate changes (15 ) 2
(17 )
Net increase in cash and cash equivalents and restricted cash $ 112
$ 471
$ (359 )

Net Cash Provided by Operating Activities

The primary driver of net cash flows associated with our operating activities is the ~~collection of customer receivables~~income generated from the sale of our products and services. ~~These collections are~~This is typically partially offset by: ~~payments to vendors for~~working capital requirements used in the ~~manufacturing, distribution,~~development, sale, and ~~marketing~~support of our products; payments for ~~customer service support for our consumers; payments to third-party developers and intellectual property holders; payments for~~ interest on our debt; ~~payments for software development;~~ payments for tax liabilities; and payments to our workforce.

Net cash provided by operating activities for the three months ended March 31, ~~2020,~~2021, was ~~$148~~$844 million, as compared to ~~$450~~$148 million for the three months ended March 31, ~~2019.~~2020. The ~~decrease~~increase was primarily due to higher net income and lower tax payments, ~~driven by~~as the prior-year period included payments ~~in the three months ended March 31, 2020~~ for a tax settlement in France with no comparable activity in ~~2019, and~~2021, in addition to changes in our working capital resulting from the timing of collections and payments.

Net Cash Used in Investing Activities

The primary drivers of net cash flows associated with ~~our~~ investing activities typically include capital expenditures, purchases and sales of investments, changes in restricted cash balances, and cash used for acquisitions.

Net cash used in investing activities for the three months ended March 31, ~~2020,~~2021, was ~~$28~~$86 million, as compared to ~~net cash used in investing activities of $5~~$28 million for the three months ended March 31, ~~2019.~~2020. The increase in cash used in investing activities was primarily due to the ~~purchase~~net purchases of $9$64 million of available-for-sale investments ~~for~~in the three months ended March 31, ~~2020,~~2021, as compared to ~~proceeds from maturities~~purchases of available-for-sale investments of ~~$13~~$9 million in the prior-year period. ~~Additionally, capital expenditures of $19 million for the three months ended March 31, 2020, were lower than the capital expenditures of $18 million for the prior-year period.~~

Net Cash provided by Financing Activities

The primary drivers of net cash flows associated with ~~our~~ financing activities typically include the proceeds from, and repayments of, our long-term debt and transactions involving our common stock, including the issuance of shares of common stock to employees upon the exercise of stock options, as well as the payment of dividends.

Net cash ~~provided by~~used in financing activities for the three months ended March 31, ~~2020,~~2021, was $7$95 million, as compared to ~~$24~~net cash provided by financing activities of $7 million for the three months ended March 31, ~~2019.~~2020. The ~~decrease~~change was primarily ~~due~~attributed to higher tax payments made for net share settlements on restricted stock units, ~~with $19~~driven by higher volume share releases and at higher market values, resulting in $124 million of payments during the three months ended March 31, ~~2020,~~2021, as compared to $6$19 million in the prior-year period.

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Effect of Foreign Exchange Rate Changes

Changes in foreign exchange rates had a negative impact of ~~$15~~$28 million on our cash and cash equivalents and restricted cash for the three months ended March 31, ~~2020,~~2021, as compared to a ~~positive~~negative impact of $2$15 million for the three months ended March 31, ~~2019.~~2020. The change was primarily due to changes in the value of the U.S. dollar relative to the euro and the British pound.

Debt

At ~~both~~ March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, our total outstanding debt was ~~$2.7~~$3.7 billion, bearing interest at a weighted average rate of ~~3.18%~~2.87%.

A summary of our outstanding debt is as follows (amounts in millions):


	At March 31, 2021		At December 31, 2020
2026 Notes	850		850
2027 Notes	400		400
2030 Notes	500		500
2047 Notes	400		400
2050 Notes	1,500		1,500
Total gross long-term debt	$	3,650	$	3,650
Unamortized discount and deferred financing costs	(44)		(45)
Total net carrying amount	$	3,606	$	3,605

At March 31, 2020
Gross Carrying Amount Unamortized Discount and Deferred Financing Costs Net Carrying Amount
2021 Notes $ 650
$ (2 ) $ 648
2022 Notes 400
(2 ) 398
2026 Notes 850
(7 ) 843
2027 Notes 400
(5 ) 395
2047 Notes 400
(9 ) 391
Total long-term debt $ 2,700
$ (25 ) $ 2,675

At December 31, 2019
Gross Carrying Amount Unamortized Discount and Deferred Financing Costs Net Carrying Amount
2021 Notes $ 650
$ (2 ) $ 648
2022 Notes 400
(2 ) 398
2026 Notes 850
(7 ) 843
2027 Notes 400
(5 ) 395
2047 Notes 400
(9 ) 391
Total long-term debt $ 2,700
$ (25 ) $ 2,675

Refer to Note 8 of the notes to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for further disclosures regarding our debt obligations.

Dividends

Capital Expenditures

For the year ending December 31, ~~2020,~~2021, we anticipate total capital expenditures of approximately ~~$130~~$100 million, primarily for ~~leasehold improvements,~~ computer and network hardware and ~~software purchases.~~leasehold improvements. During the three months ended March 31, ~~2020,~~2021, capital expenditures were ~~$19~~$22 million.

Off-Balance Sheet Arrangements

At each of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, Activision Blizzard had no significant relationships with unconsolidated entities or financial parties, 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 current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

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Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. 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 they 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;

•Income Taxes; and

•Software Development ~~Costs; and~~Costs.

•~~Fair Value Estimates (including Assessment of Impairment of Assets).~~

During the three months ended March 31, ~~2020,~~2021, there were no significant changes to the above critical accounting policies and estimates. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations” contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended ~~December��~~December 31, ~~2019,~~2020, for a more complete discussion of our critical accounting policies and estimates.

Recently Issued Accounting Pronouncements

For a detailed discussion of all relevant recently issued accounting pronouncements, see Note 2 of the notes to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

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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 foreign currency exchange rates and interest rates.

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, with a heightened risk for volatility in the future due to potential impacts of COVID-19 on global financial markets. 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, Chinese yuan, and Swedish krona. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency-denominated transactions will result in reduced revenues, operating expenses, net income, and cash flows from our international operations. Similarly, our revenues, operating expenses, net income, and cash flows will increase for our international operations if the U.S. dollar weakens against foreign currencies. Since we have significant international sales, but incur the majority of our costs in the United States, the impact of foreign currency fluctuations, particularly the strengthening of the U.S. dollar, may have an asymmetric and disproportional impact on our business. We monitor currency volatility throughout the year.

To mitigate our foreign currency risk resulting from our foreign currency-denominated monetary assets, liabilities, and earnings and our foreign currency risk related to functional currency-equivalent cash flows resulting from our intercompany transactions, we periodically enter into currency derivative contracts, principally forward contracts. These forward contracts generally have a maturity of less than one year. The counterparties for our currency derivative contracts are large and reputable commercial or investment banks.

The fair values of our foreign currency contracts are estimated based on the prevailing exchange rates of the various hedged currencies as of the end of the period.

We do not hold or purchase any foreign currency forward contracts for trading or speculative purposes.

Foreign Currency Forward Contracts Designated as Hedges (“Cash Flow Hedges”)

~~The total gross notional amounts~~ and ~~fair values of our Cash Flow Hedges are as follows (amounts in millions):~~

As of March 31, 2020 As of December 31, 2019
Notional amount Fair value gain (loss) Notional amount Fair value gain (loss)
Foreign Currency:
Buy USD, Sell Euro $ 646
$ 6
$ 350
$ (2 )

At March 31, 2020, our Cash Flow Hedges have remaining maturities of 20 months or less. Additionally, $3 million of net realized but unrecognized gains are recorded within “Accumulated other comprehensive income (loss)” at March 31, 2020, for Cash Flow Hedges that had settled but were deferred and will be amortized into earnings, along with the associated hedged revenues~~. Such amounts will be reclassified into earnings within the next 12 months.~~

The amount of pre-tax net realized gains (losses) associated with our Cash Flow Hedges that were reclassified out of “Accumulated other comprehensive income (loss)” and into earnings was as follows (amounts in millions):

For the Three Months Ended March 31, Statement of Operations Classification
2020 2019
Cash Flow Hedges $ 9
$ 11
Net revenues

Foreign Currency Forward Contracts Not Designated as Hedges

~~The total gross notional amounts~~Refer to Note 6 of the notes to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for disclosures regarding our Cash Flow Hedges and ~~fair values of our~~ foreign currency forward contracts not designated as ~~hedges are as follows (amounts in millions):~~hedges.

As of March 31, 2020 As of December 31, 2019
Notional amount Fair value gain (loss) Notional amount Fair value gain (loss)
Foreign Currency:

Buy USD, Sell GBP 25
—
25
(2 )

For the three months ended March 31, 2020 and 2019, pre-tax net gains (losses) associated with these forward contracts were recorded in “General and administrative expenses” and were not material.

In the absence of hedging activities for the three months ended March 31, ~~2020,~~2021, a hypothetical adverse foreign currency exchange rate movement of 10% would have resulted in a theoretical decline of our net income of approximately ~~$30~~$24 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 this 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, as our outstanding debt is all at fixed rates. Our investment portfolio consists primarily of money market funds and government securities with high credit quality and short average maturities. 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 March 31, ~~2020,~~2021, our cash and cash equivalents were comprised primarily of money market funds.

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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 Securities Exchange Act of 1934 (the “Exchange Act”)) are designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act is: (1) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and ~~forms;~~forms and (2) 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 March 31, ~~2020,~~2021, the end of the period covered by this report. Based on this evaluation, the principal executive officer and principal financial officer concluded that, at March 31, ~~2020,~~2021, 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 (1) recorded, processed, summarized, and reported

on a timely basis and (2) accumulated and communicated to our 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

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated any changes in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, ~~2020.~~2021. Based on this evaluation, the principal executive officer and principal financial officer concluded that, at March 31, ~~2020,~~2021, 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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

Various risks associated with our business are described in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (the ~~“2019~~“2020 Form 10-K”).

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in the ~~2019~~2020 Form 10-K, any of which could materially affect our business, reputation, financial condition, results of operations, income, revenue, profitability, cash flows, liquidity, or stock price. The ongoing global COVID-19 pandemic has heightened, and in some cases manifested, certain of the risks we normally face in operating our business, including those disclosed in the 2019 Form 10-K, and the risk factor disclosure in the 2019 Form 10-K is qualified by the information relating to the ongoing global COVID-19 pandemic that is described in this Quarterly Report on Form 10-Q, including the updated risk factor set forth below. Except as set forth below or otherwise discussed in this report, there have been no material changes to the risk factors previously disclosed in the 20192020 Form 10-K.

~~Large-scale medical emergencies or public health epidemics may adversely affect our business, operations, financial condition, and future results.~~

Epidemics, medical emergencies and other public health crises outside of our control could have a negative impact on our business. Large-scale public health emergencies can take many forms and can cause widespread illness and death.

For example, in December 2019, COVID-19 emerged and has since extensively impacted global health and the economic environment. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic.

The full extent to which the global COVID-19 pandemic and its aftermath will impact our business, reputation, financial condition, results of operations, income, revenue, profitability, cash flows, liquidity, or stock price depends on numerous evolving factors that we are not able to fully predict, including: the duration and severity of the pandemic; the impact of the pandemic on the global economy; the impact of governmental, business and individual actions that have been and will continue to be taken in response to the pandemic; unintended consequences of actions we take, or have taken, in response to the pandemic; the impact of the pandemic on the health or productivity of our employees and external developers, including the ability to develop high-quality and well-received interactive software products and entertainment content and/or to release our products and content in a timely manner; the effects on the health, finances and discretionary spending patterns of our consumers, including the ability of our consumers to pay for our products and content; the effects on the demand for our products and content (including following the lifting of stay-at-home orders); our ability to sell products at assumed prices; the financial impact and strain on the retail customers and distributors on whom we rely to sell our physical products to consumers; the financial impact and strain on platform providers for whose video game consoles and/or on whose networks certain of our products are exclusively available; the financial impact and strain on third-party mobile and web platforms that provide significant online distribution for, and/or provide other services critical for the operation of, a number of our games; the effects on our suppliers who manufacture our physical products; the effects on other third parties with which we partner (e.g., to market or ship our products); the effects on our lenders and financial counterparties; the effects on regulatory agencies around the world on which we rely; our ability and the ability of the teams in the esports leagues we operate to host live events at some time in the future; our ability to continue to develop our emerging businesses, such as esports and advertising; increased volatility in foreign currency exchange rates; the impact of large-scale intervention by the Federal Reserve and other central banks around the world, including the impact on interest rates; and any other factor which results in disruptions or increased costs associated with the development, production, post-production, marketing and distribution of our products, the operation of our esports leagues and/or the digital advertising offered within our content. If the ongoing global COVID-19 pandemic has adverse effects in any one of these areas, our business may be negatively impacted.

~~Item 5. Other Information~~

On April 28, 2020, the Board of Directors of the Company appointed Jesse Yang as its Senior Vice President, Chief Accounting Officer, effective May 6, 2020. Mr. Yang will assume the duties of the principal accounting officer from Dennis Durkin, the Company’s Chief Financial Officer, who has been serving in that role since August 5, 2019.

Mr. Yang, 44, held various positions of increasing responsibility in the finance department of Seagate Technology plc., a data storage technology and solutions company, from 2009 until April 2020, most recently serving as Senior Vice President, Corporate Controller & Treasury Operations from March 2019 until April 2020. Prior to joining Seagate, Mr. Yang was employed by PriceWaterhouseCoopers, a multinational network of firms delivering assurance, tax, and consulting services, from 1997 until 2008. Mr. Yang holds a B.S degree in applied mathematics from the University of California at Los Angeles.

There are no family relationships between Mr. Yang and any director or executive officer of the Company. Mr. Yang has not engaged in any related person transaction (as defined in Item 404(a) of Regulation S-K) with the Company.

Mr. Yang’s term of employment under his agreement began on May 1, 2020 and continues through April 30, 2022 (subject to the Company’s right to extend for an additional year). The agreement provides for: a minimum annual base salary of $439,888; eligibility to receive annual discretionary bonuses targeted at 60% of base salary; participation in other benefits generally available to executives; and a one-time payment of $400,000 as a long-term contract inducement, the entire amount of which is subject to “clawback” if Mr. Yang leaves the Company’s employment in certain situations prior to the first anniversary of his start date and half of which is subject to “clawback” if Mr. Yang leaves the Company’s employment in those situations prior to the second anniversary of his start date (but after the first anniversary of this start date).

Mr. Yang will initially be granted equity consisting of: (1) stock options ($1,160,000 grant value), two-thirds of which will vest on April 29, 2022, and the remaining one-third of which will vest on April 29, 2023; and (2) performance-vesting restricted share units ($1,740,000 grant date value at target; 125% of target at maximum performance), one-third of which will vest on each of April 29, 2021, 2022 and 2023, in each case based upon the level of achievement of the operating income objective for the Company set forth in its annual operating plan for the prior year.

If the agreement is terminated by reason of Mr. Yang’s death, his heirs or estate will be entitled to receive, in addition to any amounts earned or accrued but unpaid, a lump sum payment of two times his base salary and a pro rata annual bonus with respect to the current year, and any vested options will generally remain exercisable for one year after his death. If the agreement is terminated by the Company without “cause”, by Mr. Yang due to the relocation of his principal place of business without his consent, or as a result of his disability, he is entitled to receive, in addition to any amounts earned or accrued but unpaid, salary continuation through the expiration date of the agreement and a pro rata annual bonus with respect to the current year and, in the case of his termination due to disability, any vested options will generally remain exercisable for one year after such termination.

~~Certain payments contemplated by the agreement that would constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code are subject to reduction.~~

Item 6. Exhibits

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

Table of Contents

EXHIBIT INDEX



Exhibit Number						Exhibit

3.1						Third Amended and Restated Certificate of Incorporation of Activision Blizzard, Inc., dated June 5, 2014 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K, filed June 6, 2014).

3.2						Fourth Amended and Restated Bylaws of Activision Blizzard, Inc., adopted as of February 1, 2018 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K/A, filed March 21, 2018).

10.1*						Employment Agreement dated ~~March 9, 2020,~~April 1, 2021, between ~~Daniel Alegre~~Activision Blizzard, Inc. and Armin Zerza.

10.2*						Extension Amendment, dated April 28, 2021, between Robert A. Kotick and the Company (incorporated by reference to Exhibit 10.1 of the ~~Company’s~~Company's Current Report on Form 8-K filed ~~March 5, 2020)~~on April 29, 2021).

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 ~~Dennis Durkin~~ Armin Zerza 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 ~~Dennis Durkin~~Armin Zerza pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL 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 Linkbase Document.

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


*	~~Indicates a management contract or compensatory plan, contract or arrangement in which a director or executive officer of the Company participates.~~

* Indicates a management contract or compensatory plan, contract or arrangement in which a director or executive officer of the Company participates.

Table of Contents

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: May ~~5, 2020~~4, 2021

ACTIVISION BLIZZARD, INC.


/s/ ARMIN ZERZA		/s/ JESSE YANG
~~/s/ DENNIS DURKIN~~Armin Zerza		Jesse Yang
~~Dennis Durkin~~
Chief Financial Officer and Principal Financial Officer	Chief Accounting Officer and
Principal Accounting Officer
of Activision Blizzard, Inc.		of Activision Blizzard, Inc.

5645


	At March 31, 2021
	Estimated useful lives			Gross carrying amount		Accumulated amortization		Net carrying amount
Acquired definite-lived intangible assets:
Internally-developed franchises	3	-	11 years	$	1,154	$	(1,154)	$	0


Trade names and other	1	-	10 years	73		(60)		13
Total definite-lived intangible assets (1)				$	1,227	$	(1,214)	$	13

Acquired indefinite-lived intangible assets:
Activision trademark	Indefinite							386
Acquired trade names	Indefinite							47
Total indefinite-lived intangible assets								$	433
Total intangible assets, net								$	446



	At March 31, 2020
	Estimated useful lives			Gross carrying amount		Accumulated amortization			Net carrying amount
Acquired definite-lived intangible assets:
Internally-developed franchises	3	-	11 years	$	1,154	$	(1,116	)	$	38
Developed software	2	-	5 years	601		(599		)	2
Trade names	7	-	10 years	54		(31		)	23
Other	1	-	15 years	19		(17		)	2
Total definite-lived intangible assets				$	1,828	$	(1,763	)	$	65

Acquired indefinite-lived intangible assets:
Activision trademark	Indefinite								386
Acquired trade names	Indefinite								47
Total indefinite-lived intangible assets									$	433
Total intangible assets, net									$	498



	At December 31, 2019
	Estimated useful lives			Gross carrying amount		Accumulated amortization			Net carrying amount
Acquired definite-lived intangible assets:
Internally-developed franchises	3	-	11 years	$	1,154	$	(1,105	)	$	49
Developed software	2	-	5 years	601		(579		)	22
Trade names	7	-	10 years	54		(30		)	24
Other	1	-	15 years	19		(16		)	3
Total definite-lived intangible assets				$	1,828	$	(1,730	)	$	98

Acquired indefinite-lived intangible assets:
Activision trademark	Indefinite								386
Acquired trade names	Indefinite								47
Total indefinite-lived intangible assets									$	433
Total intangible assets, net									$	531


	At December 31, 2020
	Estimated useful lives			Gross carrying amount		Accumulated amortization		Net carrying amount
Acquired definite-lived intangible assets:
Internally-developed franchises	3	-	11 years	$	1,154	$	(1,151)	$	3
Developed software	2	-	5 years	601		(601)		0

Trade names and other	1	-	10 years	73		(58)		15
Total definite-lived intangible assets				$	1,828	$	(1,810)	$	18

Acquired indefinite-lived intangible assets:
Activision trademark	Indefinite							386
Acquired trade names	Indefinite							47
Total indefinite-lived intangible assets								$	433
Total intangible assets, net								$	451


			Fair Value Measurements at March 31, 2021 Using
	As of March 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance Sheet Classification
Financial Assets:
Recurring fair value measurements:
Money market funds	$	8,968	$	8,968	$	0	$	0	Cash and cash equivalents
Foreign government treasury bills	25		25		0		0		Cash and cash equivalents
U.S. treasuries and government agency securities	227		227		0		0		Other current assets
Foreign currency forward contracts designated as hedges	12		0		12		0		Other current assets and Other assets

Total	$	9,232	$	9,220	$	12	$	0

Financial Liabilities:
Foreign currency forward contracts not designated as hedges	$	(1)	$	0	$	(1)	$	0	Accrued expenses and other liabilities
Foreign currency forward contracts designated as hedges	(7)		0		(7)		0		Accrued expenses and other liabilities
Total	$	(8)	$	0	$	(8)	$	0


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


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


																										Common Stock							Treasury Stock						Additional Paid-In Capital				Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
	Common Stock			Treasury Stock					Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total Shareholders’ Equity					Shares					Amount		Shares			Amount
Balance at December 31, 2020												Balance at December 31, 2020				1,203											$	0				(429)		$	(5,563)		$	11,531			$	9,691			$	(622)	$	15,037
	Shares	Amount		Shares		Amount						Additional Paid-In Capital				Retained Earnings				Accumulated Other Comprehensive Income (Loss)				Total Shareholders’ Equity
Balance at December 31, 2019	1,197	$	—	(429	)	$	(5,563	)
Cumulative impact from adoption of new credit loss standard	—	—		—		—			—				(3		)								—						(3	)
Components of comprehensive income:																									Components of comprehensive income:
Net income	—	—		—		—			—				505				—				505			Net income		—					—		—			—				—				619		—		619
Other comprehensive loss	—	—		—		—			—				—				(9		)		(9		)	Other comprehensive loss		—					—		—			—			—				—		22		22
Issuance of common stock pursuant to employee stock options	1	—		—		—			27				—				—				27			Issuance of common stock pursuant to employee stock options		1					—		—			—			33				—		—		33
Issuance of common stock pursuant to restricted stock units	1	—		—		—			—				—				—				—			Issuance of common stock pursuant to restricted stock units		4					—		—			—			—				—		—		0
Restricted stock surrendered for employees’ tax liability	—	—		—		—			(31		)		—				—				(31		)	Restricted stock surrendered for employees’ tax liability		(2)					—		—			—			(165)				—		—		(165)
Share-based compensation expense related to employee stock options and restricted stock units	—	—		—		—			43				—				—				43			Share-based compensation expense related to employee stock options and restricted stock units		—					—		—			—			150				—		—		150
Dividends ($0.41 per common share)	—	—		—		—			—				(316		)		—				(316		)
Balance at March 31, 2020	1,199	$	—	(429	)	$	(5,563	)	$	11,213			$	7,999			$	(628	)		$	13,021
Dividends ($0.47 per common share)																								Dividends ($0.47 per common share)		—					—		—			—			—				(365)		—		(365)
Balance at March 31, 2021																								Balance at March 31, 2021		1,206					$	0	(429)			$	(5,563)		$	11,549			$	9,945	$	(600)	$	15,331



	At March 31,
	2020		2019
Beginning restricted cash	$	4	$	4
Ending restricted cash	4		4



	At March 31, 2020		At December 31, 2019
Internally-developed software costs	$	354	$	345
Payments made to third-party software developers	29		31
Total software development costs	$	383	$	376



For the years ending December 31,
2020 (remaining nine months)	$	42
2021	11
2022	7
2023	2
2024	1
Thereafter	2
Total	$	65



				Fair Value Measurements at March 31, 2020 Using
	As of March 31, 2020			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Balance Sheet Classification
Financial Assets:
Recurring fair value measurements:
Money market funds	$	5,576		$	5,576	$	—		$	—	Cash and cash equivalents
Foreign government treasury bills	32			32		—			—		Cash and cash equivalents
U.S. treasuries and government agency securities	74			74		—			—		Other current assets
Foreign currency forward contracts designated as hedges	7			—		7			—		Other current assets and Other assets
Total recurring fair value measurements	$	5,689		$	5,682	$	7		$	—

Financial Liabilities:
Foreign currency forward contracts designated as hedges	$	(1	)	$	—	$	(1	)	$	—	Accrued expenses and other liabilities



				Fair Value Measurements at December 31, 2019 Using
	As of December 31, 2019			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Balance Sheet Classification
Financial Assets:
Recurring fair value measurements:
Money market funds	$	5,320		$	5,320	$	—		$	—	Cash and cash equivalents
Foreign government treasury bills	37			37		—			—		Cash and cash equivalents
U.S. treasuries and government agency securities	65			65		—			—		Other current assets
Total recurring fair value measurements	$	5,422		$	5,422	$	—		$	—

Financial Liabilities:
Foreign currency forward contracts not designated as hedges	$	(2	)	$	—	$	(2	)	$	—	Accrued expenses and other liabilities
Foreign currency forward contracts designated as hedges	$	(2	)	$	—	$	(2	)	$	—	Accrued expenses and other liabilities


			Fair Value Measurements at December 31, 2020 Using
	As of December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance Sheet Classification
Financial Assets:
Recurring fair value measurements:
Money market funds	$	8,345	$	8,345	$	0	$	0	Cash and cash equivalents
Foreign government treasury bills	34		34		0		0		Cash and cash equivalents
U.S. treasuries and government agency securities	164		164		0		0		Other current assets


Total	$	8,543	$	8,543	$	0	$	0

Financial Liabilities:
Foreign currency forward contracts not designated as hedges	$	(2)	$	0	$	(2)	$	0	Accrued expenses and other liabilities
Foreign currency forward contracts designated as hedges	(24)		0		(24)		0		Accrued expenses and other liabilities
Total	$	(26)	$	0	$	(26)	$	0



	As of March 31, 2020				As of December 31, 2019
	Notional amount		Fair value gain (loss)		Notional amount		Fair value gain (loss)
Foreign Currency:
Buy USD, Sell Euro	$	646	$	6	$	350	$	(2	)



	For the Three Months Ended March 31,				Statement of Operations Classification
	2020		2019		Statement of Operations Classification
Cash Flow Hedges	$	9	$	11	Net revenues



	At March 31, 2020
	Gross Carrying Amount		Unamortized Discount and Deferred Financing Costs			Net Carrying Amount
2021 Notes	$	650	$	(2	)	$	648
2022 Notes	400		(2		)	398
2026 Notes	850		(7		)	843
2027 Notes	400		(5		)	395
2047 Notes	400		(9		)	391
Total long-term debt	$	2,700	$	(25	)	$	2,675



	Three Months Ended March 31, 2019
	Activision			Blizzard			King		Non-reportable segments			Elimination of intersegment revenues (3)			Total
Net revenues by distribution channel:
Digital online channels (1)	$	466		$	406		$	526	$	—		$	(5	)	$	1,393
Retail channels	297			16			—		—			—			313
Other (2)	—			39			—		80			—			119
Total consolidated net revenues	$	763		$	461		$	526	$	80		$	(5	)	$	1,825

Change in deferred revenues:
Digital online channels (1)	$	(217	)	$	(114	)	$	3	$	—		$	—		$	(328	)
Retail channels	(229		)	(4		)	—		—			—			(233		)
Other (2)	—			1			—		(7		)	—			(6		)
Total change in deferred revenues	$	(446	)	$	(117	)	$	3	$	(7	)	$	—		$	(567	)

Segment net revenues:
Digital online channels (1)	$	249		$	292		$	529	$	—		$	(5	)	$	1,065
Retail channels	68			12			—		—			—			80
Other (2)	—			40			—		73			—			113
Total segment net revenues	$	317		$	344		$	529	$	73		$	(5	)	$	1,258



	Total Charges Incurred Through March 31, 2020		Total Expected Charges
Activision	$	21	$	25
Blizzard	94		105
King	19		20
Other segments (1)	26		40
Total	$	160	$	190