To Our Shareholders

In a time like no other – with communities around the world
tested by extraordinary social, environmental, economic,
and public health challenges – the people of Activision
Blizzard have played an important role in supporting andserving the global community by keeping people connected
and using our powerful global platform to comfort, inspire,and draw communities together. We are humbled andgrateful that an audience of 400 million players in 190
countries has continued to turn to us for entertainment
and joy each month. We are thankful to our exceptionally
dedicated employees who have continued to innovate,deliver, and expand on our mission despite the challengesof the pandemic. And we are deeply appreciative of you –our investors – for your ongoing confidence and trust in ourability to deploy your capital wisely.

Our mission – connecting and engaging the world throughepic entertainment – has never been more relevant andimportant. As we continue to execute on our strategy,
our investments in our biggest opportunities continue
to allow us to provide superior shareholder returns.

Since 1991, when we purchased our stake in the company
and were given the privilege of managing it, the company’sbook value per share has grown at a compound annual rateof 30%. If you had invested $1,000 in our company 20 years
ago, your investment, including dividend reinvestment, would
have been worth $82,190 at the end of 2020, or around 20
times the S&P 500’s $4,223 over the same period.

returns on our investments to expand the reach, engagement,
and player investment within our largest franchises.
Gamers are becoming more deeply invested in their favorite
franchises and playing fewer games for longer, and weare fortunate to have created some of the most popular
entertainment franchises in the world. Few franchises
generate over a billion dollars in annual net bookings andtoday we operate three of them – Call of Duty, Warcraft, andCandy Crush. Each delivered strong performance in 2020and each has clear opportunities for sustained growth as wecreate more ways to entertain and engage our players. Our
teams are hard at work, in difficult circumstances, creating
highly anticipated content for these leading franchises andfor Diablo and Overwatch. We are also developing promising
new potential franchises. With all of these initiatives alreadyunderway, we expect to have at least two more billiondollar franchises in our portfolio in the next few years. Our
opportunity for audience, revenue, and earnings expansion
has never been stronger.

We have included a similar paragraph in our shareholder
letter for many years, and our commitment to delivering value
to you is as steadfast today as it was three decades ago. As
we look back on 2020, it has never been more apparent that
our ability to positively impact the lives of our players andcommunities is the ultimate driver of this share performance.
Our financial success comes from continuously finding new
ways to delight and engage hundreds of millions of players
around the world and from growing our communities ofplayers. Achieving this requires us to attract and retain adiverse and inclusive group of highly talented and motivatedemployees. And this in turn is only possible if our teams
share a sense of purpose and collective values in serving ourshareholders through our commitment to our players, ourcommunities, and each other.

Our Response To COVID-19
The digital nature of our content enabled us to produce anddeliver joy, safe entertainment, and much-needed social
engagement amidst the most challenging of circumstances.
And our continued conversion to a fully digital business isenabling us to achieve important sustainability goals as we
continue to reduce the use of plastic packaging.

We were also pleased that our continued strong businessperformance, our ability to consistently generate growing
free cash flow, and the durability of our fully-owned portfolio
of intellectual property even during challenging economic
circumstances was recognized with an upgrade of our credit
rating to A- by Standard & Poor’s.

Of course, none of this would be possible without the
unwavering enthusiasm of our players, the dedication andcommitment of our employees around the world, and the
support and capital provided by our shareholders anddebt holders.

2020 was the most difficult operating environment that
we have experienced in our 30 years leading the company.
Facing unprecedented challenges, our teams around theworld showed ingenuity and resilience as they continued
putting our players and fans first with compelling content andexperiences and executing against our most critical growth
initiatives. Our record-setting results are evidence of thesuccess of their work. In 2020 we generated net bookings1 of$8.4 billion, 32% higher than last year. Non-GAAP operating
income grew 47% year over year, and non-GAAP earnings per
share increased 39% to $3.21 (it is important to understandthe meaning of these terms and how non-GAAP operating
income and non-GAAP EPS reconcile to GAAP, and we
explain this in the tables at the end of this Annual Report).
Our results in 2020 and success over the past 30 years
illustrate the scale of the opportunity for our company.
While demand for our content last year likely benefited fromshelter-at-home dynamics, our growth was primarily driven by

The health and safety of our employees, players, and fanshas been and continues to be a top priority. To that end, we
swiftly launched several initiatives to support each of thesevital groups in managing through these unprecedented times.
All of our facilities moved to a work-from-home model by midMarch 2020, completing an efficient, safe, and successfultransition of nearly 10,000 employees to remote work. When
traditional medical services came under huge demand at
the onset of the pandemic, we created an enterprise-wide
global network of physicians in order to help ensure that ouremployees and their families had access to the very best
medical care. We made a commitment to directly support
1

Net bookings is an operating metric that is defined as 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.

1the healthcare organizations in the communities in which
our employees live and work. We donated more than $5
million dollars to aid hospitals, healthcare organizations andnonprofits treating COVID-19 patients, vaccinating frontline
workers, conducting promising drug trials and convalescentplasma therapies, and providing employment services inthese communities.
For our players and fans, we were proud to partner with
the World Health Organization for the #PlayApartTogether
campaign to leverage our game platforms to disseminate
critical health and safety information while offering in-gameevents and rewards to promote social distancing. We also
successfully transitioned our professional esports leagues,
Overwatch League and Call of Duty League, to a remotebroadcast format to keep our players and fans safe while
continuing to deliver world class esports content to ourglobal audiences.
At the time of writing, the pandemic is still exacting a tragic toll
upon so many. Most of our employees continue to work fromhome. However, we have the very best resources dedicatedto the creation of policies and workplaces that will eventually
allow our employees to return to the office with confidence
that their healthcare needs and the needs of their families willremain our priority.
A large portion of our employee population in Asia is now backin our offices, and this provides optimism that the creativity
and inspiration that are derived from the camaraderie ofbeing physically together as a team can soon be replicated in
our other locations around the world. As we embark on thephased reopening of offices, we expect to continue to berecognized as a company that provides exceptionally safe
work environments and the very best healthcare to ouremployees and their families.
Accelerating The Path To One Billion Players
Monthly, we engage approximately 400 million players acrossour network today, including over 100 million players in eachof the Americas, Europe and Asia, and we have plans to morethan double that audience as we unlock the full potentialof our global franchises. We saw the sizeable audience
expansion in Call of Duty last year as a confirmation of boththe opportunity for our franchises and validation of the growthstrategy that we are pursuing to realize that opportunity.
Call of Duty has long been one of the world’s most successful
entertainment franchises, but as we increased investment
in our creative and commercial teams and extended thefranchise across platforms, geographies, and business models,2

we delivered a dramatic increase in reach, engagement, andplayer investment. By extending the franchise to mobile, thelargest and fastest growing gaming platform, and introducing
free-to-play experiences on PC and console, we tripled the sizeof the player base versus two years earlier.
Since its launch in October 2019, Call of Duty Mobile has been
downloaded over 450 million times, becoming the highest
grossing new game in the U.S. app stores in the 12 months
after its launch. And the free-to-play Warzone experience on
PC and console has brought in over 100 million players since
its March 2020 launch. In total, over three times the numberof people played Call of Duty in 2020 versus two years earlier,with time spent in the franchise over five times higher. This
deep engagement included tens of millions of players who
experienced the franchise for the very first time on PC andmobile in countries outside of our traditional regions.
Call of Duty’s results show that free-to-play experiences
across mobile, console and PC not only extend the reach ofa franchise but can also lead to strong in-game monetization
and additional sales of premium content. Net bookings forthe franchise approximately doubled year-over-year in 2020,
premium unit sales grew over 40% year-over-year, and thefranchise added over a billion dollars to Activision’s segment
operating income in the year.
Call of Duty has established a clear, replicable blueprint for
how our franchises can reach more players on more platforms
in more geographies. The process must and will always begin
with inspiration and creativity. We then focus on developing
great gameplay. Providing players with free-to-play entry
points allows us to broaden the audience, with ongoingdelivery of in-game and premium content to sustain long-term
engagement. We continue to increase investment in our key
franchises to ensure that they are reaching their full potential
and growing their communities. We are aggressively adding
development talent to each team and we intend to have almost
tripled developer headcount for some key franchises by theend of 2022, as compared to 2019 levels. Each franchise is ata different stage of transformation, but there is no shortage ofevidence that we are following the right path.
For example, in Warcraft, net bookings from World of Warcraftgrew 40% year-over-year in 2020 after the launch of theClassic mode gave players more ways to experience the WoWuniverse. Our teams have multiple initiatives underway toextend Warcraft to the mobile platform too, creating evenmore ways to engage, for the over 100 million people who
previously played World of Warcraft over the last 15 years aswell as entirely new players around the world.

We also continue to build on our leadership position in mobile
at King. Candy Crush delivered strong growth in 2020 as wedelivered more content more frequently to the franchise’saudience of over 200 million monthly players, and Candy wasonce again the highest-grossing franchise in the U.S. appstores. We intend to accelerate the pace of content delivery
even further and introduce more social features into Candy
Crush in the coming quarters. And we are continuing to makegreat progress in building King’s advertising business, whererevenue grew approximately 50% year-over-year in 2020.
In the Diablo franchise, Diablo Immortal, our upcoming freeto-play mobile title has been extremely well received during
regional testing, setting the stage for meaningful expansion
in the franchise’s growth ahead of the upcoming Diablo 4
release. And in Overwatch, we intend to not only reinvigorate
the existing community with the launch of Overwatch 2 but
also substantially broaden the community through businessmodel and growth initiatives across platforms.
We expect to add hundreds of millions of players to ouraudience through these launches as well as multiple
unannounced potential franchises in our pipeline. And as we
increase the size of our developer teams, we are committed
to not only reaching more players across platforms but alsodelivering year-round content of the highest quality in eachfranchise, growing engagement in our communities andcreating more opportunities for player investment to deliver
ongoing growth for our shareholders.
Creating Safe, Joyful Spaces For Social Connection
We are frequently asked what has stayed the same and what
has changed over our three decades of running the business.
Regarding the former, our laser-like focus on serving playerswith inspired creativity and extraordinary execution, andalways prioritizing our greatest opportunities, have been
constants. Regarding the latter, there is no shortage ofanswers, since succeeding in this rapidly evolving industry
requires a willingness and ability to consistently adapt
the way we meet the needs of our players. But one of themost significant changes has been the evolution in how wemanage our brands, first from developing great games torunning franchises, and now to creating and sustaining global
communities connected through our intellectual properties.
Video games have redefined what it means to interact sociallyfor years, and this has been reinforced during the pandemic
while other forms of social interaction have been curtailed.
Gaming connects people more deeply than any other formof media, bringing people together without regard to race,

religion, ethnicity, sexual identity, and gender or gender
expression. With our players engaging for over an hour per day
when they play, our games can responsibly influence popular
culture, eliminate stereotypes, celebrate differences, andencourage players to embrace tolerance and understanding.
We see these deep social connections illuminated in countlessstories about how our games have provided spaces for people
around the world to find joy, solace, and community. This has
become more apparent during these challenging and often
isolating times. A group of doctors treating COVID-19 patientsin Uruguay told us how they play Candy Crush on a sharedhospital computer as a means of finding moments of comfort.
And we spoke with an ER nurse in Kentucky who explained
how World of Warcraft had helped him through several
difficult times in his life, most recently by allowing him to stayconnected with friends and find relaxation between shifts amid
the pandemic.
Across our portfolio we are finding new ways to connect
players in-game. In Call of Duty and World of Warcraft, wealready have millions of players communicating with theirfriends through social audio. Our players who play in groups
with friends spend two to three times more time in-gamethan those who play on their own. We plan to introduce new
ways for players in our other franchise communities to play,compete, or socialize with friends as we continue to enablericher social networking throughout our games.
Attracting And Retaining Diverse Views, Voices And Talent
We have the benefit of two powerful assets: franchises andtalent. We will continue to be disciplined in our approaches
to talent acquisition and human capital management and will
maintain strong alignment between financial performance andreward especially within our franchises.
While our current teams are already progressing on our richcontent pipeline, we plan to hire over 2,000 developers toachieve our ambitious franchise growth plans over the next
two years. Against a backdrop of substantial global demandfor our content, this increased capacity will allow us to support
even more frequent in-game content and events, continue
extending our PC and console franchises to mobile, and bringnew intellectual properties to market.
We have long appreciated that the creation of broadly
appealing games for our 400 million players in the 190
countries where our games are available requires diverse
talent and skills and an environment that fosters inclusion.
To this end, our recruitment practices at all levels aredesigned to attract talent from across society. Maintaining3

an equitable, inclusive workplace is essential to our
success. And, like every area of our enterprise, we are nevercomplacent about recognizing that excellence only comesfrom continuous improvement.
As a company, humility is a core value of how we operate.
For over 30 years, we have worked hard to recognize our
successes without too much fanfare and always inmeasured ways.
This year we will release our first report highlighting ourcommitment to the environment, social good and the very
best governance practices and their direct connection to thecreation of shareholder value. While the report is new, ourcommitment to these practices and shareholder value
creation is not.
Our company and employees continue to demonstrate an
unwavering commitment to the communities in which we
operate. The Call of Duty Endowment is an ideal example ofa company-inspired and -funded initiative designed to havemeaningful social impact but with a deep connection to thebrand. Through the Call of Duty Endowment, we have helped
find 81,000 jobs for veterans since we started the program a
decade ago. Citizens willing to sacrifice their lives, livelihoods,
and time with their families to protect the ideals that enable
freedom and prosperity are among the most disciplined, loyal,hardworking, team-oriented, goal-driven members of oursociety and our workforce.
Unfortunately, post-active service employment opportunities
continue to be a challenge for the veteran community. As
the pandemic caused record low unemployment rates todramatically increase, veteran unemployment, as it often has,increased at even higher rates. In 2020 we dedicated moreresources to find new employment opportunities for veteransand even greater resources for the populations of veteransthat were especially impacted: women and Black veterans.
We managed to achieve our most successful year ever for
the Call of Duty Endowment, placing over 15,000 veterans
into high-quality jobs. Of those we helped place last year,
approximately 21% were women and 28% were Black –metrics in which we take great pride considering that women
veterans and Black veterans compose just 10% and 12%,
respectively, of the U.S. veteran community.
As a result of the Call of Duty Endowment, we and our partners
gain special access to the talented women and men we placein our own recruiting initiatives.
We frequently hear heartwarming stories filled with gratitude
and appreciation for helping veterans find gainful employment
4

to be able to provide for their families. These stories remind us
that supporting the communities around the world in which we
operate is good business.
We will continue to make investments like this which serve agreater purpose, further engage our players and employees,
and contribute to shareholder value.
Consistent Principles
The principles that have guided us over the last 30 years
served us well in 2020:
Delivering innovative and compelling entertainment 		
experiences for our communities of players aroundthe world;
Focusing on the largest and most promising
opportunities;
Recruiting, rewarding, and retaining diverseworld-class talent; andRemaining disciplined in our responsibility to deliver
shareholder value.
These principles allowed us to make a meaningful and positive
impact on our players during the most difficult of times,
while also delivering significant value to shareholders andopportunities for employees.
As we execute on our pipeline of new content across multiple
platforms and business models – and as we continue topursue new opportunities to build on our already leading
franchises, reintroduce franchises from our rich library, anddevelop original intellectual property – we see a clear path tocontinue delivering growth for our shareholders. Prioritizationof opportunities and access to talent remain our biggest
challenges. But these are far more manageable challenges
than many other companies face.
Thank you to our players and audiences for continuing toinvest your time and capital in our content. Thank you to ourshareholders for your support. We continue to be proud tohave delivered you superior returns on your capital. And thankyou to our employees. Your passion, dedication and continued
commitment to excellence inspires us all.
With appreciation,

Bobby Kotick
Chief Executive Officer
Activision Blizzard

Brian Kelly
Chairman of the Board
Activision Blizzard

1

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Table of Contents
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SIGNATURESSIGNATURES

Page No.
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Cautionary Statement
Cautionary Statement
Business
Business
Risk Factors
Risk FactorsStaff Comments
Unresolved
Unresolved
Properties Staff Comments
Properties
Legal Proceedings
Legal
Proceedings
Mine Safety
Disclosures
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases ofEquity Securities
Marketfor Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases ofEquitySecurities
Selected Financial Data
Selected
Financial
Data and Analysis of Financial Condition and Results of Operations
Management's
Discussion
Management's
Discussion
andAnalysis ofabout
Financial
Condition
Quantitative and Qualitative
Disclosures
MarketRisk and Results of Operations
Quantitativeand Qualitative
Disclosures about
Financial
Statements
and Supplementary
Data Market Risk
Financialand Supplementary
Data on Accounting and Financial Disclosure
Changes inStatements
and Disagreementswith Accountants
Changesin andDisagreements with Accountants on Accounting and Financial Disclosure
Controls andProcedures
Controls
andProcedures
Other Information
Other Information
Directors, Executive Officers, and Corporate GovernanceDirectors, Executive
Officers, and Corporate Governance
Executive
Compensation
Executive
Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Certainand Related
Transactions, and Director Independence
PrincipalRelationships
Accountant Fees
and Services
Principal Accountant Fees and Services
Exhibits, Financial Statement Schedules
Exhibits, Financial Statement Schedules
Form 10-K Summary
Form 10-K Summary

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PART ICAUTIONARY STATEMENT
This Annual Report on Form 10-K contains, or incorporates by reference, certain forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995. Such statements consist of any statement other than a recitation ofhistorical 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 orservices 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
help identify forward-looking statements. Forward-looking
out ourstatements are subject to business and economic risks, reflectbusiness, 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 andother future circumstances to differ materially from those expressed in any forward-looking statements. Some of the risk factors that
Risk Factors
could cause our actual results to differ from those statPart I, Item 1A of this Annual Report on Form 10-K. The forward-looking statements contained herein are based on information
available to us as of the date of this Annual Report on Form 10-K 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 ofwhich are beyond our control and may cause actual results to differ materially from current expectations.
redor unregistered trademarks or trade names of Activision Blizzard, Inc. All other product or service names are the property of theirrespective owners. All dollar amounts referred to in, or contemplated by, this Annual Report on Form 10-K refer to U.S. dollars,
unless otherwise explicitly stated to the contrary.

33

Item 1. BUSINESS
Overview
Activision Blizzard, Inc. is a leading global developer and publisher of interactive entertainment content and services. We
operate esports leagues and offer digital advertising within some of our conten
ely to Activision Blizzard, Inc. and its subsidiaries. For a
discussion of the history of the formation of our Company, including our year and form of incorporation, refer to Part I, Item 1
10-K for the year ended December 31, 2019.
Our Strategy and Vision
Our objective is to connect and engage the world through epic entertainment by continuing to be a worldwide leader in thedevelopment, publishing, and distribution of high-quality interactive entertainment content and services, as well as related
media, that deliver engaging entertainment experiences on a year-round basis. In pursuit of this objective, we focus on threestrategic pillars: expanding audience reach; deepening consumer engagement; and increasing player investment.
Expanding audience reach. Building on our strong established franchises and creating new franchises through compelling
new content is at the core of our business. We endeavor to reach as many consumers as possible by offering our content on
multiple platforms and delivering compelling experiences across multiple business models (e.g. premium, free-to-play,subscription-based, etc.).
Driving deep consumer engagement. Our high-quality entertainment content not only expands our audience reach, but it
also drives deep engagement with our franchises. We design our games, as well as related media, to provide a depth of content
provide players the ability to connect with each other socially within our franchise communities, thus delivering more value toour players and providing additional growth opportunities for our franchises.
Increasing player investment. Increasingly, our consumers are connected to our games online through consoles, PCs, andmobile devices. This allows us to offer additional digital player investment opportunities directly to our consumers on a yearround basis. In addition to purchasing full games or subscriptions, players can invest in our franchises by purchasing
incremental in-game content (i.e. larger downloadable content or smaller content via microtransactions). These digital revenue
streams tend to be more recurring and have relatively higher profit margins. Further, if executed properly, additional player
investment can increase engagement, as it provides more frequent and incremental content for our players. In addition, we
generate revenue through offering advertising within certain of our franchises, and we believe there are opportunities to grownew forms of player investment through esports and consumer products. We are still in the early stages of developing these newrevenue streams.
Our Segments
Based upon our organizational structure, we conduct our business through three reportable segments, each of which is aleading global developer and publisher of interactive entertainment content and services based primarily on our internallydeveloped intellectual properties.
(i) Activision Publishing, Inc.
) delivers content through both premium and 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®, a first-person action franchise.
TM
Activision also includes the activities of the Call of Duty League , a global professional esports league with city-based teams.

44

(ii) Blizzard Entertainment, Inc.
delivers content through both premium and free-to-play offerings and primarily
generates revenue from full-game and in-game sales, 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 thehises include: World of Warcraft®, a subscription-based massive
creation of user-generated contmulti-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 LeagueTM, a global professional esports league with city-based teams.
(iii) King Digital Entertainment
ily through free-to-play offerings and primarily generates
revenue from in-game sales and in-game advertising on the mobile
Other
We also engage in other businesses that do not represent reportable segments, including the Activision Blizzard
distribution services to third-party publishers of interactive entertainment software, our own publishing operations, andmanufacturers of interactive entertainment hardware.
Impacts of the Global COVID-19 Pandemic

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 busine
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 businessactivities and financial markets across the globe.
During the COVID-19 pandemic, our business has experienced an increase in demand for certain of our products andservices as a result of the stay-at-home orders enacted in various regions as players have more time to engage with our games.
These trends contributed to strong full-game and in-game content sales for Call of Duty: Modern Warfare®, which also
benefited from the launch of Call of Duty: WarzoneTM in March. In addition, we saw further demand for World of Warcraft,including its in-game content, which also continued to benefit from the release of World of Warcraft Classic in August 2019.
Beginning in the month of March, our business also experienced an increase in monthly active users for certain franchises. We
have, however, seen a moderation in these trends since the stay-at-home orders were originally enacted earlier in 2020.
As a result of the COVID-19 pandemic and stay-at-home orders enacted in various regions, both the Overwatch League
and the Call of Duty League pivoted all matches from their originally planned local homestand formats to online play andremote production for the remainder of the regular and postseason in order to keep players and fans safe while still delivering
premium esports content to a global audience. Additionally, to support our Overwatch League and Call of Duty League teamowners and ecosystems amid a challenging environment, which includes losing the ability to have live fan-attended homevenue events, we have taken certain actions to support their short-term cash flow needs, adjusted our league operations to
reduce operating costs and improve franchise terms, and made certain investments which have impacted our operating results in
2020. This impact was primarily in the Blizzard segment.
The sustainability of these trends and long-term implications to our business is dependent on future developments,
including the duration of the COVID-19 pandemic and the related length of its impact on the global economy, which are
Risk Factors
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.

55In an effort to protect the health and safety of our employees, the majority of our workforce is currently working fromhome and we have placed restrictions on non-essential business travel. We have implemented business continuity plans andhave increased support and resources to enable our employees to work remotely and, thus far, our business has been able torelease dates. The 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 wedetermine are in the best interests of our employees, customers, partners, and shareholders. It is not clear what effects any suchpotential actions may have 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, or stock price.
The full extent of the impact of the COVID-19 pandemic on our business, reputation, financial condition, results ofoperations, income, revenue, profitability, cash flows, liquidity, or stock price will depend on numerous evolving factors that weare 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 $8.8 billion as of December 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 the COVID-19 pandemic.
Products
We develop interactive entertainment content and services, principally for console, PC, and mobile devices, and wemarket and sell our games primarily through digital distribution channels. Our products span various genres, including first- andproducts and services:premium full-games, which typically provide access to main game content after purchase;free-to-play offerings, which allow players to download the game and engage with the associated content for free;
in-game content for purchase to enhance gameplay (i.e. microtransactions and downloadable content) available
within both our full-games and free-to-play offerings; andsubscriptions for players in our World of Warcraft franchise that provide for ongoing access to the game content.
Providing additional content and experiences within franchises has increased opportunities for player investment outsideof premium full-game purchases. This has allowed us to shift from our historical seasonality to a more consistently recurringand year-round revenue model. In addition, if executed properly, it allows us to increase player engagement with our games andcontent.
Product Development and Support
We focus on developing enduring wholly-owned franchises backed by well-designed, high-quality games with regular
content updates. We aim to build interactive entertainment content with the potential for broad reach, sustainable engagement,
and year-round player investment. It is our experience that enduring franchises then serve as the basis for related new products
and content that can be released over an extended period of time. We believe that the development and distribution of products
and content based on established franchises enhances predictability of revenues and the probability of high unit volume sales
and operating profits. We intend to continue development of content based on our owned franchises in the future.
We develop and produce our titles using a model in which a group of creative, technical, and production professionals,
including designers, producers, programmers, artists, and sound engineers, in coordination with our marketing, finance,
analytics, sales, and other professionals, have responsibility for the entire development and production process, including thesupervision and coordination of internal and, where appropriate, external resources. We believe this model allows us to deploy
the best resources for a given task, including by supplementing our internal expertise with top-quality external resources on an
as-needed basis.
While most of our content is developed by our internal studios, we periodically engage independent third-party
developers to create content on our behalf. From time to time, we also acquire the license rights to publish and/or distribute
software products that are, or will be, independently created by third-party developers.
66

We provide various forms of product support. Central technology and development teams review, assess, and provide
support to products throughout the development process. Quality assurance personnel are also involved throughout thedevelopment and production of published content. We subject all such content to extensive testing before public release toensure compatibility with appropriate hardware systems and configurations and to minimize the number of bugs and otherdefects found in the products. To support our content, we generally provide 24-hour game support to players through various
means, primarily online and by telephone.
Marketing, Sales, and Distribution
Many of our products contain software that enables us to connect with our gamers directly. This allows us to communicate
and market directly to our customers, including through customized advertising and in-game messaging based on customer
preferences and trends. Our marketing efforts also include activities on: online social networks; other online advertising; public
relations activities; print and broadcast advertising; coordinated in-store and industry promotions (including merchandising andpoint of purchase displays); participation in cooperative advertising programs; direct response vehicles; and product sampling.
From time to time, we also receive marketing support from hardware manufacturers, producers of consumer products related toa game, and retailers in connection with their own promotional efforts, as well as co-marketing from promotional partners.
Most of our products and content are available in a digital format, which allows consumers to purchase and download thecontent at their convenience directly to their console, PC, or mobile device through our platform partners, including Apple Inc.
etary online gaming service,on content directly to PC consumers.

Blizzard Battle.net, to distribute most of

In addition to serving as a distribution platform, Blizzard Battle.net offers players communications features, social
networking, player matching, and digital content delivery and is designed to allow people to connect regardless of which of ourgames on Blizzard Battle.net they are playing.
Our physical products are available for sale in outlets around the world. These products are sold primarily on a direct
basis to mass-market retailers (e.g., Target, Walmart), consumer electronics stores (e.g., Best Buy), discount warehouses, gamespecialty stores (e.g., GameStop), and other stores (e.g., Amazon), or through third-party distribution and licensing
arrangements.
Manufacturing
We prepare master program copies for our products on each release platform. With respect to products for Microsoft,Sony, and Nintendo consoles, our disk duplication, packaging, printing, manufacturing, warehousing, assembly, and shipping
are performed by third-party subcontractors or distribution facilities owned by us.
Microsoft, Sony, and Nintendo generally specify or control the manufacturing and assembly of finished products andlicense their hardware technologies to us. In return, we pay an applicable royalty per unit once the manufacturer fills the
product order, even if the units do not ultimately sell. We deliver the master materials to the licensor or its approved replicator,
who then manufactures the finished goods and delivers them to us for distribution under our label.
Significant Customers and Top Franchises
Customers
While the Company does sell directly to end consumers in certain instances, such as sales through Blizzard Battle.net, inother instances our customers are platform providers, such as Sony, Microsoft, Google, and Apple, or retailers, such as Walmart
and GameStop, who act as distributors of our content to end consumers. For the year ended December 31, 2020, Sony, Apple,
Google, and Microsoft were our most significant customers, with revenues of 17%, 15%, 14%, and 11%, respectively. For theyears ended December 31, 2019 and 2018, Apple, Google, and Sony were our most significant customers, with revenues of
17%, 13%, and 11%, respectively, for 2019, and 15%, 11%, and 13%, respectively, for 2018. No other customer accounted for
10% or more of our net revenues in those periods.
receivables at December 31, 2020, and 11% and 18%, respectively, at December 31, 2019. No other customer accounted for
10% or more of our consolidated gross receivables in those periods.
77Top Franchises
Duty, Candy Crush, and WorldFor the years ended December 31, 2020, 2019, and 2018,
10% or more of our net revenues in those periods.
Competition

We compete for the leisure time and discretionary spending of consumers with other interactive entertainment companies
and software competitors, as well as with providers of different forms of entertainment, such as film, television, social
networking, music, and other consumer products.
The interactive entertainment industry is intensely competitive, and new interactive entertainment software products andplatforms are regularly introduced. We believe that the main competitive factors in the interactive entertainment industry
include: product features, game quality, and playability; brand name recognition; compatibility of products with popular
platforms; access to distribution channels; online capability and functionality; ease of use; price of content; marketing support;
and quality of customer service.
In addition to third-party software competitors, integrated video game console hardware and software companies, such as
Microsoft, Sony, and Nintendo, compete directly with us in the development of software titles for their respective platforms,
while at the same time act as key distribution channels and payment gateways for our products and services through their digital
storefronts. Apple and Google are similarly positioned on mobile devices.
Intellectual Property
Like other interactive entertainment companies, our business is significantly dependent on the creation, acquisition, use
and protection of intellectual property. Some of this intellectual property is in the form of copyrighted software code, patented
technology, and other technology and trade secrets that we use to develop and run our games. Other intellectual property is in
the form of copyrighted audio-visual elements that consumers can see, hear, and interact with when they are playing our games.
We develop a majority of our products based on wholly-owned intellectual properties, such as Call of Duty, World of
Warcraft, and Candy Crush. In other cases, we obtain intellectual property through licenses and service agreements. Further, ourproducts that play on consoles and mobile platforms include technology that is owned by the platform provider and is licensed
non-exclusively to us for use in the relevant product. We also license technology from providers other than console
manufacturers in developing our content and services. While we may have renewal rights for some licenses, our business isdependent on our ability to continue to obtain the intellectual property rights from the owners of these rights on reasonable
terms and at reasonable rates.
We are actively engaged in enforcement of our copyright, trademark, patent, and trade secret rights against potential
infringers of those rights along with other protective activities, including monitoring online channels for distribution of pirated
copies and participating in various enforcement initiatives, education programs, and legislative activity around the world. For
our PC products, we use technological protection measures to prevent piracy and the use of unauthorized copies of our
products. For other platforms, the platform providers typically incorporate technological protections and other security
measures in their platforms to prevent the use of unlicensed products on those platforms.
Human Capital
We believe that our continued success and growth is directly related to our ability to attract, retain, and develop top talent.
As of December 31, 2020, Activision Blizzard had approximately 9,500 employees, with approximately 65% in North America,
mately 5% in the Asia Pacific region.
approximately 30% in the Europe, Middle Ea
Of these employees, approximately 61% are personnel whose primary focus is on game and technology development, which
represents an approximate three percentage point increase from 2019. Activision Blizzard takes an active role in the entirety ofthe employee lifecycle, from candidates to alumni. Recognizing that ours is a rapidly changing industry with constanttechnological innovation, we remain focused on attracting, recruiting, enabling, developing, and retaining a diverse andinnovative employee population.

88

: We believe that a culture of inclusion and diversity enables us to create,develop, and fully leverage the strengths of our workforce to exceed players' and fans' expectations and meet our growthobjectives. We remain committed to building and sustaining a culture of belonging, built on equitable processes and systems,
where everyone thrives. By embedding DE&I practices and programs in the full employee lifecycle, we work to recruit, attract,
retain, and grow world-class talent. Our employee resource groups play an active role in our DE&I efforts by building
community and awareness. We also offer leadership and management development opportunities on the topics of unconscious
bias and inclusive leadership and train our recruiting workforce in diverse sourcing strategies.
Our Corporate Governance Principles and Policies provide that the initial list from which any new independent director
nominee is chosen includes qualified female and racially/ethnically diverse candidates and, similarly, if we conduct an external
search for a new CEO, that the initial list of external candidates includes qualified female and racially/ethnically diverse
candidates. As of December 31, 2020, two of our ten directors were women.
Additionally, we have been recognized for our efforts to create an inclusive workplace, including receiving the distinction
Corporate Equality Index. We are proud of these accolades because we believe that the most innovative work comes from aculture in which all employees can be, and bring, their authentic and best selves.
Compensation and Benefits: The main objective of our compensation program is to provide a compensation package that
attracts, retains, motivates, and rewards top-performing employees that operate in a highly competitive and technologicallychallenging environment. We seek to do this by linking compensation (including annual changes in compensation) to overallnancial interests with the interests of our shareholders. We
also seek fairness in total compensation by reference to external comparisons, internal comparisons, and the relationshipbetween development and non-development, as well as management and non-management, remuneration. We believe in equalpay for equal work, and we continue to make efforts across our global organization to promote equal pay practices.
We are committed to providing comprehensive benefit options, and it is our intention to offer benefits that allow ouremployees and their families to live healthier and more secure lives. Some examples of our wide-ranging benefits offered are:medical insurance, prescription drug benefits, dental insurance, vision insurance, hospital indemnity insurance, accident
insurance, critical illness insurance, life insurance, disability insurance, health savings accounts, and flexible spending accounts.
We frequently upgrade our benefit portfolio by seeking out pioneer partners that give our employees modern benefit
experiences. As an example, at the onset of the COVID-19 pandemic when traditional medical services became under hugedemand, in order to help ensure that our employees and their families had access to medical advice, we created an enterprisewide global network of physicians.
Talent Assessment and Development: Recognizing that ours is a rapidly changing industry with constant innovation,
developing our diverse and innovative talent base is paramount, imperative, and vital to our business. We intend for our
employees to have a clear understanding of their strengths and development opportunities, while fostering a collaborative andproductive relationship between employees and their managers. Talent assessment and development are therefore critical
succession planning, and performance management. Our performance management process includes the establishment of goals(at the beginning of the year), and throughout the year we encourage regular check-ins on progress and performance so that
employees have a clear understanding of their strengths and areas for improvement. We regularly assess employee contributions
to our Company results and culture so that we can appropriately recognize and reward performance. Additionally, on an annual
basis, we conduct an organizational and performance review process with our CEO and all segment, business unit, and function
leaders, focusing on our high-performing and high-potential talent, diverse talent, and the performance and succession for ourmost critical roles.
Employee Experience: We capture and act on the voice of our employees through regular company-wide pulse surveys.
de honest, candid feedback about their experience working for thehigher) demonstrate our collective commitment that Activision
lead to positive improvements to the employee experience at the company-wide, business unit, and team levels. Our employee
For example, most recent surveys focused on whether
feedback is dynamic and relevant to ou
our employees felt supported as they worked from home during the COVID-19 pandemic, and expectations of the employee
population as we anticipate a return to the office.

99

Information
Informationabout
aboutour
ourExecutive
ExecutiveOfficers
Officers
Our
Ourexecutive
executiveofficers
officersand
andtheirtheirbiographicalbiographicalsummaries
summariesare
areprovided
providedbelow:
below:Name
Name
RobertRobertA.
A.Kotick
KotickDanielDanielAlegre
AlegreDennisDennisDurkin
Durkin

Age
Age
57
57
52
52
50
50

Position
Position
Chief
ChiefExecutive
ExecutiveOfficer
OfficerofofActivision
ActivisionBlizzard
Blizzard
President
Presidentand
andChief
ChiefOperating
OperatingOfficer
OfficerofofActivision
ActivisionBlizzard
Blizzard
Chief
ChiefFinancial
FinancialOfficer
OfficerofofActivision
ActivisionBlizzard
Blizzard

Claudine
ClaudineNaughton
Naughton
Christopher
ChristopherWalther
Walther

52
52
54
54

Chief
ChiefPeople
PeopleOfficer
OfficerofofActivision
ActivisionBlizzard
Blizzard
Chief
ChiefLegal
LegalOfficer
OfficerofofActivision
ActivisionBlizzard
Blizzard

RobertRobertA.
A.Kotick,
Kotick,Chief
ChiefExecutive
ExecutiveOfficer
OfficerofofActivision
ActivisionBlizzard
Blizzard
RobertRobertA.
A.Kotick,
Kotick,who
whoserves
servesasasour
ourChief
ChiefExecutive
ExecutiveOfficer,
Officer,has
hasbeenbeenaadirector
directorof
ofActivision
ActivisionBlizzard
Blizzardsince
sinceFebruary
February
1991,
1991,following
followinghis
hispurchasepurchaseof
ofaasignificant
significantinterest
interestininthe
theCompany,
Company,which
whichwaswasthenthenononthe
theverge
vergeofofinsolvency.
insolvency.Mr.
Mr.Kotick
Kotickwas
wasourourChairman
ChairmanandandChief
ChiefExecutive
ExecutiveOfficer
Officerfrom
fromFebruary
February1991
1991until
untilJuly
July2008,
2008,whenwhenhehebecame
becameour
ourPresident
Presidentand
andChief
Chief
Executive
ExecutiveOfficer.
Officer.He
Heserved
servedasasour
ourPresident
Presidentfrom
fromJuly
July2008
2008until
untilJune
June2017.
2017.Mr.
Mr.Kotick
Kotickisisalso
alsoaamember
memberof
ofthe
theboardboardofof
directors
directorsof
ofThe
TheCoca-Cola
Coca-ColaCompany,
Company,aamultinational
multinationalbeverage
beveragecorporation,
corporation,and
andthetheboards
boardsof
oftrustees
trusteesfor
forThe
TheCenter
Centerfor
forEarly
Early
Education
Educationand
andHarvard-Westlake
Harvard-WestlakeSchool.
School.He
Heisisalso
alsothetheVice
ViceChairman
Chairmanof
ofthe
theBoard
BoardandandChairman
Chairmanof
ofthe
theCommittee
Committeeof
oftrustees
trusteesofofthe
theLosLosAngeles
AngelesCounty
CountyMuseum
Museumof
ofArt.
Art.InInaddition,
addition,Mr.
Mr.Kotick
Kotickisisthe
theco-founderco-founderandandco-Chairman
co-Chairmanof
ofthe
theCall
CallofofDutyDuty
Endowment,
Endowment,aanonprofit,
nonprofit,public
publicbenefit
benefitcorporation
corporationthat
thatseeks
seekstotohelp
helporganizationsorganizationsthat
thatprovide
providejob
jobplacement
placementand
andtraining
training
services
servicesfor
forveterans.
veterans.
DanielDanielAlegre,
Alegre,President
Presidentand
andChief
ChiefOperating
OperatingOfficer
OfficerofofActivision
ActivisionBlizzard
Blizzard
DanielDanielAlegre
Alegrehas
hasserved
servedasasour
ourChief
ChiefOperating
OperatingOfficer
Officersince
sinceApril
April2020.
2020.Prior
Priortotojoining
joiningthe
thecompany,
company,Mr.
Mr.Alegre
Alegreheld
heldaanumbernumberof
ofleadershipleadershippositions
positionsatatGoogle
Googlefrom
from2004
2004toto2020,
2020,including
includingserving
servingas
asPresident
Presidentof
ofGlobalGlobalRetail
Retailand
andShopping,
Shopping,
where
whereheheled
ledthetheinitiatives
initiativestotoembed
embede-commerce
e-commerceacrossacrossall
allGoogle
Googleproductproductareas
areasandandtotohelp
helpdiversify
diversifybeyond
beyondadvertising
advertisinginto
into
the
theretailretailtransactionstransactionsbusiness.
business.Prior
Priortotothat,
that,Mr.
Mr.Alegre
Alegrewa
wa
the
the
ss
Asia-PacificAsia-Pacificand
andJapanJapanbusinesses
businessesliving
livingininChina,
China,Singapore,
Singapore,and
andTokyoTokyoandandas
asViceVicePresident
Presidentof
ofthe
theLatin
LatinAmerica
Americabusiness,business,overseeing
overseeingaamassive
massiveexpansion
expansionininbothbothregions.
regions.Prior
Priortotojoining
joiningGoogle,
Google,Mr.
Mr.Alegre
Alegrewas
wasVice
VicePresident
PresidentatatBertelsmann
BertelsmannMedia,
Media,
runningrunningaadivision
divisionof
ofBMG
BMGMusic
MusicininLatin
LatinAmerica
Americaas
aswellwellasasPartnerships
Partnershipsof
ofthe
theBertelsmann
BertelsmanneCommerce
eCommerceGroup
GroupininNew
NewYork
York
City.
City.Mr.
Mr.Alegre
Alegreholds
holdsaaB.A.
B.A.degree
degreefrom
fromthetheWoodrow
WoodrowWilson
WilsonSchool
SchoolofofPublic
Publicand
andInternational
InternationalAffairs
AffairsatatPrinceton
Princeton
University,
University,asaswellwellasasdualdualM.B.A.
M.B.A.andandJ.D.
J.D.degrees
degreesfrom
fromHarvard
HarvardBusinessBusinessSchool
SchoolandandHarvard
HarvardLaw
LawSchool.
School.
DennisDennisDurkin,
Durkin,Chief
ChiefFinancial
FinancialOfficer
OfficerofofActivision
ActivisionBlizzard
Blizzard
DennisDennisDurkin
Durkinhas
hasserved
servedasasour
ourChief
ChiefFinancial
FinancialOfficer
Officersince
sinceJanuary
January2019.
2019.Mr.
Mr.Durkin
Durkinjoined
joinedthe
theCompany
CompanyininMarch
March
2012
2012asasour
ourChief
ChiefFinancial
FinancialOfficer
Officerand
andserved
servedininthat
thatroleroleuntil
untilMay
May2017.
2017. He
Heserved
servedasasour
ourChief
ChiefCorporate
CorporateOfficer
Officerfrom
fromMay
May20172017until
untilJanuary
January2019.
2019.Prior
Priortotojoining
joiningthe
theCompany
Companyinin2012,2012,Mr.
Mr.Durkin
Durkinheld
heldaanumber
numberof
ofpositions
positionsof
ofincreasing
increasing
responsibility
responsibilityatatMicrosoft,
Microsoft,aacomputing
computingsoftware
softwareandandhardware
hardwaremanufacturer,
manufacturer,mostmostrecently
recentlyserving
servingas
asthe
theCorporate
CorporateViceVicertainmentbusiness,business,which
whichincluded
includedthethertainment
President
Presidentand
andChief
ChiefOperating
Operatingand
andFinancia
Financia
entertainmentbusinessbusinessinin2006,
2006,Mr.
Mr.Durkin
Durkinspent
spentseven
sevenyears
yearsonon
entertainment
pan-Europeanactivity.
activity.Before
Beforejoining
joiningMicrosoft,
Microsoft,Mr.
Mr.Durkin
Durkinwas
wasaafinancial
financialanalyst
analystatatAlex.
Alex.Brown
Brownand
andCompany.
Company.Mr.
Mr.Durkin
Durkinpan-European
holds
holdsaaB.A.
B.A.degree
degreeiningovernment
governmentfrom
fromDartmouth
DartmouthCollege
Collegeand
andan
anM.B.A.
M.B.A.degree
degreefrom
fromHarvard
HarvardUniversity.
University.
Claudine
ClaudineNaughton,
Naughton,Chief
ChiefPeople
PeopleOfficer
OfficerofofActivision
ActivisionBlizzard
Blizzard
Claudine
ClaudineNaughton
Naughtonhas
hasserved
servedasasour
ourChief
ChiefPeople
PeopleOfficer
Officersince
sinceAugustAugust2019.
2019.Prior
Priortotojoining
joiningthe
theCompany,
Company,Ms.
Ms.
Naughton
Naughtonheld
heldaanumber
numberof
ofpositions
positionsof
ofincreasing
increasingresponsibility
responsibilitywithin
withinthe
thehuman
humanresources
resourcesdepartment
departmentof
ofAmerican
AmericanInternational
InternationalGroup,Group,Inc.
Inc.from
from1997
1997toto2018,2018,including
includingserving
servingas
asthe
thecompany's
company'sExecutive
ExecutiveVice
VicePresident
Presidentand
andChief
ChiefHuman
Human
Resources
ResourcesOfficer.
Officer.Prior
Priortotojoining
joiningAIG,
AIG,Ms.
Ms.Naughton
Naughtonserved
servedasasthe
theRegional
RegionalManager
ManagerandandDirector
Directorof
ofTraining
Trainingfor
forFairways
Fairways
Golf
GolfCorporation.
Corporation.Ms.
Ms.Naughton
Naughtonholds
holdsaaB.A
B.Adegreedegreeininpoliticalpoliticalsciencesciencefrom
fromStockton
StocktonUniversity.
University.
10

10
10

Christopher Walther, Chief Legal Officer of Activision Blizzard
Christopher Walther has served as our Chief Legal Officer since November 2009 and served as our Secretary fromFebruary 2010 until February 2011. Prior to joining the Company, Mr. Walther held a number of positions of increasing
responsibility within the legal department of The Procter & Gamble Company from 1992 to 2009, including serving as theGeneral Counsel for Central and Eastern Europe, Middle East, and Africa, General Counsel for Northeast Asia and, mostrecently, as General Counsel for Western Europe. Mr. Walther also led Procter & Gamband acquisitions practices. Before joining Procter & Gamble, Mr. Walther served as a law clerk for Senior Judge Harry W.
Wellford of the United States Sixth Circuit Court of Appeals. Since 2012, Mr. Walther has served on the board of directors of
hair. Mr. Walther has also served as our representative on theboard of directors of the Entertainment Software Association since 2013 and on its executive committee. Mr. Walther holds a
B.A. degree in history and Spanish from Centre College and a J.D. degree from the University of Kentucky College of Law.
Additional Financial Information
See theSee theof the impact of seasonality on our business.

Available Information
Our website, located at https://www.activisionblizzard.com, allows free-of-charge access to our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those
documents filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (theother report that we file with or furnish to
Our SEC filings are also available to the public over th

1111

Item 1A. RISK FACTORS
We wish to caution the reader that the following important risk factors, and those risk factors described elsewherein this report or in our other filings with the SEC, could cause our actual results to differ materially from those stated inforward looking statements contained in this document and elsewhere. These risks are not presented in order ofimportance or probability of occurrence. Further, the risks described below are not the only risks that we face.
Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also impair ourbusiness operations. Any of these risks may have a material adverse effect on our business, reputation, financial
condition, results of operations, income, revenue, profitability, cash flows, liquidity, or stock price.
We are unable to predict the full impact of the Global COVID-19 pandemic.
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 ofgovernmental, 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 thehealth 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; theeffects on the health, finances and discretionary spending patterns of our consumers, including the ability of our consumers to
pay for our products and content; our ability to sell products at assumed prices; the financial impact and strain on the retailcustomers 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 ourphysical 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 tocontinue to develop our emerging businesses, such as advertising; increased volatility in foreign currency exchange rates; theimpact of recent and potential upcoming or ongoing large-scale actions by local and federal governments and agencies orsimilar governing bodies in the U.S. and around the world, the U.S. Federal Reserve, and other central banks around the world,
including the impact of any of these actions on the U.S. or world economy or global financial markets; and any other factor
which results in disruptions or increased costs associated with the development, production, post-production, marketing anddistribution of our products, 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. As in the case of COVID-19,
the occurrence of other epidemics, medical emergencies, and other public health crises outside of our control could have anegative impact on our business. Additionally, in the case of the COVID-19 pandemic, we have seen increased demand for our
products due to stay-at-home orders, the curtailment of certain other forms of entertainment, and other pandemic-related factorsthat make consumers more inclined to spend time at home, benefiting our financial results and operating metrics. The trends in2020 for revenues, net income, and other financial results and operating metrics, may not be indicative of results for future
periods, particularly if these pandemic-related factors become less significant.
Our professional esports leagues (i.e. the Overwatch League and the Call of Duty League) and the franchise teams thatmake up the leagues generate revenues from live in-person events. The COVID-19 pandemic has resulted in the cancellation oflive in-person events and any continued health and safety concerns with large public gatherings may impact the ability of theteams in our leagues to hold future live in-person events. Prolonged COVID-19 risks could result in teams being unable orunwilling to pay their franchise fees to us or participate in our leagues going forward. This, in turn, could result in the loss of
those future franchise fee payments, revenue from advertising, and other future potential league revenues or income, otherbenefits associated with our esports business, and/or the termination of our leagues. Also, we have provided, and may continue
to provide, concessions to the owners of the teams as a result of the COVID-19 pandemic. Any one of these things could harm
our business. Additionally, a prolonged impact of COVID-19 could heighten many of the risk factors included in this Annual
Report filed on Form 10-K.

12
12

Business and Industry Risks
If we do not consistently deliver popular, high quality content in a timely manner, if we are not successful in meaningfully
expanding our franchises further on the mobile platform, or if consumers prefer products from our competitors, ourbusiness may be negatively impacted.
Consumer preferences for games are usually cyclical and difficult to predict. Even the most successful games can lose
consumer audiences over time, and remaining popular is increasingly dependent on the games being refreshed with new content
or other enhancements. In order to remain competitive and maximize the chances that consumers select our products as opposedto the various entertainment options available to them and with which we compete, we must continuously develop new products
or new content for, or other enhancements to, our existing products. These products or enhancements may not be well received
by consumers, even if well reviewed and of high quality. Our competitors include very large corporations with significantly
greater financial, marketing and product development resources than we have and many smaller competitors, particularly on themobile platform. Our larger competitors may be able to leverage their greater financial, technical, personnel, and otherresources to provide larger budgets for development and marketing and make higher offers to licensors and developers forcommercially desirable properties, as well as adopt more aggressive pricing policies to develop more commercially successful
video game products than we do. Further, competitors may develop content that imitates or competes with our best sellinggames, potentially reducing our sales or our ability to charge the same prices we have historically charged for our products.
These competing products may take a larger share of consumer spending than anticipated, which could cause product sales tofall below expectations. If we do not continue to develop consistently high quality and well received games or enhancements to
those games, if our marketing fails to resonate with our consumers, if we are not successful in meaningfully expanding ourfranchises further on the mobile platform, or if consumers lose interest in a genre of games we produce, our revenues and profit
margins could decline. In addition, our own best selling products could compete with our other games, reducing sales for thoseother games. Further, a failure by us to develop a high quality product, or our development of a product that is otherwise notwell received, could potentially result in additional expenditures to respond to consumer demands, harm our reputation, andincrease the likelihood that our future products will not be well received. The increased importance of downloadable content toour business amplifies these risks, as downloadable content for poorly received games typically generates lower than expectedsales. The increased demand for consistent enhancements to our products also requires a greater allocation of financial
resources to those products.
Additionally, consumer expectations regarding the quality, performance, and integrity of our products and services arehigh. Consumers may be critical of our brands, games, services, and/or business practices for a wide variety of reasons, andsuch negative reactions may not be foreseeable or within our control to manage effectively. For example, if our games orservices, such as our proprietary online gaming service, do not function as consumers expect, whether because they fail tofunction as advertised or otherwise, our sales may suffer. The risk that this may occur is particularly pronounced with respect toour games with online features because they involve ongoing consumer expectations, which we may not be able to consistently
satisfy. Our games with online features are also frequently updated, increasing the risk that a game may contain significant
stop playing the game and may be less likely to return to thegame as often in the future, which may negatively impact our business.
Further, delays in product releases or disruptions following the commercial release of one or more new products could
negatively impact our business and reputation and could cause our results of operations to be materially different fromexpectations. If we fail to release our products in a timely manner, or if we are unable to continue to extend the life of existinggames by adding features and functionality that will encourage continued engagement with the game, our business may be
negatively impacted.
Additionally, the amount of lead time and cost involved in the development of high quality products is increasing, and thelonger the lead time involved in developing a product and the greater the allocation of financial resources to such product, themore critical it is that we accurately predict consumer demand for such product. If our future products do not achieve expectedconsumer acceptance or generate sufficient revenues upon introduction, we may not be able to recover the substantial up front
development and marketing costs associated with those products.

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We depend on a relatively small number of franchises for a significant portion of our revenues and profits.
We follow a franchise model, and a significant portion of our revenues has historically been derived from products basedon a relatively small number of popular franchises. These products are also responsible for a disproportionately high percentage
of our profits. For example, in 2020, revenues associated with the Call of Duty, Candy Crush, and World of Warcraft franchises,
income. We expect that a relatively limited number of popular franchises will continue to produce a disproportionately highpercentage of our revenues and profits. Due to this dependence on a limited number of franchises, the failure to achieve
anticipated results by one or more products based on these franchises could negatively impact our business. Additionally, if the
popularity of a franchise declines, as has happened in the past with other popular franchises, we may have to write off theunrecovered portion of the underlying intellectual property assets, which could negatively impact our business.
If we do not continue to attract, retain, and motivate skilled personnel, we will be unable to effectively conduct our business.
Our success depends significantly on our ability to identify, attract, hire, retain, motivate, and utilize the abilities ofqualified personnel, including in some cases, external developers, particularly personnel with the specialized skills needed tocreate and sell the high quality, well received content upon which our business is substantially dependent. Our industry is
generally characterized by a high level of employee mobility, competitive compensation programs, and aggressive recruiting
among competitors for employees with technical, marketing, sales, engineering, product development, creative, and/or
management skills. We may have difficulties in attracting and retaining skilled personnel or may incur significant costs to do so.
If we are unable to attract additional qualified personnel or retain and utilize the services of key personnel, it could have anegative impact on our business.
Our industry is subject to rapid technological change, and if we do not adapt to, and appropriately allocate our resourcesamong, emerging technologies and business models, our business may be negatively impacted.
Technology changes rapidly in the interactive entertainment industry. We must continually anticipate and adapt toemerging technologies, such as cloud-based game streaming, and business models, such as free-to-play and subscription-based
access to a portfolio of interactive content, to stay competitive. Forecasting the financial impact of these changing technologies
and business models is inherently uncertain and volatile. Supporting a new technology or business model may requirepartnering with a new platform, business, or technology partner, which may be on terms that are less favorable to us than thosefor traditional technologies or business models. If we invest in the development of interactive entertainment products for
distribution channels that incorporate a new technology or business model that does not achieve significant commercial success,whether because of competition or otherwise, we may not recover the often substantial up-front costs of developing andmarketing those products, or recover the opportunity cost of diverting management and financial resources away from otherproducts or opportunities. Further, our competitors may adapt to an emerging technology or business model more quickly or
effectively than we do, creating products that are technologically superior to ours, more appealing to consumers, or both.
If, on the other hand, we elect not to pursue the development of products incorporating a new technology, or otherwise
elect not to pursue new business models that achieve significant commercial success, it may have adverse consequences. It may
take significant time and expenditures to shift product development resources to that technology or business model, and it may
be more difficult to compete against existing products incorporating that technology or using that business model.
The increasing importance of digital sales to our business exposes us to the risks of that business model, including greater
competition.
The proportion of our revenues derived from digital distribution channels, as compared to traditional retail sales,
continues to increase. The increased importance of digital channels in our industry increases our potential competition, as theminimum capital needed to produce and publish a digitally delivered game, particularly a game for a mobile platform, may besignificantly less than that needed to produce and publish one that is purchased through retail distribution and is played on agame console or PC. Also, while digitally distributed products generally have higher profit margins than retail sales, as business
shifts to digital distribution, the volume of orders from retailers for physical discs has been, and is expected to be, reduced.
Further, some of the providers of the platforms through which we digitally distribute content are also publishers of their own
content distributed on those platforms, and, therefore, a platform provider may give priority to its own products or those of ourcompetitors.

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The importance of retail sales to our business exposes us to the risks of that business model.
While the proportion of our revenues derived from digital distribution channels, as compared to traditional retail sales,
continues to increase, retail sales remain important to our business. Such sales are made primarily on a purchase order basis
without long term agreements or other forms of commitments, and due to the increased proportion of our revenue from digital
distribution channels, our retail customers and distributors have generally been reducing the levels of inventory they are willingcluding
to carry. The loss of, or significant reduction in sales to, an
digital distributors, could have adverse consequences.
We may be unable to effectively manage the continued growth and the scope and complexity of our business, including our
expansion into new business models that are untested and into adjacent business opportunities with large, establishedcompetitors.
We have experienced significant growth in the scope and complexity of our business, including through acquisitions andthe development of our esports, advertising, and consumer products businesses. Our future success depends, in part, on ourability to manage this expanded business and our aspirations for continued expansion and growth. We have dedicated resources
both to new business models that are largely untested, as is the case with esports, and to adjacent business opportunities inwhich very large competitors have an established presence, as is the case with our advertising and consumer products
businesses. We do not know to what extent our future expansions will be successful. Further, even if successful, our aspirations
for growth in our core businesses and these adjacent businesses could create significant challenges for our management,
operational, and financial resources. If not managed effectively, this growth could result in the over extension of our operating
infrastructure, and our management systems, information technology systems, and internal controls and procedures may not beadequate to support this growth. Failure by these new businesses or failure to adequately manage our growth in any of theseways may cause damage to our brand or otherwise negatively impact our core business. Further, the success of these new
businesses is largely contingent on the success of our underlying franchises and as such, a decline in the popularity of afranchise may impact the success of the new businesses adjacent to that franchise.
Due to our reliance on third party platforms, platform providers are frequently able to influence our products and costs.
Generally, when we develop interactive entertainment software products for hardware platforms offered by companies
such as Sony and Microsoft, the physical products are replicated exclusively by that hardware manufacturer or their approved
replicator. The agreements with these manufacturers include certain provisions, such as approval rights over all software
products and related promotional materials and the ability to change the fee they charge for the manufacturing of products,
which allow the hardware manufacturers substantial influence over the cost and the release schedule of such interactive
entertainment software products. During a console transition, like the one that occurred in 2020, as described below, thesemanufacturers may seek to change the terms governing our relationships with them. In addition, because each of the
manufacturers is also a publisher of games for its own hardware platforms and may manufacture products for other licensees, amanufacturer may give priority to its own products or those of our competitors. Accordingly, console manufacturers could
cause unanticipated delays in the release of our products, as well as increases to projected development, manufacturing,marketing, or distribution costs, any of which could negatively impact our business.
Sony and Microsoft are also platform providers which control the networks over which consumers purchase digitalproducts and services for their platforms and through which we provide online game capabilities for our products. The control
that these platform providers have over consumer access to our games, the fee structures and/or retail pricing for products andservices for their platforms and online networks and the terms and conditions under which we do business with them could
impact the availability of our products or the volume of purchases of our products made over their networks and our
profitability. The networks provided by these platform providers are the exclusive means of selling and distributing our content
placed the platform providers
on these platforms. Further, increased competition for limited
in an increasingly better position to negotiate favorable terms of sale. If the platform provider establishes terms that restrict ourofferings on its platform, significantly alters the financial terms on which these products or services are offered, or does not
approve the inclusion of content on its platform, our business could be negatively impacted. We also derive significant revenues
from distribution on third party mobile and web platforms, such as the Apple App Store, the Google Play Store, and Facebook,which are also our direct competitors and in some cases the exclusive means through which our content reaches gamers on
systems. These platforms also serve as significant online distribution platforms for, and/or provide other services critical for theoperation of, a number of our games. If these platforms deny access to our games, modify their current discovery mechanisms,
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communication channels available to developers, operating systems, terms of service, or other policies (including fees), ourbusiness could be negatively impacted. Additionally, if these platbusiness model, such as free to play, or change how the personal information of consumers is made available to developers, ourbusiness could be negatively impacted. These platform providers or their services may be unavailable or may not function as
intended or may experience issues with their in app purchasing functionality. As has sometimes happened in the past, if any ofthese events occurs on a prolonged, or even short term, basis or other similar issues aris
our games, access social features, or make purchases, it may result in lost revenues and otherwise negatively impact ourbusiness.
Our business is highly dependent on the success and availability of video game consoles manufactured by third parties, aswell as our ability to develop commercially successful products for these consoles.
We derive a substantial portion of our revenues from the sale of products for play on video game consoles manufactured
consoles accounted for 34% of our consolidated net revenues in 2020. The success of our console business is driven in largepart by our ability to accurately predict which consoles will be successful in the marketplace and our ability to develop
commercially successful products for these consoles. We also rely on the availability of an adequate supply of these video game
consoles and the continued support for these consoles by their manufacturers, including our ability to reach consumers via theonline networks operated by these console manufacturers. If increased costs are not offset by higher revenues and other cost
efficiencies, our business could be negatively impacted. If the consoles for which we develop new software products or modify
existing products do not attain significant consumer acceptance, we may not be able to recover our development costs, which
could be significant.
Sony and Microsoft each launched next generation consoles in 2020. We have released titles that operate on these
consoles, and we may continue to develop games for these new console systems. When next-generation consoles are announced
or introduced into the market, consumers have typically reduced their purchases of game console entertainment software
products for prior-generation consoles in anticipation of purchasing a next-generation console and products for that console.
During these periods, sales of the game console entertainment software products we publish may decline until new platforms
achieve wide consumer adoption. Console transitions may have a comparable impact on sales of downloadable content,
amplifying the impact on our revenues. This decline may not be offset by increased sales of products for the next-generation
consoles. In addition, as console hardware moves through its life cycle, hardware manufacturers typically enact pricereductions, and decreasing prices may put downward pressure on software prices. During console transitions, we may
simultaneously incur costs both in continuing to develop, market, and operate titles for prior generation video game platforms,
while also developing and supporting next generation platforms. As a result, our business and operating results may be morevolatile and difficult to predict during console transitions than during other times.
The increasing importance of free to play games to our business exposes us to the risks of that business model, including
the dependence on a relatively small number of consumers for a significant portion of revenues and profits from any given
game.
We are increasingly dependent on our ability to develop, enhance, and monetize free to play games, such as the games in
our Candy Crush franchise, Hearthstone, Call of Duty: Mobile, and Call of Duty: Warzone. As such, we are increasingly
exposed to the risks of the free to play business model. For example, we may invest in the development of new free to playinteractive entertainment products that do not achieve significant commercial success, in which case our revenues from those
products likely will be lower than anticipated and we may not recover our development costs. Further, our business may be
negatively impacted if: (1) we are unable to encourage new and existing consumers to purchase our virtual items; (2) we fail tooffer monetization features that appeal to these consumers;(3) our platform providers make it more difficult or expensive forplayers to purchase our virtual items; (4) we cannot encourage significant additional consumers to purchase virtual items in ourgame and/or (5) our free-to-play releases reduce sales of our other games.

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We may not realize the expected benefits of our recent restructuring actions, and implementation of such actions may
negatively impact our business.
During 2019, we began implementing a plan aimed at refocusing our resources on our largest opportunities and removing
unnecessary levels of complexity and duplication from certain parts of our business. While we believe this plan enables us toprovide better opportunities for talent, and greater expertise and scale over the long term, our ability to achieve the desired andanticipated benefits from the plan is subject to many estimates and assumptions, and the actual savings and timing for thosesavings may vary materially based on factors such as local labor regulations, negotiations with third parties, and operational
requirements. These estimates and assumptions are also subject to significant economic, competitive, and other uncertainties,some of which are beyond our control.
Additionally, there can be no assurance that our business will be more efficient or effective than prior to implementationof the plan. The implementation of the plan may be more costly than we anticipated or have other negative consequences, suchas attrition beyond our planned reduction in workforce or negative impacts on employee morale and productivity, or on ourability to attract and retain highly skilled employees. Any of these consequences could negatively impact our business. In
addition, there can be no assurance that additional plans will not be required or implemented in the future.
We engage in strategic transactions and may encounter difficulties in integrating acquired businesses or otherwise realizing
the anticipated benefits of these transactions.
As part of our business strategy, from time to time, we acquire, make investments in, or enter into strategic alliances andjoint ventures with, complementary businesses. These transactions may involve significant risks and uncertainties, including:(1) in the case of an acquisition, (i) the potential for the acquired business to underperform relative to our expectations and theacquisition price, (ii) the potential for the acquired business to cause our financial results to differ from expectations in any
given period, or over the longer term, (iii) unexpected tax consequences from the acquisition, or the tax treatment of thecremental tax liabilities that are difficult to predict, (iv) difficulty
in integrating the acquired business, its operations, and its employees in an efficient and effective manner, (v) any unknown
liabilities or internal control deficiencies assumed as part of the acquisition, and (vi) the potential loss of key employees of theacquired businesses; and (2) in the case of an investment, alliance, or joint venture, (i) our ability to cooperate with our partner,(ii) our partner having economic, business, or legal interests or goals that are inconsistent with ours, and (iii) the potential thatour partner may be unable to meet its economic or other obligations, which may require us to fulfill those obligations alone.
Further, any such transaction may involve the risk that our seni
other operations, the risk that our industry does not evolve as anticipated, and that any intellectual property or personnel skills
acquired do not prove to be those needed for our future success, and the risk that our strategic objectives, cost savings or otheranticipated benefits are otherwise not achieved.
We are exposed to seasonality in the sale of our products.
The interactive entertainment industry is somewhat seasonal, with the highest levels of consumer demand occurring
during the calendar year end holiday buying season. As a result, our sales, particularly for our Activision segment, receivables,
and credit risk, are higher during the fourth quarter of the year, as consumers and retailers increase their purchases in
anticipation of the holiday season. Delays in development, approvals or manufacturing could affect the release of products,
causing us to miss key selling periods such as the year end holiday buying season, which could negatively impact our business.
Our business may be harmed if our distributors, retailers, development, and licensing partners, or other third parties withwhom we are affiliated, act in ways that put our brand at risk.
In many cases, our business partners and other third party affiliates, which may include, among others, individuals or
entities affiliated with the esports leagues we operate, are given access to sensitive and proprietary information or control over
our intellectual property to provide services and support to our team. These third parties may misappropriate or misuse ourinformation or intellectual property and engage in unauthorized use of it. Further, the failure of these third parties to provide
adequate services and technologies or to adequately maintain or update their services and technologies could result in a
disruption to our business operations or an adverse effect on our reputation and may negatively impact our business. At thesame time, if the media, consumers, or employees raise any concerns about our actions vis-à-vis third parties including
consumers who play our games, this could also damage our reputation or our business.

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We use open source software in connection with certain of our games and services, which may pose particular risks to our
proprietary software, products, and services in a manner that could have a negative impact on our business.
We use open source software in connection with some of the games and services we offer. Some open source software
licenses require users who distribute open source software as part of their software to publicly disclose all or part of the sourcecode to such software or make available any derivative works of the open source code on unfavorable terms or at no cost. The
terms of various open source licenses have not been interpreted by courts, and there is a risk that such licenses could beconstrued in a manner that imposes unanticipated conditions or restrictions on our use of the open source software. Were it
determined that our use was not in compliance with a particular license, we may be required to release our proprietary source
code, pay damages for breach of contract, re engineer our games or products, discontinue distribution in the eventre engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from ourgame development efforts, any of which could negatively impact our business.
We are a global company and are subject to the risks and uncertainties of conducting business outside the U.S.
We conduct business throughout the world, and we derive a substantial amount of our revenues and profits frominternational trade, particularly from Europe and Asia. We expect that international sales will continue to account for asignificant portion of our total revenues and profits and, moreover, that sales in emerging markets in Asia and elsewhere willcontinue to be an important part of our international sales. As such, we are, and may be increasingly, subject to risks inherent inforeign trade generally, as well as risks inherent in doing business in non-U.S. markets, including increased tariffs and duties,
compliance with economic sanctions, fluctuations in currency exchange rates, shipping delays, increases in transportation costs,
international political, regulatory and economic developments, unexpected changes to laws, regulatory requirements, andenforcement on us and our platform partners and differing local business practices, all of which may impact profit margins or
make it more difficult, if not impossible, for us to conduct business in foreign markets.
A deterioration in relations between either us or the United States and any country in which we have significant operations
or sales, or the implementation of government regulations in the United States or such a country, could result in the adoption or
expansion of trade restrictions, including economic sanctions or absolute prohibitions, that could have a negative impact on ourbusiness. For instance, to operate in China, all games must have regulatory approval. A decision by the Chinese government torevoke its approval for any of our games or to decline to approve any products we desire to sell in China in the future could
have a negative impact on our business, as could delays in the approval process. Additionally, in the past, legislation has been
implemented in China that has required modifications to our products and our business model to satisfy regulatory
requirements. The future implementation of similar or new laws or regulations in China or any other country in which we haveoperations or sales may restrict or prohibit the sale of our products or may require engineering modifications to our products
and our business model that are not cost effective, if even feasible at all, or could degrade the consumer experience to the point
where consumers cease to purchase such products. Changes in Chinese game approval procedures in 2018 have resulted in
reduced rates of approval for games and unclear approval timeframes, making it uncertain as to if and when our new products
will be approved for release in China. Further, the continued enforcement of regulations relating to mobile and other gameswith an online element in China could have a negative impact on our business in China.
In addition, cultural differences may affect consumer preferences and limit the international popularity of games that are
popular in the U.S. or require us to modify the content of the games or the method by which we charge our customers for thegames to be successful. If we do not correctly assess consumer preferences in the countries in which we sell our products, it
could negatively impact our business.
We are also subject to risks that our operations outside the United States could be conducted by our employees,
contractors, third party partners, representatives, or agents in ways that violate the Foreign Corrupt Practices Act, the U.K.
Anti Bribery Act or other similar anti bribery laws, as well as the 2017 U.K. Criminal Finances Act or other similar financial
crime laws. While we have policies, procedures, and training for our employees, intended to secure compliance with these laws,
our employees, contractors, third party partners, representatives, or agents may take actions that violate our policies. Moreover,it may be more difficult to oversee the conduct of any such persons who are not our employees, potentially exposing us togreater risk from their actions.

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Our games may include undisclosed content or features. If our retailers refuse to sell such titles, or consumers refuse topurchase such titles, due to what they perceive to be objectionable undisclosed content, it could have a negative impact on
our business.
Throughout the history of the interactive entertainment industry, many interactive software products have included hidden
content and/or hidden gameplay features, some of which have been accessible through the use of in game codes or othertechnological means, that are intended to enhance the gameplay experience. In some cases, such undisclosed content or features
have been considered to be objectionable. While publishers are required to disclose pertinent hidden content during the ESRB
ratings process, in a few cases, publishers have failed to disclose hidden content, and the ESRB has required the recall of thegame, changed the rating or associated content descriptors originally assigned to the product, required the publisher to change
the game or game packaging and/or imposed fines on the publisher. Retailers have on occasion reacted to the discovery of such
undisclosed content by removing these games from their shelves, refusing to sell them, and demanding that their publishers
accept them as product returns. Likewise, some consumers have reacted to the revelation of undisclosed content by refusing topurchase such games, demanding refunds for games they have already purchased, refraining from buying other games
published by the company whose game contained the objectionable material, and, on at least one occasion, filing a lawsuit
against the publisher of the product containing such content.
We have implemented preventive measures designed to reduce the possibility of objectionable undisclosed content fromappearing in the interactive software products we publish. Nonetheless, these preventive measures are subject to human error,
circumvention, overriding, and reasonable resource constraints. If an interactive software product we publish is found to contain
undisclosed content, we could be subject to any of these consequences.
Our results of operations or reputation may be harmed as a result of objectionable consumer- or other third party created
content.
Certain of our games and esports broadcasts support collaborative online features that allow consumers to communicate
with one another and post narrative comments, in real time, that are visible to other consumers. Additionally, certain of our
objectionable and offensive consumer content may be distributed within our games and on our broadcasts through thesefeatures or to gaming websites or other sites or forums with online chat features or that otherwise allow consumers to postcomments. We may be subject to lawsuits, governmental regulation or restrictions, and consumer backlash (including decreased
sales and harmed reputation), as a result of consumers posting offensive content.
Additionally, we have begun to generate revenue through offering advertising within certain of our franchises and inconnection with our esports broadcasts. The content of in game and esports broadcast advertisements is generally created anddelivered by third party advertisers without our pre approval, and, as such, objectionable content may be published in ourgames or during our esports broadcasts by these advertisers. This objectionable third party created content may expose us toregulatory action or claims related to content, or otherwise negatively impact our business. We may also be subject to consumer
backlash from comments made in response to postings we make on social media sites such as Facebook, YouTube, and Twitter.

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We depend on servers and networks to operate our games with online features and our proprietary online gaming service. If
we were to lose functionality in any of these areas for any reason, our business may be negatively impacted.
Our business relies on the continuous operation of servers, some of which are owned and operated by third parties.
Although we strive to maintain more than sufficient server capacity, and provide for active redundancy in the event of limited
hardware failure, any broad based catastrophic server malfunction, a significant service disrupting attack or intrusion byhackers that circumvents security measures, a failure of disaster recovery service or the failure of a company on which we arerelying for server capacity to provide that capacity for whatever reason would likely degrade or interrupt the functionality of
our games with online features, and could prevent the operation of such games altogether, any of which could result in the lossof sales for, or in, such games. The risk is particularly pronounced with respect to: (1) the mobile games published by King,
which rely on a small number of third party owned data centers located in one city; (2) the functioning of our proprietary online
gaming service, Blizzard Battle.net, the disruption of which could prevent Blizzard from delivering content digitally or render
all of Blizzard games, as well as selected Activision content for the PC platfo
multiplayer game services, which rely on systems hosted in a hybrid of data centers across the world as well as cloud providers.
Further, insufficient server capacity could affect our ability to provide game services, which could negatively impact ourbusiness. Conversely, if we overestimate the amount of server capacity required by our business, we may incur additional
operating costs.
We also rely on platforms and networks operated by third parties, such as the PlayStation Network, Xbox Live, andSteam, for the sale and digital delivery of downloadable console and PC game content, the functionality of our games with
online features. Similarly, we rely on those platforms and networks, as well as the continued operation of the Apple App Store,
the Google Play Store, and Facebook, for the sale of virtual currency and other services for our free to play games. An extended
interruption to any of these services could adversely affect our ability to sell and distribute our digital products and operate ourgames with online features, which could result in a loss of revenue and otherwise negatively impact our business.
Any cybersecurity related attack, significant data breach, or disruption of the information technology systems or networks
on which we rely could negatively impact our business.
In the course of our day to day business, we and third parties operating on our behalf create, store, and/or use
commercially sensitive information, such as the source code and game assets for our interactive entertainment software
products and sensitive and confidential information with respect to our customers, consumers, and employees. A malicious
cybersecurity related attack, intrusion, or disruption by hackers (including through spyware, ransomware, viruses, phishing,denial of service, and similar attacks) or other breach of the systems on which such source code and assets, account information(including personal information), and other sensitive data is stored could lead to piracy of our software, fraudulent activity,
al information, or our own
disclosure, or misappropriation
business data. Such incidents could also lead to product code base and game distribution platform exploitation, should
undetected viruses, spyware, or other malware be inserted into our products, services, or networks, or systems used by ourconsumers. We have implemented cybersecurity programs and the tools, technologies, processes, and procedures intended tosecure our data and systems, and prevent and detect unauthorized access to, or loss of, our data, or the data of our customers,
consumers, or employees. However, because these cyberattacks may remain undetected for prolonged periods of time and thetechniques used by criminal hackers and other third parties to breach systems change frequently, we may be unable to anticipate
these techniques or implement adequate preventative measures. A data intrusion into a server for a game with online features orfor our proprietary online gaming service could also disrupt the operation of such game or platform. If we are subject tocybersecurity breaches, or a security related incident that materially disrupts the availability of our products and services, we
may have a loss in sales or subscriptions or be forced to pay damages or incur other costs, including from the implementation of
additional cyber and physical security measures, or suffer reputational damage. Additionally, although we maintain insurance
policies, they may be insufficient to reimburse the Company for all losses or all types of claims that may be caused bycyberbreaches or system or network disruptions, and it is uncertain whether we will be able to maintain our current level ofcoverage in the future. Moreover, if there were a public perception that our data protection measures are inadequate, whether or
not the case, it could result in reputational damage and potential harm to our business relationships or the public perception of
our business model. In addition, such cybersecurity breaches may subject us to legal claims or proceedings, like individual
claims and regulatory investigations and actions, including fines, especially if there is loss, disclosure, or misappropriation of,ation or other sensitive information, or there is otherwise an intrusion into our20
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Significant disruption during our live events may adversely affect our business.
We, as well as the teams in the esports leagues we operate, host numerous live events each year, many of which areattended by a large number of people. There are many risks that are inherent in large gatherings of people, including the risk ofan actual or threatened terrorist act, fire, explosion, protests, and riots, and other safety or security issues, any one of which
could result in injury or death to attendees and/or damage to the facilities at which such an event is hosted. While we maintaininsurance policies, they may be insufficient to reimburse us for all losses or all types of claims that may be caused by such an
event. Moreover, if there were a public perception that the safety or security measures are inadequate at the events we host or
events hosted by teams in the esports leagues we operate, whether or not the case, it could result in reputational damage and a
decline in future attendance at events hosted by us or those teams. Any one of these things could harm our business.
Catastrophic events may disrupt our business.
Our corporate headquarters and our primary corporate data center are located in the Los Angeles, California area, which isnear a major earthquake fault. A major earthquake or other catastrophic event that results in the destruction or disruption of anyof our critical business or information technology systems, or otherwise prevents us from conducting our normal business
operations, could require significant expenditures to resume operations and negatively impact our business. While we maintaininsurance coverage for some of these events, the potential liabilities associated with such events could exceed the insurance
coverage we maintain. Further, our system redundancy may be ineffective or inadequate and our disaster recovery planning
may not be sufficient for all eventualities. Any such event could also limit the ability of retailers, distributors, or our othercustomers to sell or distribute our products.
Provisions in our corporate documents and Delaware state law could delay or prevent a change of control.
Our Fourth Amended and Restated Bylaws contain a provision regulating the ability of shareholders to bring matters foraction before annual and special meetings. The regulations on shareholder action could make it more difficult for any person
seeking to acquire control of the Company to obtain shareholder approval of actions that would support this effort. In addition,
our Third Amended and Restated Certificate of Incorporation authorizes the issuance of sostock. This ability of our Board of Directors to issue and fix the rights and preferences of preferred stock could effectively
dilute the interests of any person seeking control or otherwise make it more difficult to obtain control.
Regulatory and Legal Risks
We may be involved in legal proceedings that have a negative impact on our business.
From time to time, we are involved in claims, suits, investigations, audits, and proceedings arising in the ordinary courseof our business, including with respect to intellectual property, competition and antitrust, regulatory, tax, privacy, labor andemployment, compliance, unclaimed property, liability and personal injury, product damage, collection, and/or commercial
matters. In addition, negative consumer sentiment about our business practices may result in inquiries or investigations from
regulatory agencies and consumer groups, as well as litigation.
Claims, suits, investigations, audits, and proceedings are inherently difficult to predict, and their results are subject tosignificant uncertainties, many of which are outside of our control. Regardless of the outcome, such legal proceedings can havea negative impact on us due to reputational harm, legal costs, diversion of management resources, and other factors. It is also
possible that a resolution of one or more such proceedings could result in substantial settlements, judgments, fines or penalties,
injunctions, criminal sanctions, consent decrees, or orders preventing us from offering certain features, functionalities, products,
or services, requiring us to change our development process or other business practices.
There is also inherent uncertainty in determining reserves for these matters. Significant judgment is required in theanalysis of these matters, including assessing the probability of potential outcomes and determining whether a potential
exposure can be reasonably estimated. In making these determinations, we, in consultation with outside counsel, examine therelevant facts and circumstances on a quarterly basis assuming, as applicable, a combination of settlement and litigatedoutcomes and strategies. Further, it may take time to develop factors on which reasonable judgments and estimates can bebased.

21
21

We regard our software as proprietary and rely on a variety of methods, including a combination of copyright, patent,
trademark, and trade secret laws, and employee and third party non disclosure agreements, to protect our proprietary rights. We
own or license various copyrights, patents, trademarks, and trade secrets. The process of registering and protecting these rights
in various jurisdictions is expensive and time consuming. Further, we are aware that some unauthorized copying and piracy
occurs, and if a significantly greater amount of unauthorized copying or piracy of our software products were to occur, it could
negatively impact our business. We also cannot be certain that existing intellectual property laws will provide adequate
protection for our products in connection with emerging technologies or that we will be able to effectively protect our
intellectual property through litigation and other means.
Our business, products, and distribution are subject to increasing regulation in key territories. If we do not successfully
respond to these regulations, our business could be negatively impacted.
The video game industry continues to evolve, and new and innovative business opportunities are often subject to new
attempts at regulation. As such, legislation is continually being introduced, and litigation and regulatory enforcement actions aretaking place, that may affect the way in which we, and other industry participants, may offer content and features, and distributeand advertise our products. These laws, regulations, and investigations are related to protection of minors, gambling, screen
time, business models, consumer privacy, accessibility, advertising, taxation, payments, intellectual property, distribution, andantitrust, among others.
For example, many foreign countries have laws that permit governmental entities to restrict or prohibit marketing or
distribution of interactive entertainment software products because of the content therein (and similar legislation has been
introduced at one time or another at the federal and state levels in the United States, including legislation that attempts toimpose additional taxes based on content). In addition, certain jurisdictions have laws that restrict or prohibit marketing or
distribution of interactive entertainment software products with random digital item mechanics, which some of our online
games and services include, or subject such products to additional regulation and oversight, such as reporting to regulators.
Certain jurisdictions also have laws that restrict or prohibit certain types of esports tournaments. We also sometimes offer
consumers of our online and casual games various types of contests and promotional opportunities. We are subject to laws in a
number of jurisdictions concerning the operation and offering of tournaments and games, many of which are still evolving andcould be interpreted in ways that could harm our business. Further, the growth and development of electronic commerce, virtual
items, and currency may prompt calls for more stringent consumer protection laws that may impose additional burdens orlimitations on operations of companies such as ours conducting business through the Internet and mobile devices, including
related to screen time. Also, existing laws or new laws regarding the marketing of in app purchases, regulation of currency,
banking institutions, unclaimed property, and money laundering may be interpreted to cover virtual currency or goods.
Additionally, laws may limit or prevent the auto-renewal of contracts and subscriptions. Further, the European Commission has
recently imposed a large antitrust fine on a number of other game publishers who had been geoblocking certain EU countries.
Classification of Diseases (ICD-11), leading some countries to consider legislation and policies aimed at addressing this issue.
Moreover, the public dialogue concerning interactive entertainment may have an adverse impact on our reputation andpurchase our products.
The adoption and enforcement of legislation that restricts the marketing, content, business model, or sales of our products
in countries in which we do business may harm the sales of our products, as the products we are able to offer to our customers
and the size of the potential audience for our products may be limited. We may be required to modify certain productdevelopment processes or products or alter our marketing strategies to comply with regulations, which could be costly or delay
the release of our products. In addition, the laws and regulations affecting our products vary by territory and may be
inconsistent with one another, imposing conflicting or uncertain restrictions. Failure to comply with any applicable legislation
may also result in government imposed fines or other penalties, as well as harm to our reputation.

22
22

Change in government regulations relating to the Internet could negatively impact our business.
Internet bandwidth for the sale and digital delivery of ourcontent and the functionality of our games with online features. Changes in laws or regulations that adversely affect the growth,availability of bandwidth could impair our
popularity, or use of the Internet, includ
r our products and services or increase our cost of doing
business. Although certain jurisdictions have implemented laws and regulations intended to prevent Internet service providers
from discriminating against particular types of legal traffic on their networks, other jurisdictions may lack such laws andregulations or repeal existing laws or regulations. For example, in December 2017, the Federal Communications Commission
voted to repeal net neutrality regulations in the U.S. and, following that decision, several states enacted net neutrality
regulations. Given uncertainty around these rules relating to the Internet, including changing interpretations, amendments, or
repeal of those rules, coupled with the potentially significant political and economic power of local Internet service providers
and the relatively significant level of Internet bandwidth access our products and services require, we could experience
discriminatory or anti competitive practices that could impede our growth, cause us to incur additional expenses, or otherwise
negatively impact our business.
The laws and regulations concerning data privacy are continually evolving. Failure to comply with these laws andregulations could harm our business.
Consumers play certain of our games online using our own distribution platforms, including Blizzard Battle.net,
third party platforms and networks, through online social platforms, and on mobile devices. We collect and store information
about our consumers, including consumers who play these games. In addition, we collect and store information about ouremployees. We are subject to laws from a variety of jurisdictions regarding privacy and the protection of this information,
Online Privacy Protection Act,
which regulates the collection, use, and disclosure of personal information from children under 13 years of age, and theCalifornia Consumer Privacy Act, among others. Failure to comply with any of these laws or regulations may increase ourcosts, subject us to expensive and distracting government investigations, result in substantial fines, or result in lawsuits andclaims against us to the extent these laws include a private right of action.
Data privacy protection laws are rapidly changing and likely will continue to do so for the foreseeable future and may be
inconsistent from jurisdiction to jurisdiction. For example, the E.U. has traditionally taken a broader view than the UnitedStates and certain other jurisdictions as to what is considered personal information and has imposed greater obligations underdata privacy and protection regulations, including those imposed under the GDPR. The U.S. government, including the Federal
Trade Commission and the Department of Commerce, as well as various U.S. state governments, are continuing to review theneed for greater regulation over the collection, sharing, use, or sale of personal information and information about consumer
behavior on the Internet and on mobile devices. Complying with emerging and changing laws could require us to incur
substantial costs or impact our approach to operating and marketing our games. Due to the rapidly changing nature of these data
privacy protection laws, there is not always clear guidance from the respective governments and regulators regarding theinterpretation of the law, which may create the risk of an inadvertent violation. Various government and consumer agencies
worldwide have also called for new regulation and changes in industry practices. In addition, in some cases, we are dependent
upon our platform providers and external data processors to assist us in ensuring compliance with these various types ofregulations, and a violation by one of these third parties may also subject us to government investigations and result in
substantial fines.
Player interaction with our games is subject to our privacy policies, end user licen
service. If we fail to comply with our posted privacy policies, EULAs, or terms of service, or if we fail to comply with existing
privacy related or data protection laws and regulations, it could result in proceedings or litigation against us by governmental
authorities or others, which could result in fines or judgments against us, damage our reputation, impact our financial condition,and harm our business. If regulators, the media, consumers, or employees raise any concerns about our privacy and dataprotection or consumer protection practices, even if unfounded, this could also result in fines or judgments against us, damage
our reputation, negatively impact our financial condition, or damage our business.

23
23

Our games are subject to scrutiny regarding the appropriateness of their content. If we fail to receive our target ratings forcertain titles, or if our retailers refuse to sell such titles due to what they perceive to be objectionable content, it could have anegative impact on our business.
self regulatory body based in the U.S. that provides U.S. and Canadian consumers of interactive entertainment software withratings information, including information on the content in such software, such as violence, nudity, or sexual content, alongwith an assessment of the suitability of the content for certain age groups. Certain other countries have also established content
rating systems as prerequisites for product sales in those countries. In addition, certain stores use other ratings systems, such as
rating system. If we are unable to obtain the ratings we have targeted for our products, it could have a negative impact on ourbusiness. In some instances, we may be required to modify our products to meet the requirements of the rating systems, which
could delay or disrupt the release of any given product or may prevent its sale altogether in certain territories. Further, if one ofretailers could refuse to sell it and demand that we accept the return of any unsold or returned copies or consumers could
demand a refund for copies previously purchased.
Additionally, retailers may decline to sell interactive entertainment software containing what they judge to be graphic
violence or sexually explicit material or other content that they deem inappropriate for their businesses, whether because a
product received a certain rating by the ESRB or other content rating system, or otherwise. If retailers decline to sell our
products based upon their opinion that they contain objectionable themes, graphic violence or sexually explicit material, orother generally objectionable content, we might be required to modify particular titles or forfeit the revenue opportunity ofselling such titles with that retailer.
Financial and Economic Risks
Changes in tax rates or exposure to additional tax liabilities could negatively impact our business.
Our income tax liability and effective tax rate could be adversely affected by a variety of factors, including changes in ourbusiness, the mix of earnings in countries with differing statutory tax rates, changes in tax laws or tax rulings, changes ininterpretations of existing laws, or developments in tax examinations or investigations. Any of these factors could have anegative impact on our business or require us to change the manner in which we operate our business. The tax regimes we aresubject to, or operate under, are unsettled and may be subject to significant change. Furthermore, tax authorities may choose to
examine or investigate our tax reporting or tax liability, including under transfer pricing or permanent establishment theories.
These proceedings may lead to adjustments or proposed adjustments to our income taxes or provisions for uncertain tax
positions.
Additionally, a number of countries are actively pursuing fundamental changes to the tax laws applicable to multinational
companies like us, including an increasing number that have enacted, or are considering enacting, revenue-based taxes on
digital services. These digital services taxes target various business activities, including online advertising and, in some cases,
video game sales. While the scope and applicability of these taxes often remains unclear, digital services taxes that ultimately
apply to us could have an adverse impact on our business.
Fluctuations in currency exchange rates could negatively impact our business.
We transact business in various currencies other than the U.S. dollar and have significant international sales and expenses
denominated in currencies other than the U.S. dollar, subjecting us to currency exchange rate risks. A substantial portion of ourinternational sales and expenses are denominated in local currencies, which could fluctuate against the U.S. dollar. Since wehave 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 ourbusiness. We have, in the past, utilized currency derivative contracts to hedge certain foreign exchange exposures and managed
these exposures with natural offsets. However, there can be no assurance that we will continue our hedging programs, or that
we will be successful in managing exposure to currency exchange rate risks whether or not we do so.

2424

Our reported financial results could be significantly impacted by changes in financial accounting standards or by theapplication of existing or future accounting standards to our business as it evolves.
Our reported financial results are impacted by the accounting policies promulgated by the SEC and national accounting
standards bodies and the methods, estimates, and judgments that we use in applying our accounting policies. Policies affecting
revenue recognition have affected, and could further significantly affect, the way we report revenues related to our products andservices. We recognize a majority of the revenues from video games that include an online service on a deferred basis over an
estimated service period for such games. In addition, we defer the cost of revenues of those products. Further, as we increase
our downloadable content and add new features to our online services, our estimate of the service period may change, and we
could be required to recognize revenues, and defer related costs, over a shorter or longer period of time. As we enhance,
expand, and diversify our business and product offerings, the application of existing or future financial accounting standards,
particularly those relating to the way we account for revenues and income taxes, could have a significant impact on our reported
net revenues, net income and earnings per share under generally accepted accounting principles in the United States in any
given period.
The insolvency or business failure of any of our business partners could negatively impact us.
Our sales, whether digital or retail, are concentrated in a small number of large customers, which makes us more
vulnerable to collection risk if one or more of these large customers becomes unable to pay for our products or seeks protection
under the bankruptcy laws. Retailers and distributors in the interactive entertainment industry have from time to time
experienced significant fluctuations in their businesses and a number of them have failed. Challenging economic conditions
may impair the ability of our customers to pay for products they have purchased and, as a result, our reserves for doubtful
accounts and write off of accounts receivable could increase and, even if increased, may turn out to be insufficient. While we
significant deductible and co payment obligation and does not cover all instances of non payment. Further, a payment default
or the insolvency or business failure of, other types of business partners could result in disruptions to the manufacturing or
distribution of our products or the cancellation of contractual arrangements that we consider to be favorable, and could
negatively impact our business. In addition, having such a large portion of our total net revenues concentrated in a few
customers reduces our negotiating leverage with these customers.
Because our products and services are discretionary spending, if general economic conditions decline, demand for our
products could decline.
Purchases of our products and services involve discretionary spending on the part of consumers. Consumers are generally
more willing to make discretionary purchases, including purchases of products and services like ours, during periods in whichfavorable economic conditions prevail. As a result, our products are sensitive to general economic conditions and economic
cycles. A reduction or shift in domestic or international consumer spending could result in an increase in our selling andpromotional expenses, in an effort to offset that reduction, and could negatively impact our business.

25
25

Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
Our principal corporate and administrative offices, which incl
Santa Monica, California. Our Activision segment also leases office space for development studio personnel throughout the
U.S., primarily in California, New York, and Wisconsin. We also lease officeheadquarters, which include administrative and development studio space. We lease office space in London, United Kingdom
Barcelona, Spain and Stockholm, Sweden.
We anticipate no difficulty in extending the leases of our facilities or obtaining comparable facilities in suitable locations,as needed, and we consider our facilities to be adequate for our current needs.
Item 3. LEGAL PROCEEDINGS
Refer to Note 22 of the notes to the consolidated financial statements included in Item 8 of this Annual Report on Form
10-K for disclosures regarding our legal proceedings.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.

26
26

PART IION EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIESMarket Information and Holders
1,524 holders of record of our common stock.
Stock Performance Graphto the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Activision
Blizzard, Inc. under the Exchange Act or the Securities Act of 1933, as amended.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
among Activision Blizzard, Inc., the Nasdaq Composite Index, the S&P 500 Index,
and the RDG Technology Composite Index
The following graph and table compare the cumulative total stockholder return on our common stock, the Nasdaq
Composite Index, the S&P 500 Index, and the RDG Technology Composite Index. The graph and table assume that $100 wasinvested on December 31, 2015, and that dividends were reinvested daily. The stock price performance on the following graphand table is not necessarily indicative of future stock price performance.

$400

$350

$300

$250

$200

$150

$100

$50

$0
12/15

12/16

Activision Blizzard, Inc.

12/17

▲

12/18

NASDAQ Composite

27
27

12/19

S&P 500

12/20

RDG Technology Composite

Fiscal year ending December 31:

12/15

$

Activision Blizzard, Inc.
Nasdaq Composite
S&P 500
RDG Technology Composite

100.00100.00100.00100.00

12/16

$

94.04
108.87111.96114.21

12/17$

165.89141.13136.40156.95

12/18$

122.64137.12130.42
157.6812/19$

157.75187.44171.49231.9612/20$

248.10271.64203.04340.33

Cash Dividends
We have paid a dividend annually since 2010. Below is a summary of cash dividends paid over the past three fiscal years,
along with the dividend most recently declared by the Board of Directors that will be paid in May 2021:

Year
2021
2020
2019
2018

Per Share Amount
$0.47
$0.41
$0.37
$0.34

Record Date
4/15/2021
4/15/2020
3/28/2019
3/30/2018

Dividend Payment Date
5/6/2021
5/6/2020
5/9/2019
5/9/2018

Future dividends will depend upon our earnings, financial condition, cash requirements, anticipated future prospects, andother factors deemed relevant by our Board of Directors. There can be no assurances that dividends will be declared in the
future.
Issuer Purchase of Equity Securities
On January 27, 2021, our Board of Directors authorized a stock repurchase program under which we are authorized torepurchase up to $4 billion of our common stock during the two-year period from February 14, 2021 until the earlier ofFebruary 13, 2023 and a determination by the Board of Directors to discontinue the repurchase program. To date, we have notrepurchased any shares under this program.
On January 31, 2019, our Board of Directors authorized a stock repurchase program under which we were authorized torepurchase up to $1.5 billion of our common stock during the two-year period from February 14, 2019 until the earlier ofFebruary 13, 2021 and a determination by the Board of Directors to discontinue the repurchase program. We did not repurchaseany shares under this program.
Item 6. SELECTED FINANCIAL DATA
Not applicable.

28
28

OPERATIONSBusiness 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, PCs, and mobile devices. We also operate esports leagues
and offer digital advertising within someision Blizzard, Inc. and its subsidiaries.
Our Segments
Based upon our organizational structure, we conduct our business through three reportable segments, each of which is aleading global developer and publisher of interactive entertainment content and services based primarily on our internallydeveloped intellectual properties.
(i) Activision
Activision delivers content through both premium and free-to-play offerings and primarily generates revenue from fullgame and in-game sales, as well as by licensing software to third-party or related-party companies that distribute Activision
products. Activision also includes the activities of the Call of Duty League, a global professional esports league with city-based
teams.
(ii) Blizzard
Blizzard delivers content through both premium and free-to-play offerings and primarily generates revenue from fullgame and in-game sales, 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 also includes the activities of the Overwatch League, a global professional esports league with city-based
teams.
(iii) KingKing delivers content primarily through free-to-play offerings and primarily generates revenue from in-game sales and ingame advertising on the mobile platform.
Other
We also engage in other businesses that do not represent reportable segments, including the Distribution business, which
consists of operations in Europe that provide warehousing, logistics, and sales distribution services to third-party publishers ofinteractive entertainment software, our own publishing operations, and manufacturers of interactive entertainment hardware.

29
29

Business Results and Highlights
Financial Results
2020 financial highlights included:
consolidated net revenues increased 25% to $8.1 billion and consolidated operating income increased 70% to $2.7
billion, as compared to consolidated net revenues of $6.5 billion and consolidated operating income of $1.6 billion
in 2019;
diluted earnings per common share increased to $2.82, as compared to $1.95 in 2019; andcash flows from operating activities were approximately $2.25 billion, an increase of 23%, as compared to $1.83
billion in 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 andrecognize the attributable revenues over the relevant estimated service periods, which are generally less than a year. Net
revenues and operating income for the year ended December 31, 2020, include a net effect of $333 million and $238 million,
respectively, from the deferral of net revenues and related cost of revenues.
Additionally, for the year ended December 31, 2020 and 2019, 16% and 18% of total net revenues recognized were from82%, of total net revenues, respectively. Revenue recognized atcomprised of the portion ofrevenue from software products that is recognized when the customer takes control of the product (i.e., upon delivery of therevenue associated with the online functionality of our games, in-game purchases, and subscriptions.
Content Release and Event Highlights
Throughout the year we regularly release new content through seasonal and live services updates within our franchises,
including Call of Duty, Candy Crush, and Hearthstone. In addition to these updates, notable game releases during 2020,
included:
Call of Duty: Warzone, a free-to-play experience on console and PC platforms;
TM Pro SkaterTM 1 and 2;

CrashTM

TM;

Call of Duty: Black Ops Cold War; andWorld of Warcraft: Shadowlands.
International Sales
International sales are a fundamental part of our business. An important element of our international strategy is to develop
content that is specifically directed toward local cultures and customs. Net revenues from international sales accounted forapproximately 52%, 54%, and 54% of our total consolidated net revenues for the years ended December 31, 2020, 2019, and2018, respectively. The majority of our net revenues from foreign countries are generated by consumers in Australia, Canada,
China, France, Germany, Italy, Japan, South Korea, Spain, Sweden, and the U.K. Our international business is subject to risks
typical of an international business, including, but not limited to, foreign currency exchange rate volatility and changes in local
economies. Accordingly, our future results could be materially and adversely affected by changes in foreign currency exchange
rates and changes in local economies.

30
30

Operating Metrics
The following operating metrics are key performance indicators that we use to evaluate our business. The key drivers ofchanges 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 key operating metrics in evaluating the performance of ourbusiness because they enable an analysis of performance based on the timing of actual transactions with our customers andprovide a more timely indication of trends in our operating results. Net bookings is the net amount of products and services solddigitally 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 amountof microtransactions and downloadable content sold during the period, and is equal to in-game net revenues excluding theimpact from deferrals.
Net bookings and in-game net bookings were as follows (amounts in millions):
For the Years Ended December 31,
2020

Net bookings
In-game net bookings$$

Increase(Decrease)

2019

8,419
4,852

$
$

6,388
3,366

$
$

2,031
1,486

Net bookings
The increase in net bookings for 2020, as compared to 2019, was primarily due to:a $1.7 billion increase in Activision net bookings driven by higher net bookings from (1) Call of Duty: Modern
Warfare (which was released in October 2019, and when referred to herein, is inclusive of Call of Duty: Warzone,
from its release in March 2020 through December 16, 2020, the launch date of Call of Duty: Black Ops Cold War
Season 1 content; after December 16, 2020, Call of Duty: Warzone revenues are associated with Call of Duty:
Call of Duty: Black Ops 4,
Black Ops Cold War
which was released in October 2018, (2) Call of Duty: Mobile, which was released in October 2019, and (3) the
Call of Duty franchise catalog titles, partially offset by lower net bookings from SekiroTM: Shadows Die Twice,
which was released in March 2019;a $186 million increase in Blizzard net bookings driven by higher net bookings from World of Warcraft, which
includes the release of World of Warcraft: Shadowlands in November 2020, partially offset by lower net bookingsfrom Overwatch;a $133 million increase in King net bookings driven by higher net bookings from advertising and in-game playerpurchases, primarily in the Candy Crush franchise; anda $116 million increase in net bookings from our Distribution business.
In-game net bookings
The increase in in-game net bookings for 2020, as compared to 2019, was primarily due to:a $1.4 billion increase in Activision in-game net bookings, driven by higher in-game net bookings from (1) Call of
Duty: Modern Warfare, as compared to Call of Duty: Black Ops 4 and (2) Call of Duty: Mobile; anda $75 million increase in Blizzard in-game net bookings, driven by World of Warcraft.

31
31

MonthlyMonthlyActive
ActiveUsers
Users
We
zezeofofour
ouruser
userbase.
base.MAUs
MAUsarearethethenumbernumberWemonitor
monitormonthly
monthlyactive
activeusers
users
ofofindividuals
individualswho
whoaccessed
accesseda particulara particulargame
gameinina given
a givenmonth.
month.We
Wecalculate
calculateaverage
averageMAUs
MAUsinina period
a periodbybyadding
addingthethetotal
total
numbernumberofofMAUs
MAUsinineacheachofofthe
themonths
monthsinina given
a givenperiod
periodandanddividing
dividingthat
thattotal
totalbybythe
thenumbernumberofofmonths
monthsininthe
theperiod.
period.
AnAn
individual
individualwho
whoaccesses
accessestwo
twoofofour
ourgames
gameswould
wouldbebecounted
countedasastwo
twousers.
users.InInaddition,
addition,due
duetototechnicaltechnicallimitations,limitations,forfor
Activision
Activisionand
andKing,King,ananindividual
individualwho
whoaccesses
accessesthe
thesamesamegamegameonontwo
twoplatforms
platformsorordevices
devicesininthe
therelevant
relevantperiod
periodwould
wouldbebecountedcountedasastwo
twousers.
users.For
ForBlizzard,
Blizzard,ananindividual
individualwho
whoaccesses
accessesthe
thesamesamegamegameonontwo
twoplatforms
platformsorordevices
devicesininthe
therelevant
relevant
periodperiodwould
wouldgenerally
generallybebecounted
countedasasa asingle
singleuser.
user.InIncertain
certaininstances,instances,wewerely
relyononthird
thirdparties
partiestotopublish
publishour
ourgames.
games.InInthese
these
instances,instances,MAU
MAUdatadatais isbased
basedononinformation
informationprovided
providedtotoususbybythose
thosethird
thirdparties,
parties,or,or,if iffinal
finaldatadatais isnot
notavailable,
available,reasonablereasonableestimates
estimatesofofMAUs
MAUsforforthese
thesethird-party
third-partypublishedpublishedgames.
games.
The
ThenumbernumberofofMAUs
MAUsforfora given
a givenperiod
periodcan
canbebesignificantly
significantlyimpacted
impactedbybythe
thetiming
timingofofnew
newcontent
contentreleases,
releases,since
sincenewnewreleasesreleasesmay
maycausecausea temporary
a temporarysurge
surgeininMAUs.
MAUs.
Accordingly,
Accordingly,althoughalthoughwewebelieve
believethat
thatoverall
overalltrending
trendingininthe
thenumbernumberofofMAUs
MAUs
cancanbebea meaningfula meaningfulperformance
performancemetric,
metric,period-to-period
period-to-periodfluctuations
fluctuationsmay
maynotnotbebeindicative
indicativeofoflonger-term
longer-termtrends.
trends.The
The
following
followingtable
tabledetails
detailsour
ouraverage
averageMAUs
MAUsonona asequential
sequentialquarterly
quarterlybasis
basisforforeacheachofofour
ourreportable
reportablesegments
segments(amounts(amountsinin
millions):
millions):
December
December
31,31,
2020
2020 September
September
30,30,
2020
2020

128
128
2929
240
240
397
397

Activision
Activision
Blizzard
Blizzard
King
King
Total
Total

June
June
30,30,
2020
2020

111
111
3030
249
249
390
390

125
125
3232
271
271
428
428

March
March
31,31,
2020
2020

December
December
31,31,
2019
2019

102
102
3232
273
273
407
407

128
128
3232
249
249
409
409

Average
AverageMAUs
MAUsincreased
increasedbyby7 7million,
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thethreethreemonths
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endedDecember
December31,
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2020,asascompared
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duetotoananincrease
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Activision
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fromOverwatch.
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Impactsofofthe
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3232
32

Mobile Gaming and Free-to-Play Games
Wide adoption of smartphones globally and the free-to-play business model on mobile platforms have increased the total
addressable audience for gaming significantly by introducing gaming to new age groups and new regions and allowing gaming
to occur more widely outside the home. Mobile gaming is estimated to be larger than console and PC gaming, and continues togrow at a significant rate. King is a leading developer of mobile and free-to-play games, and our other business units havemobile efforts underway that present the opportunity for us to expand the reach of, and drive additional player investment in,
our franchises. The 2019 launch of Call of Duty: Mobile is an example of these efforts.
In addition, the free-to-play business model, which allows players to try a new game with no upfront cost, has begun toreceive broader acceptance on PC and console platforms. This provides opportunities for us to increase the reach of ourfranchises through free-to-play offerings, which, in turn, provides opportunities to further drive player investment, as was seen
with our recent Call of Duty: Warzone release.
Concentration of Sales Among the Most Popular Franchises
The top titles in the industry are also becoming more consistent as players and revenues concentrate more heavily inestablished franchises. Of the top 10 gaming franchises in the U.S. in 2020, all 10 were established prior to 2020.
A significant portion of our revenues historically has been derived from video games based on a few popular franchises,
and these video games have also been responsible for a disproportionately higher percentage of our profits. For example, in
2020, the Call of Duty, Candy Crush, and World of Warcraft franchises, collectively, accounted for 76% of our consolidated net
In addition to investing in new content for our top franchises, with the aim of releasing such content more frequently, weCall of Duty:
are continually exploring additional ways to expand those franchises, such
Warzone. Additionally, we have been increasing our development efforts to focus on expanding our franchises to the mobile
and Crashplatform, as demonstrated by the release of Call of Duty: Mobile, as well as our plans for, which are both currently in development.
Overall, we expect that a limited number of popular franchises will continue to produce a disproportionately highthe near future. Accordingly, our ability to maintain our top
chises can significantly impact our
franchises and our ability to successfully
performance.
Recurring Revenue Business Models
Increased consumer online connectivity has allowed us to offer players new investment opportunities and to shift ourbusiness further towards a more consistently recurring and year-round model. While our business does continue to experience
our releases of new premium full games, our in-game content
and free-to-play offerings allow our players to access and invest in new content throughout the year. This incremental content
not only provides additional high-margin revenues, but it can also increase player engagement.
Opportunities to Expand Franchises Outside of GamesOur fans spend significant time engaging in our franchises and investing through purchases of our game content,
including full games and in-game content. Given the passion our players have for our franchises, we believe there are emerging
opportunities to drive additional engagement and investment in our franchises outside of games, such as with our Overwatch
and Call of Duty leagues. Our efforts to build these adjacent opportunities are still relatively nascent.

33
33

Upcoming Content Release Highlights
In the second half of 2021, we plan to release the next premium title in our Call of Duty franchise. In addition, throughout
the year we expect to deliver ongoing content for our various franchises, including continued in-game content for Call of Duty:
Black Ops Cold War, which includes seasonal content updates for Call of Duty: Warzone, seasonal content updates for Call of
Duty: Mobile, content updates for World of Warcraft, expansion packs and content updates for Hearthstone, and continued
releases of content, features, and services
also continue to invest in opportunities that we think have the potential to drive our growth over the long-term, including
continuing to build on our advertising initiatives and investments in mobile titles, some of which we anticipate will launch in2021, including Crash Bandicoot: On the Run and Diablo Immortal.

34
34

Consolidated Statements of Operations Data
The following table sets forth 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 associatedrevenues:
For the Years Ended December 31,
2020
2019
Net revenues
Product sales
In-game, subscription, and other revenues

$

2,350
5,736
8,086

Total net revenues

29 % $
71
100

1,975
4,514
6,489

30 %
70
100

Costs and expenses
Product costs
Software royalties, amortization, and intellectual
property licenses

705

30

656

33

269

11

240

12

Game operations and distribution costs
Software royalties, amortization, and intellectual
property licenses
Product development
Sales and marketing
General and administrative
Restructuring and related costs

1,131

20

965

21

Total costs and expenses

155
1,150
1,064
784
94
5,352

3
14
13
10
1
66

233
998
926
732
132
4,882

5
15
14
11
2
75

Operating income
Interest and other expense (income), net
Loss on extinguishment of debt (1)

2,734
87
31

34
1

1,607
(26)

25

Income before income tax expense
Income tax expense

2,616
419
2,197

32
5
27 % $

1,633
130
1,503

25
2
23 %

Net income$(1) Represents the loss on extinguishment of debt we recognized in connection with our debt financing activities during theyear ended December 31, 2020. Refer to Note 13 of the notes to the consolidated financial statements included in Item 8 ofthis Annual Report on Form 10-K for further disclosures regarding our debt obligations.

35
35

Consolidated Net Revenues
The key drivers of changes in our consolidated results, operating segment 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 (amounts in millions):
For the Years Ended December 31,
Increase/2019(decrease)

2020

Consolidated net revenues
In-game net revenues (1)

$
$

8,086
4,571

$
$

6,489
3,376

$
$

% Change

1,597
1,195

25 %
35 %

(1) In-game net revenues primarily includes the net amount of revenue recognized for microtransactions and downloadable
content during the period.
Consolidated net revenues
The increase in consolidated net revenues for 2020, as compared to 2019, was primarily driven by an increase in revenues
of $1.9 billion due to 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;
Call of Duty: Mobile, which was released in October 2019;
World of Warcraft, which includes the release of World of Warcraft: Shadowlands in November 2020;
our Distribution business;
the Candy Crush franchise; andthe Call of Duty franchise catalog titles.
The increase was partially offset by a decrease in revenues of $339 million due to lower revenues from:
Overwatch;Call of Duty: Black Ops Cold War, which was released in November 2020, as compared to Call of Duty: Modern
Warfare; andSekiro: Shadows Die Twice, which was released in March 2019.
In-game net revenues
The increase in in-game net revenues for 2020, as compared to 2019, was primarily driven by an increase in in-game net
revenues of $1.2 billion due to higher in-game net revenues from:
Call of Duty: Modern Warfare, as compared to Call of Duty: Black Ops 4; andCall of Duty: Mobile.

36
36

Operating Segment Results
tivision, Blizzard, and King. Our operating segments are consistent with themanner in which our operations are reviewed and managed by our Chief Executive Officer, who is our chief operating decision
related cost of revenues with respect to certain of our online-enabled games; share-based compensation expense; amortizationof intangible assets as a result of purchase price accounting; fees and other expenses (including legal fees, expenses, andaccruals) related to acquisitions, associated integration activities, and financings; certain restructuring and related costs; andcertain other non-cash charges. The CODM does not review any information regarding total assets on an operating segment
basis, and accordingly, no disclosure is made with respect thereto.
Our operating segments are also consistent with our internal organizational structure, the way we assess operating
performance and allocate resources, and the availability of separate financial information. We do not aggregate operating
segments.
Information on the reportable segment net revenues and segment operating income are presented below (amounts inmillions):
For the Year Ended December 31, 2020
Activision

Blizzard

$

$

King

Increase / (decrease)

Total

Activision

Blizzard

7,900

$

$

King

Total

Segment Revenues
Net revenues from externalcustomers

3,942Intersegment net revenues (1)

1,794

$

2,164

$

111

1,723

111

118

$

133

$

68

1,974
68

Segment net revenues

$

3,942

$

1,905

$

2,164

$

8,011

$

1,723

$

186

$

133

$

2,042

Segment operating income

$

1,868

$

693

$

857

$

3,418

$

1,018

$

229

$

117

$

1,364

For the Year Ended December 31, 2019
Activision

Blizzard

$

2,219

$

1,676

Segment net revenues

$

2,219

$

Segment operating income

$

850

$

King

Total

Segment Revenues
Net revenues from externalcustomers
Intersegment net revenues (1)

$

2,031

$

5,926

1,719

$

2,031

$

5,969

464

$

740

$

2,054

43

43

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

37
37

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

Reconciliation to consolidated net revenues:
Segment net revenues
Revenues from non-reportable segments (1)Net effect from recognition (deferral) of deferred net revenues (2)Elimination of intersegment revenues (3)Consolidated net revenues
Reconciliation to consolidated income before income tax expense:
Segment operating income
Operating income (loss) from non-reportable segments (1)Net effect from recognition (deferral) of deferred net revenues and related cost ofrevenues (2)Share-based compensation expense (Note 16)
Amortization of intangible assets
Restructuring and related costs (Note 17)
Discrete tax-related items (4)Consolidated operating income
Interest and other expense (income), net
Loss on extinguishment of debt
Consolidated income before income tax expense

For the Years Ended December 31,
2020
2019
$

$

$

8,011
519
(333)
(111)
8,086

$

3,418
(55)

$

$

(238)
(218)
(79)
(94)

$

2,734
87
31
2,616

5,969
462
101
(43)
6,489

2,054
24
52
(166)
(203)
(137)
(17)
1,607
(26)

$

1,633

(1) Includes other income and expenses from operating segments managed outside the reportable segments, including ourDistribution business. Also includes unallocated corporate income and expenses.
(2) 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 then recognize the attributable revenues over the relevant estimated service periods, which are generally less than ayear. The related cost of revenues is deferred and recognized as an expense as the related revenues are recognized. This
table reflects the net effect from the deferrals of revenues and recognition of deferred revenues, along with the related costof revenues, on certain of our online enabled products.
(3) Intersegment revenues reflect licensing and service fees charged between segments.
(4) Reflects the impact of other unusual or unique tax-related items and activities.
Segment Net Revenues
Activision
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;
Call of Duty: Mobile, which was released in October 2019; andthe Call of Duty franchise catalog titles.

38
38

The increase was partially offset by lower revenues from Sekiro: Shadows Die Twice, which was released in March 2019.
Blizzard
venues for 2020, as compared to 2019, was primarily due to higher revenues
from World of Warcraft, which includes the release of World of Warcraft: Shadowlands in November 2020. The increase waspartially offset by lower revenues from Overwatch.
Kingand in-game player purchases, primarily in the Candy Crush franchise.
Segment Income from Operations
Activision
come for 2020, as compared to 2019, was primarily due to higher segment net

revenues.
The increase was partially offset by:higher cost of revenues and marketing costs for the Call of Duty franchise; andhigher product development costs driven by higher personnel bonuses as a result of strong business performance.
Blizzard
income for 2020, as compared to 2019, was primarily due to:higher segment net revenues;
lower product development costs, despite an increase in personnel costs, driven by higher capitalization ofsoftware development costs from the timing of game development cycles; andlower general and administrative costs.
The increase was partially offset by higher cost of revenues, primarily from higher software amortization and higher
marketing costs related to the launch of World of Warcraft: Shadowlands.
King
income for 2020, as compared to 2019, was primarily due to:higher segment net revenues; andlower general and administrative costs.
The increase was partially offset by higher marketing costs, driven by the Candy Crush franchise.
Foreign Exchange Impact
Changes in foreign exchange rates had a positive impact of $61 million and a negative impact of $126 million onreportable segment net revenues for 2020 and 2019, respectively, as compared to the same periods in the previous year. Thechanges are primarily due to changes in the value of the U.S. dollar relative to the euro and British pound.

39
39

Consolidated Results
Net Revenues by Distribution Channel
The following table details our consolidated net revenues by distribution channel (amounts in millions):
For the Years Ended December 31,
Increase/2019(decrease)2020

Net revenues by distribution channel:
Digital online channels (1)Retail channels
Other (2)Total consolidated net revenues
(1)
(2)

$

6,658
741
687
8,086

$

$

$

4,932
909
648
6,489

$

$

% Change

1,726
(168)
39
1,597

35 %
(18)
6
25

es from digitally-distributed downloadable content,
microtransactions, subscriptions, and products, as well as licensing royalties.
Call of Duty League.

Digital Online Channel Net Revenues
The increase in net revenues from digital online channels for 2020, as compared to 2019, was primarily due to 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;
Call of Duty: Mobile, which was released in October 2019;
World of Warcraft, which includes the release of World of Warcraft: Shadowlands in November 2020;
the Call of Duty franchise catalog titles; andthe Candy Crush franchise, driven by higher revenues from advertising and in-game player purchases.
This increase was partially offset by lower revenues from Overwatch.
Retail Channel Net Revenues
from:The decrease in net revenues from retail channels for 2020, as compared to 2019, was primarily due to lower revenues
Call of Duty: Black Ops Cold War, which was released in November 2020, as compared to Call of Duty: Modern
Warfare; andSekiro: Shadows Die Twice, which was released in March 2019.
The decrease was partially offset by higher revenues from:; which was released in October 2020; and, which was released in September 2020.

40
40

Net Revenues by Platform
The following tables detail our net revenues by platform (amounts in millions):
For the Years Ended December 31,
2020

Net revenues by platform:
ConsolePC
Mobile and ancillary (1)Other (2)Total consolidated net revenues
(1)
(2)

$

$

2,784
2,056
2,559
687
8,086

Increase/(decrease)

2019

$

$

1,920
1,718
2,203
648
6,489

$

$

% Change

864
338
356
39
1,597

45 %
20
16
6
25

om mobile devices, as well as non-platform-specific gamerelated revenues, such as standalone sales of toys and accessories.
Call of Duty League.

ConsoleThe increase in net revenues from the console platform for 2020, as compared to 2019, was primarily due to 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. The increase was partially offset by lower revenues from Call of Duty: Black Ops Cold
War, which was released in November 2020, as compared to Call of Duty: Modern Warfare.
PC
from:

The increase in net revenues from the PC platform for 2020, as compared to 2019, was primarily due to higher revenues
Call of Duty: Modern Warfare, as compared to Call of Duty: Black Ops 4; andWorld of Warcraft, which includes the release of World of Warcraft: Shadowlands in November 2020.
The increase was partially offset by lower revenues from Overwatch.

Mobile and Ancillary
The increase in net revenues from mobile and ancillary for 2020, as compared to 2019, was primarily due to higher
revenues from:
Call of Duty: Mobile, which was released in October 2019; andthe Candy Crush franchise, driven by higher revenues from advertising and in-game player purchases.

41
41

Costs and Expenses
Cost of Revenues
The following tables detail the components of cost of revenues in dollars (amounts in millions) and as a percentage ofassociated net revenues:
Year Ended
December 31,
2020

Product costs
Software royalties, amortization,
intellectual property licenses$

and other:Game operations and distribution costs
Software royalties, amortization,
intellectual property licenses$

Total cost of revenues% ofassociatednet revenues

Year Ended
December 31,
2019

% of
associatednet revenues

Increase(Decrease)705

30 % $

656

33 % $

49

269

11

240

12

29

1,131

20

965

21

166

155
2,260

3

233
2,094

5

(78)
166

28 % $

32 % $:The increase in product costs for 2020, as compared to 2019, was primarily due to an increase in product costs for ourDistribution business as a result of higher revenues.
The increase in software royalties, amortization, and intellectual property licenses related to product sales for 2020, as
compared to 2019, was primarily due to a $32 million increase in software amortization and royalties from Activision, driven
by software amortization and royalties from the 2020 releases of (1)(2) Crash Bandicoot 4:, and (3) Call of Duty: Modern Warfare 2 Campaign Remastered; partially offset by lower software amortization
and royalties from:
Sekiro: Shadows Die Twice, which was released in March 2019; andCall 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.
cription, and Other Revenues:
The increase in game operations and distribution costs for 2020, as compared to 2019, was primarily due to (1) anincrease of $114 million in service provider fees such as digital storefront fees (e.g., fees retained by Apple and Google for oursales on their platforms), payment processor fees, and server bandwidth fees, as a result of higher revenues, and (2) an increaseof $64 million associated with our professional esports leagues, which includes event and production costs associated with theinaugural season of the Call of Duty League in 2020.
The decrease in software royalties, amortization, and intellectual property licenses related to in-game, subscription, andother revenues for 2020, as compared to 2019, was primarily due to a decrease of $128 million in amortization of internallydeveloped franchise intangible assets acquired as part of our 2016 acquisition of King. The decrease was partially offset by anincrease in software amortization and royalties from Activision of $46 million, driven by Call of Duty: Mobile, which was
released in October 2019.
Product Development (amounts in millions)

Product development$

Year Ended
December 31,
2020

1,150

% of
consolidated
net revenues

14 % $

42

42

Year Ended
December 31,
2019

998

% of
consolidated
net revenues

15 % $

Increase(Decrease)

152

The increase in product development costs for 2020, as compared to 2019, was primarily due to higher development costsof $261 million, driven by higher personnel bonuses as a result of strong business performance. The increase was partially
offset by a $108 million increase in capitalization of development costs, driven by the timing
cycles.
Sales and Marketing (amounts in millions)

Sales and marketing$Year Ended
December 31,
2020

1,064

% of
consolidated
net revenues

13 % $

Year Ended
December 31,
2019

926

% of
consolidated
net revenues

Increase(Decrease)

14 % $

138

The increase in sales and marketing expenses for 2020, as compared to 2019, was primarily due to an increase of$159 million in marketing spending, driven by the Call of Duty, World of Warcraft, and Candy Crush franchises.
General and Administrative (amounts in millions)

General and administrative$

Year Ended
December 31,
2020

784

% of
consolidated
net revenues

10 % $

Year Ended
December 31,
2019

732

% of
consolidated
net revenues

Increase(Decrease)

11 % $

52

The increase in general and administrative expenses for 2020 as compared to 2019, was primarily due to a $48 million
increase in personnel costs as a result of higher share-based compensation.
Restructuring and related costs (amounts in millions)

Restructuring and related costs$

Year Ended
December 31,
2020

94

% of
consolidated
net revenues

1% $Year Ended
December 31,
2019

132

% of
consolidated
net revenues

Increase(Decrease)

2% $

(38)

During 2019, we began implementing a plan aimed at refocusing our resources on our largest opportunities and to remove
unnecessary levels of complexity and duplication from certain parts of our business. Since then, we have been, and willcontinue focusing on these goals as we continue to execute against our plan. The restructuring and related costs incurred during2020 relate primarily to severance costs. We do not expect to realize significant net savings in our total operating expenses as aresult of our plan, as cost reductions in our selling, general and administrative activities is expected to be offset by increased
investment in product development. Refer to Note 17 of the notes to the consolidated financial statements included in Item 8 ofthis Annual Report on Form 10-K for further discussion.
Interest and Other Expense (Income), Net (amounts in millions)Interest and other expense (income), net$

Year Ended
December 31,
2020

87

% of
consolidated
net revenues

1% $Year Ended
December 31,
2019

(26)

% of
consolidated
net revenues

Increase(Decrease)$

113

The increase in interest and other expense (income), net, for 2020, as compared to 2019, was primarily due to:a $58 million decrease in interest income driven by lower returns on our investment portfolio as a result of interest
rate cuts, reflecting actions by central banks around the world;
a $38 million gain recognized in the prior-year period as a result of adjusting a cost-method equity investment tofair value, as compared to a $3 million gain recorded in the current year; anda $7 million gain recognized in the prior-year period from the settlement of available for sale securities, ascompared to a $4 million loss recorded in the current year.

43
43

Income Tax Expense (amounts in millions)

Income tax expense$

Year Ended
December 31,
2020

419

% of
Pretaxincome16 % $

Year Ended
December 31,
2019

130

% of
PretaxincomeIncrease(Decrease)

8% $

289

For the years ended December 31, 2020 ancome tax expense was $2.6 billion and$1.6 billion, respectively, and our income tax expense was $419 million (or a 16% effective tax rate) and $130 million (or an
8% effective tax rate), respectively. Our full year 2020 effective tax rate of 16% is lower than the U.S. statutory rate of 21%
primarily due to a U.S. tax benefit from foreign-derived intangible income, a one-time benefit from deferred tax asset
remeasurement, and excess tax benefits from share-based payments.
The effective tax rate in 2020 was higher than in 2019, primarily due to one-time tax benefits reported in the prior year
related to the intra-entity transfer of certain intellectual property rights, partially offset by changes in the Company's liability for
uncertain tax positions and audit settlements.
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 variations in the estimated and actual level of annual pre-tax income
or loss.
Further analysis of the differences between the U.S. federal statutory rate and the consolidated effective tax rate, as wellas other information about our income taxes, is provided in Note 19 of the notes to the consolidated financial statements
included in Item 8 of this Annual Report on Form 10-K.
Foreign Exchange Impact
Changes in foreign exchange rates had a positive impact of $62 million and a negative impact of $150 million on ourconsolidated net revenues in 2020 and 2019, respectively, as compared to the same periods in the previous year.
Changes in foreign exchange rates had a positive impact of $35 million and a negative impact of $71 million on ourconsolidated operating income in 2020 and 2019, respectively, as compared to the same periods in the previous year.
Comparison of 2019 to 2018
For the comparison of 2019 to 2018, refer to
our Annual Report on Form 10-K for the year ended December 31, 2019.
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 $8.8 billion, our access to capital, and theavailability 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 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 December 31, 2020, the amount of cash and cash equivalents held outside of the U.S. by our foreign subsidiaries
was $2.5 billion, as compared to $2.8 billion as of December 31, 2019. 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.
44

44

Sources of Liquidity (amounts in millions)
For the Years Ended December 31,
2020

Cash and cash equivalents
Short-term investments

$

8,647

$

170
8,817

$

5,794

$

69
5,863

$

2,853

$

101
2,954

30 %

38 %

Percentage of total assets

Increase(Decrease)2019

For the Years Ended December 31,
2020

Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Effect of foreign exchange rate changes
Net increase in cash and cash equivalents and restricted
cash

Increase(Decrease)

2019

$

2,252
(178)
711
69

$

1,831
(22)
(237)
(3)

$

421
(156)
948
72

$

2,854

$

1,569

$

1,285

Net Cash Provided by Operating Activities
The primary driver of net cash flows associated with our operating activities is the income generated from the sale of our
products and services. These are typically partially offset by: working capital requirements used in the development, sale, andsupport of our products; payments for interest on our debt; payments for tax liabilities; and payments to our workforce.
Net cash provided by operating activities for 2020 was $2.25 billion, as compared to $1.83 billion for 2019. The increase
was primarily due to higher net income, partially offset by higher tax payments and 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 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 2020 was $178 million, as compared to $22 million for 2019. The increase in cashused in investing activities was primarily due to the net purchases of available-for-sale investments of $100 million in 2020, as
compared to net proceeds from maturities of available-for-sale investments of $88 million in 2019. This was partially offset bycapital expenditures of $78 million in 2020, which were lower than the capital expenditures of $116 million in 2019.
Net Cash Provided by (Used in) Financing Activities
The primary drivers of net cash flows associated with financing activities typically include the proceeds from, andrepayments 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 financing activities for 2020 was $711 million, as compared to net cash used in financing activities
of $237 million for 2019. The change was primarily attributed to:issuance of an aggregate principal amount of $2.0 billion of new notes and the early redemption of $1.05 billionof our previously outstanding notes, with no comparable activity for 2019 (refer to Note 13 of the notes to theconsolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion);
and

45
45

higher proceeds from issuances of common stock to employees of $170 million in 2020 as compared to $105
million in 2019.
The cash flows provided by the activities above were partially offset by higher dividends paid, with $316 million ofdividend payments in 2020, as compared to $283 million for 2019.
Effect of Foreign Exchange Rate Changes
Changes in foreign exchange rates had a positive impact of $69 million and a negative impact of $3 million on our cash
and cash equivalents for the years ended December 31, 2020 and 2019, respectively. The change is primarily due to changes inthe value of the U.S. dollar relative to the euro and British pound.
Debt
At December 31, 2020 and December 31, 2019, our total outstanding debt was $3.6 billion and $2.7 billion, respectively,
bearing interest at a weighted average rate of 2.87% and 3.18%, respectively.
A summary of our outstanding debt is as follows (amounts in millions):
At December 31, 20202021 Notes
2022 Notes
2026 Notes
2027 Notes
2030 Notes
2047 Notes
2050 Notes$

Total gross long-term debt
Unamortized discount and deferred financing costs
Total net carrying amount$$At December 31, 2019

$
850
400
500
400
1,500
3,650
(45)
3,605

$
$
$
$
$
$
$

650
400
850
400
400
2,700
(25)
2,675

Refer to Note 13 of the notes to the consolidated financial statements included in Item 8 of this Annual Report on
Form 10-K for further disclosures regarding our debt obligations.
Dividends
On February 4, 2021, our Board of Directors declared a cash dividend of $0.47 per common share, payable on May 6,
2021, to shareholders of record at the close of business on April 15, 2021.
On February 6, 2020, our Board of Directors declared a cash dividend of $0.41 per common share. On May 6, 2020, we
made an aggregate cash dividend payment of $316 million to shareholders of record at the close of business on April 15, 2020.
Capital Expenditures
We made capital expenditures of $78 million in 2020, as compared to $116 million in 2019. In 2021, we anticipate total
capital expenditures of approximately $100 million, primarily for computer hardware, leasehold improvements, and softwarepurchases.
Commitments
Refer to Note 22 of the notes to the consolidated financial statements included in Item 8 of this Annual Report on
Form 10-K for disclosures regarding our commitments, including a table showing contractual obligations.
Comparison of 2019 to 201846

46

Refer to Note 22 of the notes to the consolidated financial statements included in Item 8 of this Annual Report on
Form 10-K for disclosures regarding our commitments, including a table showing contractual obligations.
Comparison of 2019 to 2018
For the comparison of 2019 to 2018, refer to
our Annual Report on Form 10-K for the year ended December 31, 2019, under the46
Off-balance Sheet Arrangements
At December 31, 2020 and 2019, Activision Blizzard had no significant relationships with unconsolidated entities orlitating
off-balance sheet arrangements or other contractually narrow or limited purposes, that have or are reasonably likely to have amaterial current or future effect on our financial condition, changes in financial condition, revenues or expenses, results ofoperations, liquidity, capital expenditures, or capital resources.

47

Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates andassumptions. The impact and any associated risks related to these policies on our business operations are discussed throughout
and Results of Operations where such policies affect ourreported and expected financial results. The policies, estimates, and assumptions discussed below are considered bymanagement to be critical because they are both important to the portrayal of our financial condition and results of operations
dgment, with financial reporting results
and because their application places the mostrelying on estimates and assumptions about the effect of matters that are inherently uncertain. Specific risks for these criticalaccounting policies, estimates, and assumptions are described in the following paragraphs.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board issued new accounting guidance related to revenue recognition.
On January 1, 2018, we adopted the new accounting standard and related amendments.
We generate revenue primarily through the sale of our interactive entertainment content and services, principally for the
console, PC, and mobile platforms, as well as through the licensing of our intellectual property. Our products span various
following products and services:premium full games, which typically provide access to main game content after purchase;free-to-play offerings, which allow players to download the game and engage with the associated content for free;
in-game content for purchase to enhance gameplay (i.e.microtransactions and downloadable content) available
within both our full-game and free-to-play offerings; andsubscriptions to players in our World of Warcraft franchise, which provide ongoing access to the game content.
When control of the promised products and services is transferred to our customers, we recognize revenue in the amountthat reflects the consideration we expect to receive in exchange for these products and services.
We determine revenue recognition by:
identifying the contract, or contracts, with a customer;
identifying the performance obligations in each contract;
determining the transaction price;
allocating the transaction price to the performance obligations in each contract; andrecognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods orservices.
Certain products are sold to customers w
retailers). For these products, we recognize revenues on the later of the street date and the date the product is sold to ourcustomer. For digital full-game downloads sold to customers, we recognize revenue when it is available for download or isactivated for gameplay. Revenues are recorded net of taxes assessed by governmental authorities that are imposed at the time ofthe specific revenue-producing transaction between us and our customer, such as sales and value-added taxes.

48
48

Payment terms and conditions vary by contract type, although terms generally include a requirement of payment
immediately upon purchase or within 30 to 90 days. In instances where the timing of revenue recognition differs from thetiming of invoicing, we do not adjust the promised amount of consideration for the effects of a significant financing component
when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer andpayment for that product or service will be one year or less.
Product Sales
Product sales consist of sales of our games, including digital full-game downloads and physical products. We recognize
revenues from the sale of our products after both (1) control of the products has been transferred to our customers and (2) theunderlying performance obligations have been satisfied. Such revenues, which include our software products with significant
online functionality and our online hosted software arrangements, are recognized in "Product sales" on our consolidated
statement of operations.
Revenues from product sales are recognized after deducting the estimated allowance for returns and price protection,
which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and priceprotection are estimated at contract inception and updated at the end of each reporting period as additional information becomes
available.
Sales incentives and other consideration given by us to our customers, such as rebates and product placement fees, areconsidered adjustments of the transaction price of our products and are reflected as reductions to revenues. Sales incentives andother consideration that represent costs incurred by us for distinct goods or services received, such as the appearance of our
expense when the benefit fromthe sales incentive is separable from sales to the same customer and we can reasonably estimate the fair value of the good orservice.
Products with Online Functionality
For our software products that include both offline functionality (i.e., do not require an Internet connection to access) andsignificant online functionality, such as for most of our titles from the Call of Duty franchise, we evaluate whether the license of
our intellectual property and the online functionality each represent separate and distinct performance obligations. In such
instances, we typically have two performance obligations: (1) a license to the game software that is accessible without anInternet connection (predominantly the offline single player campaign or game mode) and (2) ongoing activities associated withthe online components of the game, such as content updates, hosting of online content and gameplay, and online matchmaking
es of
the game that are only available online, not the offline license. This evaluation is performed for each software product or
product add-on, including downloadable content. When we determine that our software products contain a license of
intellectual property (i.e., the offline software license) that is separate and distinct from the online functionality, we consider
market conditions and other observable inputs to estimate the standalone selling price for the performance obligations, since we
do not generally sell the software license on a standalone basis. These products may be sold in a bundle with other products andservices, which often results in the recognition of additional performance obligations.
For arrangements that include both a license to the game software that is accessible offline and separate online
functionality, we recognize revenue when control of the license transfers to our customers for the portion of the transaction
price allocable to the offline software license and ratably over the estimated service period for the portion of the transaction
price allocable to the online functionality. Similarly, we defer a portion of the cost of revenues on these arrangements andrecognize the costs as the related revenues are recognized. The cost of revenues that are deferred include product costs,
distribution costs, and software royalties, amortization, and intellectual property licenses, and excludes intangible asset
amortization.

49
49

Online Hosted Software Arrangements
For our online hosted software arrangements, such as titles for the Overwatch, World of Warcraft, and Candy Crush
franchises, substantially all gameplay and functionality are obtained through our continuous hosting of the game content for theplayer. In these instances, we typically have a single performance obligation related to our ongoing activities in the hosted
arrangement, including content updates, hosting of the gameplay, online matchmaking, and access to the game content. Similar
to our software products with online functionality, these arrangements may include other products and services, which often
results in the recognition of additional performance obligations. Revenues related to online hosted software arrangements are
generally recognized ratably over the estimated service period.
In-game, Subscription, and Other Revenues
In-game Revenues
In-game revenues primarily includes revenue from microtransactions and downloadable content. Microtransaction
revenues are derived from the sale of virtual currencies and goods to our players to enhance their gameplay experience.
Proceeds from these sales of virtual currencies and goods are initially recorded in deferred revenue. Proceeds from the sales ofvirtual currencies are recognized as revenues when a player uses the virtual goods purchased with a virtual currency. Proceedsfrom the direct sales of virtual goods are similarly recognized as revenues when a player uses the virtual goods. We categorize
specific player action; accordingly, we recognize revenues from the sale of consumable virtual goods as the goods are
consumed and our performance obligation is satisfied. Durable virtual goods represent goods that are accessible to the playerover an extended period of time; accordingly, we recognize revenues from the sale of durable virtual goods ratably over theperiod of time the goods are available to the player and our performance obligation is satisfied, which is generally the estimatedservice period.
Subscription Revenues
Subscription revenue arrangements are mostly derived from World of Warcraft, which is only playable online and isgenerally sold on a subscription-only basis. Revenues associated with the sales of subscriptions are deferred until thesubscription service is activated by the consumer and are then recognized ratably over the subscription period as theperformance obligations are satisfied.
Revenues attributable to the purchase of World of Warcraft software by our customers, including expansion packs, arenues attributable to subscriptions and othe
Other Revenues
Other revenues primarily include revenues from software licensing and licensing of intellectual property other thansoftware. These revenues are recognized in "In-game, subscription, and other revenues" on our consolidated statement ofoperations.
In certain countries we have software licensing arrangements where we utilize third-party licensees to distribute and hostour games in accordance with license agreements, for which the licensees typically pay us a fixed minimum guarantee andsales-based royalties. These arrangements typically include multiple performance obligations, such as an upfront license of
intellectual property and rights to specified or unspecified future updates. Our estimate of the selling price is comprised ofseveral factors including, but not limited to, prior selling prices, prices charged separately by other third-party vendors for
similar service offerings, and a cost-plus-margin approach. Based on the allocated transaction price, we recognize revenue
associated with the minimum guarantee (1) when we transfer control of the upfront license of intellectual property, (2) upontransfer of control of future specified updates, and/or (3) ratably over the contractual term in which we provide the customer
with unspecified future updates. Royalty payments in excess of the minimum guarantee are generally recognized when thelicensed product is sold by the licensee.

50
50Revenues from the licensing of intellectual property other than software primarily include the licensing of our (1) brand,logo, or franchise to customers and (2) media content. Fixed fee payments from customers for the license of our brand or
franchise are generally recognized over the license term. Fixed fee payments from customers for the license of our media
content are generally recognized when control has transferred to the customer, which may be upfront or over time.
Significant Judgment around Revenue Arrangements with Multiple Deliverables
Our contracts with customers often include promises to transfer multiple products and services. Determining whether
products and services are considered distinct performance obligations that should be accounted for separately versus together
may require significant judgment. Certain of our games, such as titles in the Call of Duty franchise, may contain a license of ourintellectual property to play the game offline, but may also depend on a significant level of integration and interdependencywith the online functionality. In these cases, significant judgment is required to determine whether this license of ourintellectual property should be considered distinct and accounted for separately, or not distinct and accounted for together withthe online functionality provided and recognized over time. Generally, for titles in which the software license is functional
without the online functionality and a significant component of gameplay is available offline, we believe we have separate
performance obligations for the license of the intellectual property and the online functionality.
Significant judgment is also required to determine the standalone selling price for each distinct performance obligationand to determine whether there is a discount that needs to be allocated based on the relative standalone selling price of thevarious products and services. To estimate the standalone selling price we generally consider market data, including our pricing
strategies for the product being evaluated and other similar products we may offer, competitor pricing to the extent data isavailable, and the replayability design of both the offline and online components of our games. In limited instances, we may
also utilize an expected cost approach to determine whether the estimated selling price yields an appropriate profit margin.
Estimated Service Period
We consider a variety of data points when determining the estimated service period for players of our games, including thedate and last date played online. We also consider known online trends, the service periods of our previously released games,
ieve
and, to the extent publicly available, the service periods of ou
this provides a reasonable depiction of the transfer of services to our customers, as it is the best representation of the time
period during which our customers play our games. Determining the estimated service period is subjective and requires
historical usage patterns, and therefore the estimated service
period may change in the future. The estimated service periods for players of our current games are less than 12 months.
Principal Agent Considerations

net of fees retained by the storefront. Key indicators that we evaluate in determining whether we are the principal in the sale
(gross reporting) or an agent (net reporting) include, but are not limited to:which party is primarily responsible for fulfilling the promise to provide the specified good or service; andwhich party has discretion in establishing the price for the specified good or service.
Based on our evaluation of the above indicators, we report revenues on a gross basis for sales arrangements via the AppleApp Store and the Google Play Store, and we report revenues on a net basis (i.e., net of fees retained by the digital storefront)

51
51

Income Taxes
We record a tax provision for the anticipated tax consequences of the reported results of operations. In accordance withAccounting Standards Codification Topic 740, the provision for income taxes is computed using the asset and liability method,under which deferred tax assets and liabilities are recognized for the expected future tax consequences attributable todifferences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases andoperating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effecton deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that includes theenactment date. We evaluate deferred tax assets each period for recoverability. For those assets that do not meet the threshold of
in the future, a valuation allowance is recorded.
Management believes it is more likely than not that forecasted income, including income that may be generated as a resultof certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover
the remaining deferred tax assets. In the event that all or part of the net deferred tax assets are determined not to be realizable in
the future, an adjustment to the valuation allowance would be charged to tax expense in the period such determination is made.
The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the applicationof ASC Topic 740 and complex tax laws. The accounting guidance for uncertainty in income taxes applies to all income tax
positions, including the potential recovery of previously paid taxes. Resolution of these uncertainties in a manner inconsistentwhich the uncertainties are ultimately resolved.
Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes.
Although we believe our reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not
be different from that which is reflected in our historical income tax provisions and accruals. We adjust these reserves in light ofchanging facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final
tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes
in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions
and changes to reserves that are considered appropriate, as well as the related net interest and penalties.
We are also subject to the continuous examination of our income tax returns by the IRS and are regularly subject to audit
by other tax authorities. We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine
the adequacy of our provision for income taxes. There can be no assurance that the outcomes from these continuous
examinations will not have an adverse impact on our operating results and financial condition.
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act which also created a new minimum tax that applies toelected to recognize deferred taxes for temporary basis differences expected toreverse as GILTI in future years.

52
52

Software Development Costs
Software development costs include direct costs incurred for internally developed products, as well as payments made to
independent software developers under development agreements. Software development costs are capitalized once thetechnological feasibility of a product is established and such costs are determined to be recoverable. Technological feasibility ofa product requires both technical design documentation and game design documentation, or the completed and tested productdesign and a working model. For products where proven technology exists, this may occur early in the development cycle.
Software development costs related to online hosted revenue arrangements are capitalized after the preliminary project phase iscomplete and it is probable that the project will be completed and the software will be used to perform the function intended.
Significant management judgments and estimates are applied in assessing when capitalization commences for software
believe capitalized costs are not recoverable, we expense th

sts for products that are canceled or are expected to be

are not capitalized are charged imme
italized software development costs
software royalties, amortization, and intellectual property licen
revenues for the specific product, generally resulting in an amortization period of six months to approximately two years.
We evaluate the future recoverability of capitalized software development costs on a quarterly basis. For products thathave been released, the primary evaluation criterion is the actual performance of the title to which the costs relate. For productsthat are scheduled to be released in future periods, recoverability is evaluated based on the expected performance of the specificproducts to which the costs relate or in which the licensed trademark or copyright is to be used. Additionally, criteria used toevaluate expected product performance may include, as appropriate: historical performance of comparable products developedwith comparable technology; market performance of comparable titles; orders for the product prior to its release; generalmarket conditions; and, for any sequel product, estimated performance based on the performance of the product on which thesequel is based.
Significant management judgments and estimates are utilized in assessing the recoverability of capitalized costs. In
evaluating the recoverability of capitalized costs, the assessment of expected product performance utilizes forecasted sales
amounts and estimates of additional costs to be incurred. If revised forecasted or actual product sales are less than the originallyforecasted amounts utilized in the initial recoverability analysis, the net realizable value may be lower than originally estimatedin any given quarter, which could result in an impairment charge. Material differences may result in the amount and timing of
For a detailed discussion of the application of these and other accounting policies, see Note 2 of the notes to theconsolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
Recently Issued Accounting Pronouncements
For a detailed discussion regarding the accounting adoption and impacts, see Note 2 and Note 3 of the notes to theconsolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

53
53

Item 7A. 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 fromfluctuations 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, thetranslation 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, andearnings 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 reputablecommercial 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.
For a detailed discussion of our accounting policies for our foreign currency forward contracts, see Note 2 of the notes tothe consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
Foreign Currency Forward Contracts Designated as Hedges
Contracts Not Designated as Hedges
Refer to Note 10 of the notes to the consolidated financial statements included in Item 8 of this Annual Report on Form
10-K for disclosures regarding our Cash Flow Hedges and foreign currency forward contracts not designated as hedges.
In the absence of hedging activities for the year ended December 31, 2020, a hypothetical adverse foreign currency
exchange rate movement of 10% would have resulted in a theoretical decline of our net income of approximately $191 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 ouroutstanding 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 andmust be reinvested at the then-current market rates, interest income on a portfolio consisting of cash, cash equivalents, or shortterm securities is more subject to market fluctuations than a portfolio of longer-term securities. Conversely, the fair value ofsuch a portfolio is less sensitive to market fluctuations than a portfolio of longer-term securities. At December 31, 2020, our$8.6 billion of cash and cash equivalents was comprised primarily of money market funds.

5454

As of December 31, 2020, based on the composition of our investment portfolio 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 continue to negatively impact our future interest income. Such impact is not expected to be material to theItem 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm

F-1
F-1

Consolidated Balance Sheets at December 31, 2020 and 2019

F-3
F-4

Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019, and 2018

F-4
F-5

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019, and 2018
Equity for the Years Ended December 31, 2020, 2019,and 2018

F-5
F-6
F-6
F-7

Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019, and 2018

F-7
F-8

Notes to Consolidated Financial Statements

F-8
F-9
F-54
F-56

Other financial statement schedules are omitted because the information called for is not applicable or is shown either in
the Consolidated Financial Statements or the Notes thereto.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE
None.
Item 9A. 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 ExchangeAct) 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 specifi(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. A control system, no matter how well designed andoperated, 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 suchcontrols 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.

55
55

Evaluation of Disclosure Controls and Procedures.
Our management, with the participation of our principal executive officer and principal financial officer, has evaluatedthe effectiveness of our disclosure controls and procedures at December 31, 2020, the end of the period covered by this report.
Based on this evaluation, the principal executive officer and principal financial officer concluded that, at December 31, 2020,
our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosedby the Company in the reports that it files or submits under the Exchange Act is (1) recorded, processed, summarized, andreported 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.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (assuch term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management, with the participation of ourprincipal executive officer and principal financial officer, conducted an evaluation of the effectiveness, as of December 31,
2020, of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations
concluded that our internal control over financial reporting was effective as of December 31, 2020.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
The effectiveness of our internal control over financial reporting as of December 31, 2020, has been audited byPricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included in this Annual
Report on Form 10-K.
Changes in Internal Control Over Financial Reporting.
Our management, with the participation of our principal executive officer and principal financial officer, has evaluatedany changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2020. Basedon this evaluation, the principal executive officer and principal financial officer concluded that, at December 31, 2020, there
have not been any changes in our internal control over financial reporting during the most recent fiscal quarter that havematerially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Additionally, we
have not experienced any material impact to our internal control over financial reporting or our disclosure controls andprocedures despite the fact that most of our employees are working remotely for their health and safety during the COVID-19
pandemic. We are continually monitoring and assessing the potential impact of COVID-19 on our internal controls to minimize
the impact on their design and operating effectiveness.
Item 9B. OTHER INFORMATION
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by this Item, other than the information regarding executive officers, which is included in Item
1 of this report, is incorporated by reference to the sections of our definitive Proxy Statement for our 2021 Annual Meeting of56
56

Item 11.

EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to the sections of our definitive Proxy Statement for
SEC.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to the sections of our definitive Proxy Statement for

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item is incorporated by reference to the sections of our definitive Proxy Statement for

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference to the sections of our definitive Proxy Statement forPART IV
Item 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

1

Financial Statements
Statements and Financial Statement Schedule on page 55
59 herein.

2

Financial Statement Schedule The following financial statement schedule of Activision Blizzard for the years ended
December 31, 2020, 2019, and 2018 is filed as part of this report on page F-54
F-56 and should be read in conjunction withthe consolidated financial statements of Activision Blizzard:(a)Other financial statement schedules are omitted because the information called for is not applicable or is shown either
in the Consolidated Financial Statements or the Notes thereto.
3

Item 16.

The exhibits listed on the accompanying index to exhibits immediately following the financial statements are filed aspart of, or hereby incorporated by reference into, this Annual Report on Form 10-K.
FORM 10-K SUMMARY

None.

57
57

This page intentionally left blank58

Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Activision Blizzard, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Activision Blizzard, Inc. and its subsidiaries (the2019, and the related consolidated statements of operations, of comprehensive
for each of the three years in the period ended December 31,
2020, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2)audited the Company's internal control overfinancial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of thethree years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the UnitedStates of America. Also in our opinion, the Company maintained, in all material respects, effective internal control overfinancial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Changes in Accounting Principles
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts forleases in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.
Basis for Opinions
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
Reporting appearing under Item 9A. Our responsibility is toreporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan andperform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in
all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit ofinternal control over financial reporting included obtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in thecircumstances. We believe that our audits provide a reasonable basis for our opinions.

F-1
F-1

Definition and Limitations of Internal Control over Financial Reporting
DefinitionandandLimitations
LimitationsofofInternalInternalControl
Controlover
overFinancial
FinancialReporting
ReportingDefinition
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
reliabilityofoffinancial
financialreporting
reportingand
andthethe preparation of financial statements for externalpurposes
purposesininaccordance
accordancewith
withgenerally
generally
reliability
rting includes thosepolicies andprocedures
accepted accounting
principles. A
co preparation of financial statements for external
rtingincludesthose
policies
andprocedures
acceptedaccounting
principles.
Acoincludesthose
and procedures
acceptedaccounting
A co
that
(i) pertain
to the principles.
maintenanceof records that, in reasonable detail, accuratelyrtingand fairly
reflect
thepolicies
transactions
andthat(i)(i)pertain
pertaintotothe
themaintenancemaintenanceofofrecords
recordsthat,
that,ininreasonablereasonabledetail,detail,accurately
accuratelyand
andfairly
fairlyreflectreflectthe
thetransactionstransactionsand
andthat
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
dispositionsoftheassetsofthecompany;(ii)
providereasonableassurancethattransactions
arerecordedasnecessaryto permit
dispositions
offinancial
the assetsstatementsof the company;(ii) provide
assuranceaccountingthat transactions
are recorded
as necessary
preparation of
in accordancewithreasonablegenerally accepted
principles,
and that receipts
and to permit
preparationoffinancialstatementsinaccordance
withgenerally
acceptedaccounting
principles,andthatreceipts
andpreparation
statementsin accordance
generally accepted
accountingof
principles,and andthat directors
receipts andexpendituresofoffinancial
the company
are being
made onlywith
in accordancewith authorizations
managementof theexpendituresofofthe
thecompany
companyare
arebeing
beingmademadeonly
onlyininaccordance
accordancewith
withauthorizations
authorizationsofofmanagement
managementand
anddirectors
directorsofofthe
theexpenditurescompany; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use, orcompany;
and(iii)
providereasonableassurance
regardingprevention
ortimelydetectionofunauthorizedacquisition,use,ororcompany; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
Becauseofofitsitsinherent
inherent limitations,internalinternalcontrol
controlover
over financialreporting
reportingmay
maynotnotprevent
preventorordetect
detectmisstatements.
misstatements.Also,
Also,
Becauseprojectionsof any evaluationlimitations,of effectiveness to future
periodsfinancial
are subject to the riskthat controls
may become
inadequate
projectionsofanyevaluationofeffectivenesstofutureperiods
aresubject
to
the
risk
that
controls
may
becomeinadequate
projectionsof any evaluationof effectivenessto future
periods are subject
the riskorthat
controls may
inadequate
because of changes
in conditions,or that the degreeof compliancewith thetopolicies
procedures
may become
deteriorate.
becauseofofchanges
changesininconditions,conditions,ororthat
thatthethedegreedegreeofofcompliancecompliancewith
withthethepolicies
policiesororprocedures
proceduresmay
maydeteriorate.
deteriorate.
because
Critical Audit Matters
CriticalAudit
AuditMatters
Matters
Critical
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
Thecriticalcriticalaudit
auditmattermattercommunicatedcommunicatedbelow
belowisisa amattermatterarisingarisingfrom
fromthethecurrent
currentperiod
periodaudit
auditofofthe
theconsolidated
consolidatedThe
financialstatementsthat was communicatedor required
to be communicatedto theaudit committee
and that(i) relates tofinancialstatements
thatwascommunicatedorrequiredtobecommunicated
to
the
audit
committee
andthat
relatestoto
financialstatements
thatthatwasarecommunicatedor consolidated
required to befinancial
communicatedto thecommitteethat (i)(i)relates
accounts ordisclosuresmaterial to thestatements
andaudit(ii) involved
ourandespeciallychallenging,accounts
ordisclosuresthatarematerial
totheconsolidated
financialstatements
and(ii)
involved
ourespeciallychallenging,accounts
oror
disclosuresthat are material
to the consolidated
financialstatements
and not(ii) alter
involved
ourwayespeciallychallenging,
subjective,complex judgments.
The communicationof criticalaudit
matters doesin anyour opinion
on thesubjective,orcomplexjudgments.
The
communicationofcriticalaudit
matters
does
not
alter
in
any
way
our
opinionon thesubjective,
orfinancial
complexstatements,
judgments.taken
The communication
audit
matters does notthealter
in anyaudit
waymatterour opinion
consolidated
as a whole, andofwecriticalare not,by communicating
criticalbelow,on the
consolidated
financialstatements,
taken
as
a
whole,
and
we
are
not,
by
communicating
thecriticalaudit
matterbelow,
consolidated
financialopinion
statements,
as aaudit
whole,and orweon
arethenot,by communicating
thetocriticalmatter below,
providing a separate
on thetaken
criticalmatteraccounts
or disclosures
which audit
it relates.
providinga aseparate
separateopinion
opinionon
onthe
thecriticalcriticalaudit
auditmattermatterororon
onthe
theaccounts
accountsorordisclosures
disclosurestotowhich
whichititrelates.
relates.
providingService Period for Online Functionality
ServicePeriod
Periodfor
forOnline
OnlineFunctionality
Functionality
Servicethe year ended December 31, 2020, is recognized ratably over the estimated service period for the portion of the transaction
theyearyearended
ended December31,
31,2020,
2020,isisrecognizedrecognizedratably
ratablyover
overthetheestimatedestimatedservice
serviceperiod
periodfor
forthetheportion
portionofofthe
thetransaction
transaction
the
price
allocable December
to the online functionality,
which is generally
less thantwelve months.
When determining
the estimatedservicepriceallocable
totheonlinefunctionality,
whichisgenerallylessthantwelvemonths.
Whendetermining
theestimated
serviceprice allocable to the online functionality, which is generally lessers
thantwelveofmonths.
Whenincluding
determining
the estimated service
a varietydata points
the weighted-average
ersavarietyof
data
pointsincludingtheweighted-average
ers a variety
of datapointsincluding
ed online,
the average
total
hours
played, the weighted-average
average number ofedonline,
online,thetheaverage
averagetotal
totalhours
hoursplayed,
played,thetheaverage
averagenumber
numberofof
eddays in which the player activity stabilizes, and the weighted-avera
days
in
which
the
playeractivitystabilizes,
andtheweighted-avera
daysdatein which
playerManagement
activity stabilizes,
and the weighted-avera
lastplayedthe
online.
also considers
known online trends, the service period of their previously released games,
lastdate
dateplayed
playedonline.
online.Management
Managementalso
alsoconsiders
considersknown
knownonline
onlinetrends,
trends,thetheservice
serviceperiod
periodofoftheir
theirpreviously
previouslyreleased
released games,
lastilar in nature,to the extent
they are publicly
available. games,
ilarinnature,totheextenttheyarepublicly
available.
ilar in nature, to the extent they are publicly available.
The principal considerations for our determination that performing procedures relating to revenue recognition Theprincipal
principalconsiderations
considerations forour
our determinationthat
thatperforming
performingprocedures
proceduresrelating
relatingtotorevenue
revenuerecognition
recognition- Thedeterminationof the service periodfor
for thedetermination
online functionality
is a critical audit matterare the significant
judgment bydetermination
oftheserviceperiodfortheonlinefunctionality
isacriticalaudit
matterarethesignificant
judgmentby
bydeterminationof thedetermining
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is leda criticalaudit
matterofare
the significant
management when
the forserviceperiod,functionality
which in turnto a highdegreeauditorjudgment,judgment
subjectivity
andmanagement
when
determining
theserviceperiod,
which
in
turn
led
to
a
high
degreeofauditorjudgment,
subjectivity
andmanagement
when determining
service period,
which inrelatingturn ledtotothe
a highdegreeauditor judgment,
subjectivity
andeffort in performing
procedures theto evaluate
audit evidence
data used
in ofdeveloping
the service
period assumption,
effortinperforming
procedures
toevaluate
audit
evidence
relating
to
the
data
used
in
developing
theserviceperiodassumption,
effortperforming
procedures
audit forevidence
relating
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used toin determine
developingthe
theweighted-average
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historicalor comparable
numbersuchasasthe
theplayer
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dataassessed
assessedby
bymanagement
managementfor
forhistoricalhistoricalororcomparable
comparabletitles
titlestotodetermine
determinethe
theweighted-average
weighted-averagenumber
numbersuch
ayed online, as well as qualitative factors utilized by management,
ayedonline,aswell
asqualitative
factors
utilizedbymanagement,
ayed online, as well as qualitative factors utilized by management,such as analysis of competitor information.
suchasasanalysis
analysisofofcompetitor
competitorinformation.
information.
such
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming ourAddressingthe
the matterinvolved
involvedperforming
performingprocedures
proceduresand
andevaluating
evaluatingaudit
auditevidence
evidenceininconnection
connectionwith
withforming
forming ourAddressing
overall
opinion on thematterconsolidated financial
statements. These
procedures included
testing the effectivenessof controlsour
relating
overall
opiniononthe
consolidated
financialstatements.
These
procedures
included
testingtheeffectivenessofcontrolsrelating
relating
overall
opinion on thefinancial
These procedures
testing
effectiveness
controls
to the determination
ofconsolidated
the service period
for statements.
the online functionality.
Theseincluded
procedures
alsotheincluded,amongofothers,(i) testingtothedetermination
oftheserviceperiodfortheonlinefunctionality.
These
procedures
also
included,among
others,(i)testing
to the determination of the service period for the online functionality. These procedures also included,
among
others,testinganalyzingplayerdata,(i)(iii)
analyzingplayer
playerdata,data,(iii)(iii)
analyzing
testing the completeness and accuracy of underlying data used in the determination of the service period estimate, and (iv)
testingthe
thecompletenesscompletenessand
andaccuracy
accuracyofofunderlying
underlyingdata
datausedusedininthe
the determinationofofthe
the serviceperiod
periodestimate,estimate,and
and(iv)(iv)
testing
evaluating
the reasonablenessof the service
period by comparing
it todetermination
similar or historical service
titles and competitor
information.
evaluatingthereasonablenessoftheserviceperiodbycomparingittosimilaror
historical
titlesandcompetitor
information.
evaluating the reasonableness of the service period by comparing it to similar or historical titles and competitor information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopersLLP
LLP/s//s/PricewaterhouseCoopers
Los Angeles, California
LosAngeles,
Angeles,California
California
Los
February23, 2021
February23,
2021
February 23, 2021
We have served as the Co
Wehavehaveserved
servedasasthe
theCo
Co
We

r since 2008.
since2008.
2008.
r rsince
F-2
F-2
F-2
F-2

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESACTIVISIONBLIZZARD,BALANCE
INC. AND SHEETSSUBSIDIARIESCONSOLIDATEDCONSOLIDATEDBALANCESHEETS(Amounts in millions, except share data)(Amounts in millions, except share data)
AssetsAssetsCurrent assets:
Current
Cash assets:
and cash equivalents$
Cash and cash
equivalents
Accounts
receivable,
net of allowances of $83 and $132, at December 31, 2020 and December 31, $2019,
respectively
Accounts
receivable, net of allowances of $83 and $132, at December 31, 2020 and December 31,
2019,
respectively
Softwaredevelopment
Softwaredevelopment
Other current
assets
Other
Totalcurrent
currentassets
assetsTotaldevelopment
current assets
Software
Software anddevelopment
Propertyequipment, net
Propertyandequipment,
net
Deferred income
taxes, net
Deferredincometaxes,
net
Other assets
Other assets
Intangible
assets, net
Intangible assets, net
Goodwill
Goodwill
Total assets

At December 31,
2020 31,
At December
2020

$
$

Total assets

Current liabilities:
Current
liabilities:
Accounts
payableAccounts
payableDeferred revenues
Deferred
revenues and other liabilities
Accrued expenses
Accruedexpensesand other liabilities
Total current liabilities$$

Total current
liabilities
Long-term
debt, net
Long-term
debt, net
Deferred income
taxes, net
Deferredincome taxes, net
Other liabilities
OtherTotal
liabilities
liabilities

Total liabilities
Commitments
and contingencies (Note 22)
Commitments and contingencies (Note 22)
Common stock, $0.000001 par value, 2,400,000,000 shares authorized, 1,202,906,087 and
1,197,436,644
issuedpar
at December
31, 2020 and
December31, 2019,
respectively
Commonstock,shares$0.000001
value, 2,400,000,000
sharesauthorized,
1,202,906,087
and
1,197,436,644
sharesissued at December 31, 2020 and December 31, 2019, respectively
Additional
paid-in
capitalAdditional
paid-in
capitalLess: Treasury
stock,
at cost, 428,676,471 shares at December 31, 2020 and December 31, 2019
Less: Treasury
stock, at cost, 428,676,471 shares at December 31, 2020 and December 31, 2019
Retainedearnings
Retainedearnings
Accumulated
other comprehensive loss
Accumulated other comprehensivelossyTotal liabilities andTotal liabilities and

y

y
y

$
$

8,647
8,647
1,052
1,052
352
352
514
514
10,565
10,565
160
160
209
209
1,318
1,318
641
641
451
451
9,765
9,765
23,10923,109

$
$

295
295
1,689
1,689
1,116
1,116
3,100
3,100
3,605
3,605
418
418
949
949
8,072
8,072

$
$

11,531
11,531(5,563)(5,563)
9,691
9,691
(622)
(622)
15,037
15,037
23,10923,109The accompanying notes are an integral part of these Consolidated Financial Statements.
The accompanying notes are an integral part of these Consolidated Financial Statements.

F-3
F-3
F-3

At December 31,
2019 31,
At December
2019

$
$

$
$

5,794
5,794
848
848
322
322
328
328
7,292
7,292
54
54
253
253
1,293
1,293
658
658
531
531
9,764
9,764
19,845
19,845

292
292
1,375
1,375
1,248
1,248
2,915
2,915
2,675
2,675
505
505
945
945
7,040
7,040

11,174
11,174(5,563)(5,563)
7,813
7,813
(619)
(619)
12,80512,805
19,845
19,845ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONSACTIVISION
INC. ANDSUBSIDIARIES(AmountsBLIZZARD,
in millions, except
per sharedata)
CONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in millions, except per share data)
For the Years Ended December 31,
Net revenues
Productsales
Netrevenues
In-game,sales
subscription, and other revenues
Product$$

Total
net revenues
In-game,subscription, and other revenues

2020
2019
2018
For the Years Ended December 31,
2020
2019
2018

2,350
5,736
2,350
8,086
5,736

$
$

1,975
4,514
1,975
6,489
4,514

$
$

2,255
5,245
2,255
7,500
5,245

8,086

6,489

7,500

705
269
705

656
240
656

719
371
719

Software royalties, amortization, and intellectual property licenses
Game operations and distribution costs
Softwareroyalties,andamortization,
intellectual property licenses
Game operations
distributionand
costs
Product
development
Softwareroyalties, amortization, and intellectual property licenses
Sales
and
marketing
Product development
Generaladministrative
Sales
andandmarketingRestructuring
and related costs
General and administrative

269
1,131
155
1,131
1,150
155
1,064
1,150
784
1,064
94
784
5,352
94

240
965
233
965
998
233
926
998
732
926
132
732
4,882
132

371
1,028
399
1,028
1,101
399
1,062
1,101
822
1,062
10
822
5,512
10

Total costs and expenses
Operating income
Interest andincome
other expense (income), net (Note 18)
OperatingLosson andextinguishmentof (income),
debtInterest
other expense
net (Note 18)

4,882
1,607
(26)
1,607

Total net revenues
Costs and expenses
Costs and expenses
Product costs
Softwareroyalties, amortization, and intellectual property licenses
Product costs

Total
costs and expenses
Restructuring
and related costs

Net
incomeIncometax expense

$

5,352
2,734
87
2,734
31
87
2,616
31
419
2,616
2,197
419

Net income
Earnings per common share
Basic per common share
Earnings
Diluted
Basic

$

2,197

$

1,503

$

1,848

$
$$

2.85
2.82
2.85

$
$$

1.96
1.95
1.96

$
$$

2.43
2.40
2.43

$

2.82

$

1.95

$

2.40

Incomeincome tax
Loss
on before
extinguishmentof expense
debt
Incometax
expenseIncome before income tax expense

DilutedWeighted-average number of shares outstanding
Basic
Weighted-average
number of shares outstanding
Diluted
Basic
Diluted

$

(26)
1,633
130
1,633
1,503
130

$

5,512
1,988
71
1,988
40
71
1,877
40
29
1,877
1,848
29

771
778
771

767
771
767

762
771
762

778

771

771

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

F-4
F-4
F-4

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES(Amounts in millions)CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Amounts in millions)
For the Years Ended December 31,$
Net income
Other
comprehensive
income(loss):$Net income
Foreigncurrencytranslation
adjustments,
net
of
tax
Other comprehensive income (loss):
Unrealized
gains (losses)
on forward
contracts
as hedges, net
Foreigncurrencytranslation
adjustments,
net ofdesignatedtax
of taxUnrealized gains (losses) on forward contracts designated as hedges, net
Unrealized
gains (losses) on investments, net of tax
of tax$Total
other comprehensive(loss) net of tax
Unrealized
gains (losses) income
on investments,
Comprehensive
income income (loss)$$
Totalother comprehensive$

Comprehensive income

2020For the Years Ended
2019 December 31,2018$$20202,197
20191,503
20181,848

2,197
35
35
(36)
(2)
(36)
(3)
(2)
2,194
(3)
2,194

$

1,503
5

1,848
(9)

$
$$

5
(15)
(8)
(15)
(18)
(8)
1,485
(18)

$
$$

(9)
38
385
345
1,882
34

$

1,485

$

1,882

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

F-5
F-5
F-5

$

F-6

Balance at December 31, 2020

1,203

5
1

1,197

4
2

1,192

5
2

Shares
1,186

$

$

$

$

Amount
$

(429)

(429)

(429)

Shares(429)$ (5,563)$$ (5,563)$ (5,563)

Amount$ (5,563)

Treasury Stock

$

$

$

$

$

11,531

226

(40)

171

11,174

164

(58)

105

10,963

211

(93)

98

10,747

Additional
Paid-In
Capital

$

$

$

$

$

F-6

9,691

(316)

2,197

(3)

7,813

(283)

1,503

6,593

(259)

1,848

4,916
88

Retained
Earnings

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

Share-based compensation expense related to employee stock options and restricted stock
units

Issuance of common stock pursuant to employee stock options
Issuance of common stock pursuant to restricted stock units

Cumulative impact from adoption of new credit loss standard
Components of comprehensive income:Net income

Balance at December 31, 2019

Share-based compensation expense related to employee stock options and restricted stock
units

Issuance of common stock pursuant to employee stock options
Issuance of common stock pursuant to restricted stock units

Components of comprehensive income:Net income

Balance at December 31, 2018

Share-based compensation expense related to employee stock options and restricted stock
units

Issuance of common stock pursuant to employee stock options
Issuance of common stock pursuant to restricted stock units

Balance at December 31, 2017
Cumulative impact from adoption of new revenue accounting standard
Components of comprehensive income:Net income

Common StockACTIVISION BLIZZARD, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CH
For the Years Ended December 31, 2020, 2019, and 2018
(Amounts and shares in millions, except per share data)

$

$

$

$

(622)

(3)

(619)

(18)

(601)

34

Accumulated
Other
Comprehensive
Income (Loss)
$
(638)
3

$

$

$

$

15,037

(316)

226

(40)

2,197
(3)
171

(3)

12,805

(283)

164

(58)

1,503
(18)
105

11,392

(259)

211

(93)

1,848
34
98

9,462
91

EquityTotal

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSACTIVISION BLIZZARD,
INC.
AND SUBSIDIARIES(Amounts inmillions)
CONSOLIDATED STATEMENTS OF CASH FLOWSFor the Years Ended December 31,(Amounts in millions)
Cash flows from operating activities:
Net income
Cashflows fromoperatingnet
activities:
Adjustments
to reconcile
income to net cash provided by operating activities:
Net
incomeincome taxes
Deferred
Adjustments
to reconcile
income to net cash provided by operating activities:
Non-cash operatingleasenet
cost
Deferredincometaxes
Depreciation and amortization
Non-cashoperatinglease cost
Amortizationof capitalized
software development costs and intellectual property licenses (1)Depreciation
andamortization
Share-based compensation expense (2)Amortizationof capitalized software development costs and intellectual property licenses (1)Other
Share-based
compensation
expense(2)
Changes in operating assets andliabilities:
Other
Accounts receivable, net
Changes
operating assets
liabilities:
Softwareindevelopment
and andintellectual
property licenses
Accounts
receivable,
net
Other assets
Software revenues
development and intellectual property licenses
DeferredOther
assets
Accounts payable
Deferred
revenues and other liabilities
Accrued expenses
Accounts
payableby operating activities
Net cash provided
Accruedexpensesand other
liabilities
Cash flows from investing
activities:

$

2020
2019
2018
For the Years Ended December 31,
20202,197
20191,503
20181,848$$$

Net cash provided
by operating
activities
Proceeds
from maturities
of available-for-saleinvestments
Cashflows frominvesting activities:
Purchasesof available-for-saleinvestments
Proceeds
from maturities of available-for-sale investments
Capital expenditures
Purchasesof available-for-saleinvestments
Other investing
activities
Capitalexpenditures
Net cash used in investing activities
Other
investingactivities activities:
Cash
flows
from financing$

Netcash provided
by in
(used
financing
activities and restricted cash
Net
increase(decrease)cashin)andcash equivalents
Effectandof foreignexchange rateon cashcash equivalents
Cashcash equivalents
andchanges
restrictedcashandat beginningof periodNet(decrease)in cashcash equivalents
and ofrestrictedCashincrease
and cashequivalents
andandrestrictedcash at end
period cash
Cash and cash equivalents and restricted cash at beginning of period$$
Cash and cashcash
equivalents
and restricted cash at end of period
Supplemental
flow information:
Cash paid for income taxes, net of refunds$
Supplemental
flow information:
Cash paid forcash
interest
Cash paid for income taxes, net of refunds$(1) Excludes deferral and amortization of share-based compensation expense.
Cash
paid
for
interest(2) Includes the net effects of capitalization, deferral, and amortization of share-based compensation expense.

1,503
(352)
64
(352)
328
64
225
328
166
225
19
166
19
182

(35)
509
489
509
209
489
53
209
53
(114)
(372)
(114)
(56)
(372)
(122)
(56)
(65)
(122)
(554)
(65)
1,790
(554)
1,790
116

(221)
121
(78)
(221)
(78)
(178)

(65)
153
(116)
(65)
6
(116)
(22)
6
(22)
105

(209)
116
(131)
(209)
(6)
(131)
(230)
(6)
(230)
99

(59)
105
(283)
(59)
(283)

(94)
99
(259)
(94)
(259)
(1,740)

69
711
2,854
69
5,798
2,854
8,652
5,798
8,652
806
82
806
82

$
$

(237)
(3)
(237)
1,569
(3)
4,229
1,569
5,798
4,229
5,798

$
$

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

F-7
F-7

1,848
(35)

(275)
182
171
(275)
(154)
171
31
(154)
(77)
31
1,831
(77)
1,831
153

Excludes deferral and amortization of share-based compensation expense.
Includes the net effects of capitalization, deferral, and amortization of share-based compensation expense.

F-7

$

(378)
(194)
(119)
(378)
216
(119)
(10)
216
(154)
(10)
2,252
(154)
2,252
121

(178)
170
(39)
170
(316)
(39)
1,994
(316)
(1,050)1,994(20)(1,050)
(28)
(20)
(28)
711

Net cash used
investing
Proceeds
frominissuanceof activities
common stock to employees
Cash
from
financing
Tax flows
payment
relatedto netactivities:
share settlements on restricted stock units
Proceeds from
Dividends
paidissuance of common stock to employees
Taxpayment
to net shareon restricted stock units
Proceeds
fromrelated
debt issuances,
netsettlementsof discounts
Dividends
paid
Repayment of long-term debt
Proceeds offromdebt issuances,
Payment
financingcosts net of discounts
Repaymentoflong-term
debtPremium payment for early
redemption of note
Paymentoffinancing
costs
Other financing activities
Premium
payment by
for(used
early in)redemptionnote
Net cash provided
financingofactivities
Other
financing
activities
Effect of foreign exchange rate changes on cash and cash equivalents

(1)
(2)

2,197
(94)
65
(94)
197
65
249
197
218
249
59
218
59
(194)

319
86
319
86

(1,740)
(25)
(1)
(25)
(2,020)
(1)
(31)

$
$
$
$

(2,020)
(491)
(31)
4,720
(491)
4,229
4,720
4,229
560
150
560
150

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

1. Description of Business
Activision Blizzard, Inc. is a leading global developer and publisher of interactive entertainment content and services. We
operate esports leagues and offer digital advertising within some of our conten
tively to Activision Blizzard, Inc. and its subsidiaries.
Our Segments
Based upon our organizational structure, we conduct our business through three reportable segments, each of which is aleading global developer and publisher of interactive entertainment content and services based primarily on our internallydeveloped intellectual properties.
(i) Activision Publishing, Inc.
) delivers content through both premium and 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®, a first-person action franchise.
TM
Activision also includes the activities of the Call of Duty League , a global professional esports league with city-based teams.
(ii) Blizzard Entertainment, Inc.
delivers content through both premium and free-to-play offerings and primarily
generates revenue from full-game and in-game sales, 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 thehises include: World of Warcraft®, a subscription-based massive
creation of user-generated cont®
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 LeagueTM, a global professional esports league with city-based teams.
(iii) King Digital Entertainment
ily through free-to-play offerings and primarily generates
revenue from in-game sales and in-game advertising on the mobile
Other
We also engage in other businesses that do not represent reportable segments, including the Activision Blizzard
distribution services to third-party publishers of interactive entertainment software, our own publishing operations, andmanufacturers of interactive entertainment hardware.

F-8

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
2. Summary of Significant Accounting Policies
Basis of Consolidation and Presentation
The accompanying consolidated financial statements include the accounts and operations of the Company. Allintercompany accounts and transactions have been eliminated. The consolidated financial statements have been prepared ineparation ofconformity with accounting principles generally accepted in th
the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ
from these estimates and assumptions.
Certain reclassifications have been made to prior-year amounts to conform to the current period presentation.
The Company considers events or transactions that occur after the balance sheet date, but before the financial statements
are issued, for additional evidence relative to certain estimates or to identify matters that require additional disclosures.
Cash and Cash Equivalents
We consider all money market funds and highly liquid investments with original maturities of three months or less at theInvestment Securities
Investments in debt securities designated as available-for-sale are carried at fair value, which is based on quoted market
prices for such securities, if available, or is estimated on the basis of quoted market prices of financial instruments with similar
securities are excluded from earnings andcharacteristics. Unrealized gains and losses
Investments with original maturities greater than three months and remaining maturities of less than one year are
year may be classified
investment of cash that is available for current operations.
The specific identification method is used to determine the cost of securities disposed of, with realized gains and losses
Investments in equity securities which are not accounted for under the equity method and for which there is not a readily
determinable fair value are carried at cost, less impairment, and adjusted for changes resulting from observable price changes inorderly transactions for identical or similar investment of the same issuer.
Financial Instruments
approximate fair value due to the short-term nature of these accounts. Ourinvestments in U.S. treasuries, government agency securities, and corporate bonds, if any, are carried at fair value, which isbased on quoted market prices for such securities, if available, or is estimated on the basis of quoted market prices of financial
instruments with similar characteristics.
We transact business in various foreign currencies and have significant international sales and expenses denominated inforeign currencies, subjecting us to foreign currency risk. To mitigate our foreign currency risk resulting from our foreign
currency-denominated monetary assets, liabilities, earnings and our foreign currency risk related to functional currencyequivalent 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 forour currency derivative contracts are large and reputable commercial or investment banks.
F-9

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)

values of foreign currency contracts are estimated based on the prevailing exchange rates of the various hedged currencies as ofthe end of the period. We report the fair value of these cont
We do not hold or purchase foreign currency forward contracts for trading or speculative purposes.
For foreign currency forward contracts which are not designated as hedging instruments under ASC 815, we record thechanges in the estimated fair value of these derivatives withinstatements of operations, consistent with the nature of the underlying transactions.
For foreign currency forward contracts which have been designated as cash flow hedges in accordance with ASC 815, we
assess the effectiveness of these cash flow hedges at inception and on an ongoing basis and determine if the hedges are effectiveat providing offsetting changes in cash flows of the hedged items. The Company records the changes in the estimated fair value
accumulated other comprehensive income (lohedged item impacts earnings, consistent with the nature and timing of the underlying transactions. Cash flows from these
foreign currency forward contracts are classified in the same category as the cash flows associated with the hedged item in the
consolidated statements of cash flows. We measure hedge ineffectiveness, if any, and if it is determined that a derivative hasceased to be a highly effective hedge, the Company will discontinue hedge accounting for the derivative.
Concentration of Credit Risk
Our concentration of credit risk relates to depositors holwith significant accounts receivable balances.
Our cash and cash equivalents are invested primarily in money market funds consisting of short-term, high-quality debt
instruments issued by governments and governmental organizations, financial institutions, and industrial companies.
Our customer base includes first party digital storefronts, retailers and distributors, including mass-market retailers,
consumer electronics stores, discount warehouses, and game specialty stores in the U.S. and other countries worldwide. We
perform ongoing credit evaluations of our customers and maintain allowances for potential credit losses. We generally do not
require collateral or other security from our customers.
For the year ended December 31, 2020, Sony Interactive Entert
and 11%, respectively. For the years ended December 31, 2019 and 2018, Apple, Google, and Sony were our most significant
customers with revenues of 17%, 13%, and 11%, respectively, for 2019, and 15%, 11%, and 13%, respectively, for 2018. Noother customer accounted for 10% or more of our net revenues in those periods.
receivables at December 31, 2020, and 11% and 18%, respectively, at December 31, 2019. No other customer accounted for
10% or more of our consolidated gross receivables in those periods.

F-10Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Software Development Costs and Intellectual Property Licenses
Software development costs include direct costs incurred for internally developed products, as well as payments made to
independent software developers under development agreements. Software development costs are capitalized once
technological feasibility of a product is established and such costs are determined to be recoverable. Technological feasibility ofa product requires both technical design documentation and game design documentation, or the completed and tested productdesign and a working model. For products where proven technology exists, this may occur early in the development cycle.
Software development costs related to online hosted revenue arrangements are capitalized after the preliminary project phase iscomplete and it is probable that the project will be completed and the software will be used to perform the function intended.
Significant management judgments and estimates are applied in assessing when capitalization commences for software
believe capitalized costs are not recoverable, we expense th

sts for products that are canceled or are expected to be

are not capitalized are charged imme
italized software development costs
software royalties, amortization, and intellectual property licen
revenues for the specific product, generally resulting in an amortization period of six months to approximately two years.
Intellectual property license costs represent license fees paid to intellectual property rights holders for use of theirtrademarks, copyrights, software, technology, music or other intellectual property or proprietary rights in the development ofour products. Depending upon the agreement with the rights holder, we may obtain the right to use the intellectual property intion, and intellectual property
are canceled or are expected to be abandoned are charged to

specific product to total projected revenues for all products in which the licensed property will be utilized. As intellectual
property license contracts may extend for multiple years and can be used in multiple products to be released over a period
beyond one year, the amortization of capitalized intellectual property license costs relating to such contracts may extend beyond
one year.
We evaluate the future recoverability of capitalized software development costs and intellectual property licenses on aquarterly basis. For products that have been released, the primary evaluation criterion is the actual performance of the title towhich the costs relate. For products that are scheduled to be released in future periods, recoverability is evaluated based on the
expected performance of the specific products to which the costs relate or in which the licensed trademark or copyright is to be
used. Additionally, criteria used to evaluate expected product performance may include, as appropriate: historical performanceof comparable products developed with comparable technology; market performance of comparable titles; orders for the
product prior to its release; general market conditions; and, for any sequel product, estimated performance based on theperformance of the product on which the sequel is based.
Significant management judgments and estimates are utilized in assessing the recoverability of capitalized costs. In
evaluating the recoverability of capitalized costs, the assessment of expected product performance utilizes forecasted sales
amounts and estimates of additional costs to be incurred. If revised forecasted or actual product sales are less than the originallyforecasted amounts utilized in the initial recoverability analysis, the net realizable value may be lower than originally estimatedin any given quarter, which could result in an impairment charge. Material differences may result in the amount and timing of

F-11

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Assets Recognized from Costs to Obtain a Contract with a Customer
We apply the practical expedient to expense, as incurred, costs to obtain a contract with a customer when the amortization
period would have been one year or less for certain similar contracts in which commissions are paid to internal personnel or
third parties. We believe application of the practical expedient has a limited effect on the amount and timing of cost recognition.
Total capitalized costs to obtain a contract were immaterial as of December 31, 2020 and 2019.
Long-Lived Assets
Property and Equipment.
Property and equipment are recorded at cost and depreciated on a straight-line basis over the estimated useful life of theasset (i.e., 25 to 33 years for buildings, and 2 to 5 years for computer equipment, office furniture and other equipment). Whenassets are retired or disposed of, the cost and accumulated depreciation thereon are removed and any resulting gains or losses
are included in the consolidated statements of operations. Leasehold improvements are amortized using the straight-line method
over the estimated life of the asset, not to exceed the length of the lease. Repair and maintenance costs are expensed as incurred.
Goodwill and Other Indefinite-Lived Assets.
Goodwill is considered to have an indefinite life and is carried at cost. Acquired trade names are assessed as indefinite
lived assets if there are no foreseeable limits on the periods of time over which they are expected to contribute cash flows.
Goodwill and indefinite-lived assets are not amortized, but are subject to an annual impairment test, as well as between annual
tests when events or circumstances indicate that the carrying value may not be recoverable. We perform our annual impairment
testing at December 31.
Our annual goodwill impairment test is performed at the reporting unit level. As of December 31, 2020 and 2019, ourreporting units were the same as our operating segments. We generally test goodwill for possible impairment first by
performing a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is lessthan its carrying value. If a qualitative assessment is not used, or if the qualitative assessment is not conclusive, a quantitative
impairment test is performed. If a quantitative test is performed, we determine the fair value of the related reporting unit andcompare this value to the recorded net assets of the reporting unit, including goodwill. The fair value of our reporting units isdetermined using an income approach based on discounted cash flow models. In the event the recorded net assets of thereporting unit exceed the estimated fair value of such assets, an impairment charge is recorded for this amount under revised
accounting guidance effective for the year ended December 31, 2020, and future periods. Refer to Note 3 for further discussion
on the revised accounting guidance. Based on our annual impairment assessment, no impairments of goodwill were identified
for the years ended December 31, 2020, 2019, and 2018.
We test our acquired trade names for possible impairment by applying the same process as for goodwill. In the instancewhen a qualitative test is not performed or is inconclusive, a quantitative test is performed by using a discounted cash flow
model to estimate fair value of our acquired trade names. Based on our annual impairment assessment, no impairments of ouracquired trade names were identified for the years ended December 31, 2020, 2019, and 2018.
Changes in our assumptions underlying our estimates could result in future impairment charges.
Amortizable Intangible and Other Long-lived Assets.
Intangible assets subject to amortization are carried at cost less accumulated amortization, and amortized over theestimated useful life in proportion to the economic benefits received.

F-12

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
We evaluate the recoverability of our definite-lived intangible assets and other long-lived assets when events orcircumstances indicate a potential impairment exists. We consider certain events and circumstances in determining whether the
carrying value of identifiable intangible assets and other long-lived assets, other than indefinite-lived intangible assets, may not
be recoverable including, but not limited to: significant changes in performance relative to expected operating results;
significant changes in the use of the assets; significant negative industry or economic trends; a significant decline in our stock
price for a sustained period of time; and changes in our business strategy. If we determine that the carrying value may not berecoverable, we estimate the undiscounted cash flows to be generated from the use and ultimate disposition of the asset group to
determine whether an impairment exists. If an impairment is indicated based on a comparison
values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of theasset group exceeds its fair value. We did not record an impairment charge to our definite-lived intangible assets for the years
ended December 31, 2020, 2019, and 2018.
LeasesIn February 2016, the FASB issued new guidance related to the accounting for leases. The new standard replaced all
current U.S. GAAP guidance on this topic. On January 1, 2019, we adopted the new lease accounting standard.
We determine if an arrangement is or contains a lease at contract inception. In certain of our lease arrangements, primarily
those related to our data center arrangements, judgment is required in determining if a contract contains a lease. For thesearrangements, there is judgment in evaluating if the arrangement provides us with an asset that is physically distinct, or that
represents substantially all of the capacity of the asset, and if we have the right to direct the use of the asset. Lease assets andliabilities are recognized based on the present value of future lease payments over the lease term at the commencement date.
Included in the lease liability are future lease payments that are fixed, in-substance fixed, or are payments based on an index orrate known at the commencement date of the lease. Variable lease payments are recognized as lease expenses as incurred, andgenerally relate to variable payments made based on the level of services provided by the landlords of our leases. The operatingt also includes any lease payments made prior to the lease commencement date, initial direct
costs incurred, and lease incentives received. As most of our leases do not provide an implicit rate, we generally use ourincremental borrowing rate in determining the present value of future payments. The incremental borrowing rate represents anapproximation of the rate that would be charged to borrow funds to purchase the leased asset over a similar term, and is basedon the information available at the commencement date of the lease. For leased assets with similar lease terms and asset types,
we applied a portfolio approach in determining a single incremental borrowing rate for the leased assets.
In determining our lease liability, the lease term includes options to extend the lease when it is reasonably certain that wewill exercise such option. For operating leases, the lease expense for minimum lease payments is recognized on a straight-line
basis over the lease term. Finance lease assets are depreciated on a straight-line basis over the estimated life of the asset, not toexceed the length of the lease, with interest expense associated with finance lease liabilities recorded using the effective interest
method. Leases with an initial term of 12 months or less are not recorded on the balance sheet and we recognize lease expense
for these leases on a straight-line basis over the lease term.
We have lease agreements with lease and non-lease components. For our real estate, server and data center, and event
production and broadcasting equipment leases, we elected the practical expedient to account for the lease and non-lease
components as a single lease component. In all other lease arrangements, we account for lease and non-lease components
separately. Additionally, for certain leases that have a group of leased assets with similar characteristics in size and composition,
we may apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities.
Operating lease ROU assets are presente
Finance lease ROU assets are presented

F-13

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Revenue Recognition
In May 2014, the FASB issued new accounting guidance related to revenue recognition. On January 1, 2018, we adopted
the new accounting standard and related amendments.
We generate revenue primarily through the sale of our interactive entertainment content and services, principally for the
console, PC, and mobile platforms, as well as through the licensing of our intellectual property. Our products span various
following products and services:premium full games, which typically provide access to main game content after purchase;free-to-play offerings, which allows players to download the game and engage with the associated content forfree;
in-game content for purchase to enhance gameplay (i.e. microtransactions and downloadable content) available
within both our full-game and free-to-play offerings; andsubscriptions to players in our World of Warcraft franchise that provide ongoing access to the game content.
When control of the promised products and services is transferred to our customers, we recognize revenue in the amountthat reflects the consideration we expect to receive in exchange for these products and services.
We determine revenue recognition by:
identifying the contract, or contracts, with a customer;
identifying the performance obligations in each contract;
determining the transaction price;
allocating the transaction price to the performance obligations in each contract; andrecognizing revenue when, or as, we satisfy performance obligations by transferring the promised goods orservices.
Certain products are sold to customers w
retailers). For these products, we recognize revenues on the later of the street date and the date the product is sold to ourcustomer. For digital full-game downloads sold to customers, we recognize revenue when it is available for download or isactivated for gameplay. Revenues are recorded net of taxes assessed by governmental authorities that are imposed at the time ofthe specific revenue-producing transaction between us and our customer, such as sales and value-added taxes.
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment
immediately upon purchase or within 30 to 90 days. In instances where the timing of revenue recognition differs from thetiming of invoicing, we do not adjust the promised amount of consideration for the effects of a significant financing component
when we expect, at contract inception, that the period between our transfer of a promised product or service to our customer andpayment for that product or service will be one year or less.

F-14

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Product Sales
Product sales consist of sales of our games, including digital full-game downloads and physical products. We recognize
revenues from the sale of our products after both (1) control of the products has been transferred to our customers and (2) theunderlying performance obligations have been satisfied. Such revenues, which include our software products with significant
online functionality and our online hosted software arrangements, are recognized in "Product sales" on our consolidated
statement of operations.
Revenues from product sales are recognized after deducting the estimated allowance for returns and price protection,
which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns and priceprotection are estimated at contract inception and updated at the end of each reporting period as additional information becomes
available.
Sales incentives and other consideration given by us to our customers, such as rebates and product placement fees, areconsidered adjustments of the transaction price of our products and are reflected as reductions to revenues. Sales incentives andother consideration that represent costs incurred by us for distinct goods or services received, such as the appearance of our
expense when the benefit fromthe sales incentive is separable from sales to the same customer and we can reasonably estimate the fair value of the good orservice.
Products with Online Functionality
For our software products that include both offline functionality (i.e., do not require an Internet connection to access) andsignificant online functionality, such as for most of our titles from the Call of Duty franchise, we evaluate whether the license of
our intellectual property and the online functionality each represent separate and distinct performance obligations. In such
instances, we typically have two performance obligations: (1) a license to the game software that is accessible without anInternet connection (predominantly the offline single player campaign or game mode) and (2) ongoing activities associated withthe online components of the game, such as content updates, hosting of online content and gameplay, and online matchmaking
es of
the game that are only available online, not the offline license. This evaluation is performed for each software product or
product add-on, including downloadable content. When we determine that our software products contain a license of
intellectual property (i.e., the offline software license) that is separate and distinct from the online functionality, we consider
market conditions and other observable inputs to estimate the standalone selling price for the performance obligations, since we
do not generally sell the software license on a standalone basis. These products may be sold in a bundle with other products andservices, which often results in the recognition of additional performance obligations.
For arrangements that include both a license to the game software that is accessible offline and separate online
functionality, we recognize revenue when control of the license transfers to our customers for the portion of the transaction
price allocable to the offline software license and ratably over the estimated service period for the portion of the transaction
price allocable to the online functionality. Similarly, we defer a portion of the cost of revenues on these arrangements andrecognize the costs as the related revenues are recognized. The cost of revenues that are deferred include product costs,
distribution costs, and software royalties, amortization, and intellectual property licenses, and excludes intangible asset
amortization.
Online Hosted Software Arrangements
For our online hosted software arrangements, such as titles for the Overwatch, World of Warcraft, and Candy Crush
franchises, substantially all gameplay and functionality are obtained through our continuous hosting of the game content for theplayer. In these instances, we typically have a single performance obligation related to our ongoing activities in the hosted
arrangement, including content updates, hosting of the gameplay, online matchmaking, and access to the game content. Similar
to our software products with online functionality, these arrangements may include other products and services, which often
results in the recognition of additional performance obligations. Revenues related to online hosted software arrangements are
generally recognized ratably over the estimated service period.
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Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
In-game, Subscription, and Other Revenues
In-game Revenues
In-game revenues primarily includes revenues from microtransactions and downloadable content. Microtransaction
revenues are derived from the sale of virtual currencies and goods to our players to enhance their gameplay experience.
Proceeds from these sales of virtual currencies and goods are initially recorded in deferred revenue. Proceeds from the sales ofvirtual currencies are recognized as revenues when a player uses the virtual goods purchased with a virtual currency. Proceedsfrom the direct sales of virtual goods are similarly recognized as revenues when a player uses the virtual goods. We categorize
specific player action; accordingly, we recognize revenues from the sale of consumable virtual goods as the goods are
consumed and our performance obligation is satisfied. Durable virtual goods represent goods that are accessible to the playerover an extended period of time; accordingly, we recognize revenues from the sale of durable virtual goods ratably over theperiod of time the goods are available to the player and our performance obligation is satisfied, which is generally the estimatedservice period.
Subscription Revenues
Subscription revenue arrangements are mostly derived from World of Warcraft, which is only playable online and isgenerally sold on a subscription-only basis. Revenues associated with the sales of subscriptions are deferred until thesubscription service is activated by the consumer and are then recognized ratably over the subscription period as theperformance obligations are satisfied.
Revenues attributable to the purchase of World of Warcraft software by our customers, including expansion packs, arenues attributable to subscriptions and othe
Other Revenues
Other revenues primarily include revenues from software licensing and licensing of intellectual property other thansoftware. These revenues are recognized in "In-game, subscription, and other revenues" on our consolidated statement ofoperations.
In certain countries we have software licensing arrangements where we utilize third-party licensees to distribute and hostour games in accordance with license agreements, for which the licensees typically pay us a fixed minimum guarantee andsales-based royalties. These arrangements typically include multiple performance obligations, such as an upfront license of
intellectual property and rights to specified or unspecified future updates. Our estimate of the selling price is comprised ofseveral factors including, but not limited to, prior selling prices, prices charged separately by other third-party vendors for
similar service offerings, and a cost-plus-margin approach. Based on the allocated transaction price, we recognize revenue
associated with the minimum guarantee (1) when we transfer control of the upfront license of intellectual property, (2) upontransfer of control of future specified updates, and/or (3) ratably over the contractual term in which we provide the customer
with unspecified future updates. Royalty payments in excess of the minimum guarantee are generally recognized when thelicensed product is sold by the licensee.
Revenues from the licensing of intellectual property other than software primarily include the licensing of our (1) brand,logo, or franchise to customers and (2) media content. Fixed fee payments from customers for the license of our brand or
franchise are generally recognized over the license term. Fixed fee payments from customers for the license of our media
content are generally recognized when control has transferred to the customer, which may be upfront or over time.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Significant Judgment around Revenue Arrangements with Multiple Deliverables
Our contracts with customers often include promises to transfer multiple products and services. Determining whether
products and services are considered distinct performance obligations that should be accounted for separately versus together
may require significant judgment. Certain of our games, such as titles in the Call of Duty franchise, may contain a license of ourintellectual property to play the game offline, but may also depend on a significant level of integration and interdependencywith the online functionality. In these cases, significant judgment is required to determine whether this license of ourintellectual property should be considered distinct and accounted for separately, or not distinct and accounted for together withthe online functionality provided and recognized over time. Generally, for titles in which the software license is functional
without the online functionality and a significant component of gameplay is available offline, we believe we have separate
performance obligations for the license of the intellectual property and the online functionality.
Significant judgment is also required to determine the standalone selling price for each distinct performance obligationand to determine whether there is a discount that needs to be allocated based on the relative standalone selling price of thevarious products and services. To estimate the standalone selling price we generally consider market data, including our pricing
strategies for the product being evaluated and other similar products we may offer, competitor pricing to the extent data isavailable, and the replayability design of both the offline and online components of our games. In limited instances, we may
also utilize an expected cost approach to determine whether the estimated selling price yields an appropriate profit margin.
Estimated Service Period
We consider a variety of data points when determining the estimated service period for players of our games, including
d last days played online, the average total hours played, thepurchase date and last date played online. We also consider known online trends, the service periods of our previously released
We
games, and, to the extent publicly available, the service periods
believe this provides a reasonable depiction of the transfer of services to our customers, as it is the best representation of thetime period during which our customers play our games. Determining the estimated service period is subjective and requires
historical usage patterns, and therefore the estimated service
period may change in the future. The estimated service periods for players of our current games are less than 12 months.
Principal Agent Considerations

fees retained by the storefront. Key indicators that we evaluate in determining whether we are the principal in the sale (grossreporting) or an agent (net reporting) include, but are not limited to:which party is primarily responsible for fulfilling the promise to provide the specified good or service; andwhich party has discretion in establishing the price for the specified good or service.
Based on our evaluation of the above indicators, we report revenues on a gross basis for sales arrangements via the AppleApp Store and the Google Play Store, and we report revenues on a net basis (i.e., net of fees retained by the digital storefront)

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Allowances for Returns and Price Protection
We may permit product returns from, or grant price protection to, our customers under certain conditions. In general, priceprotection refers to the circumstances in which we elect to decrease, on a short- or longer-term basis, the wholesale price of a
product by a certain amount and, when granted and applicable, allow customers a credit against amounts owed by suchcustomers to us with respect to open and/or future invoices. The conditions our customers must meet to be granted the right toreturn products or receive price protection credits include, among other things, compliance with applicable trading and payment
terms and delivery of sell-through reports to us. We may also consider the facilitation of slow-moving inventory and othermarket factors.
Management uses judgment in estimates made with respect to potential future product returns and price protection related
to current period product revenues and when establishing the allowance for returns and price protection. We estimate theamount of future returns and price protection for current period product revenues utilizing historical experience and information
regarding inventory levels and the demand and acceptance of our products by the end consumer, and record revenue for thetransferred products in the amount of consideration to which we expect to be entitled.
Based upon historical experience, we believe that our estimates are reasonable. However, actual returns and priceprotection could vary from our allowance estimates and therefore impact the amount and timing of our revenues for any period
if conditions change or if matters resolv
determining the allowances.
Contract Balances
We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment,
and record deferred revenue when cash payments are received or due in advance of our performance, even if amounts arerefundable.
The allowance for doubtful accounts reflects our best estimate of expected credit losses inherent in our accounts
receivable balance. In estimating the allowance for doubtful accounts, we analyze the age of current outstanding accountbalances, historical bad debts, customer concentrations, customer creditworthiness, current economic trends, and changes in ourll as whether we can obtain sufficient credit insurance. Any
significant changes in any of these criteria would affect mana
accounts.
Deferred revenue is comprised primarily of unearned revenue related to the sale of products with online functionality or
online hosted arrangements. We typically invoice, and collect payment for, these sales at the beginning of the contract period
and recognize revenue ratably over the estimated service period. Deferred revenue also includes payments for: product sales
pending delivery or activation; subscription revenues; licensing revenues with fixed minimum guarantees; and other revenues
for which we have been paid in advance and earn the revenue when we transfer control of the product or service.
Refer to Note 11 for further information, including changes in deferred revenue during the period.
Shipping and Handling
Shipping and handling costs consist primarily of packaging and transportation charges incurred to move finished goods toincurred when control of the product has already transferred to the customer.

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Tableof Contents
Table
Table ofof Contents
Contents

ACTIVISIONBLIZZARD,
INC.
AND
SUBSIDIARIESACTIVISION BLIZZARD,
BLIZZARD, INC.
INC. ANDAND SUBSIDIARIESSUBSIDIARIESACTIVISION
Notes
toConsolidated
Financial
Statements(continued)
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements (continued)(continued)
Notes

Cost
of
Revenues
Cost ofof Revenues
Revenues
Cost
Our
cost
of
revenues
consistofthefollowing:
Our cost
cost ofof revenues
revenues consist
consist ofof thethe following:
following:
Our

includesthemanufacturing
costs
of
goods
produced
and
sold.
These
generally
includeproduct
includes thethe manufacturing
manufacturing costs
costs ofof goods
goods produced
produced andand sold.
sold. These
These generally
generally include
include productproduct
includescosts,
manufacturing
royalties(netofvolumediscounts),
personnel-related
costs,
warehousing,anddistribution
costs,
manufacturing
royalties(netofvolumediscounts),
personnel-related
costs,
warehousing,anddistribution
costs,
manufacturing
royalties volume(net of volume
discounts),
personnel-related
costs,inwarehousing,and thedistribution
costs.
We
generallyrecognize
discounts
when
they
are
earned(typicallyconnection
withcosts. We
We generally
generally recognize
recognize volume
volume discounts
discounts when
when they
they areare earned
earned (typically(typically inin connection
connection with
with thethecosts.
achievementofunit-based
milestones).
achievement ofof unit-based
unit-based milestones).
milestones).
achievement
includestheamortizationofcapitalized
includes thethe amortizationamortization ofof capitalized
capitalized
includessoftwarecosts
androyalties
attributabletoproductsales
revenues.
These
are
costs
capitalizedonthebalancesheet
softwarecosts
androyalties
attributabletoproductsales
revenues.
These
are
costs
capitalizedonthebalance sheet
sheet
softwarecosts and royalties
attributabletowhichproductsales
revenues.
These
are
costs
capitalizedonthe balance
until
the
respective
games
are
released,
at
time
the
capitalized
costs
are
amortized.
Also
included
is
until
the
respective
games
are
released,
at
which
time
the
capitalized
costs
are
amortized.
Also
includedisuntil
the respective
games assets
are released,
at whichtime theaccounting
capitalizedattributable
costs are amortized.
Also
includedisamortizationof
intangible
recognizedinpurchasetoproductsales
revenues.
amortization ofof intangible
intangible assets
assets recognizedrecognized inin purchasepurchase accounting
accounting attributable
attributable toto productproduct sales
sales revenues.
revenues.
amortization

includescosts
tooperateourgames,
suchascustomer
service,
Internet
includes costs
costs toto operate
operate ourour games,
games, such
such asas customer
customer service,service, Internet
Internet
includesbandwidthandservercosts,
platform
providerfees,
andpayment
provider
fees,
along
with
costs
to
associatedwithbandwidthandservercosts,
platform
providerfees,
andpayment
provider
fees,
along
with
costs
to
associatedwithbandwidthandserver costs, platform provider fees, and payment provider fees, along with costs to associated withouresports
activities.
ouresports
activities.
our esports activities.
includestheamortizationofcapitalized
includes thethe amortizationamortization ofof capitalized
capitalized
includessoftwarecosts
androyalties
attributabletoin-game,subscription,
and
other
revenues.
These
are
costs
capitalized
softwarecosts
androyalties
attributabletoin-game,subscription,
and
other
revenues.
These
are
costs
capitalized
softwarecosts androyalties
attributabletoin-game,subscription,and time
othertherevenues.
These
are arecosts
capitalizedonthebalance
sheet
until
the
respective
games
are
released,atwhichcapitalized
costs
amortized.
onthebalance
sheet
until
the
respective
games
are
released,
at
which
time
the
capitalized
costs
are
amortized.
ontheincluded
balance issheet
until the respective
games
arerecognized
released, atinwhichtimeaccounting
the capitalized
costs areamortized.
Also
amortizationof
intangible
assetspurchase
attributabletoin-game,
Also included
included isis amortizationamortization ofof intangible
intangible assets
assets recognizedrecognized inin purchasepurchase accounting
accounting attributable
attributable toto in-game,in-game,Also
subscription,
and
other
revenues.
subscription,
and
other
revenues.
subscription, and other revenues.
Advertising
Expenses
Advertising Expenses
Expenses
Advertising
We expense advertising
advertising as
as incurred, except
except for production
production costs
costs associatedassociated with
with media advertising,advertising, which
which areare deferreddeferredWe
We expense
expenseadvertising
as incurred,
incurred,
except forfor production
costs
associatedwith media
mediaexpenses
advertising,which
areended
deferredandchargedtoexpensewhentherelatedadvertisement
is
run
for
the
first
time.
Advertising
for
the
years
and
chargedtoexpensewhen
the related
advertisement isrun
thetime. Advertisingexpenses
the years
ended
andcharged31,
to2020,expensewhenrelatedrun forforthe first
firstexpenses for
for
ended
December
2019,
andthe2018
wereadvertisement$746 million,
million,is$587$587
million,andtime.
$631Advertisingmillion, respectively,
respectively,
andtheareyears
includedinDecember
31,
2020,
2019,
and
2018
were
$746
million,and$631
million,andare
includedinDecember 31, 2020, 2019, and 2018lidated
were $746
million,$587
million,and$631
million,respectively,
andareincludedinstatementsofoperations.
lidatedlidated statements
statements ofof operations.
operations.
Income Taxes
Taxes
IncomeIncomeTaxes
We record
record aa tax
tax provision
provision forfor thethe anticipatedanticipated tax
tax consequences
consequences ofof thethe reported
reported results
results ofof operations.
operations. In
In accordance
accordance with
with
We
We
recordathe
taxprovision
provisionfor
forincomethe anticipatedtax consequencesofassetthe reported
resultsof operations.
In accordance
with
ASC
Topic
740,
taxes
is
computed
using
the
and
liability
method,under
whichdeferredtax
ASC Topic
Topic 740,
740, thethe provision
provision forfor income
income taxes
taxes isis computed
computed using
using thethe asset
asset andand liability
liability method, under
under which deferreddeferred tax
tax
ASC
assets andand liabilities
liabilities
are recognizedrecognized
for thethe expected
expected
future tax
tax consequences
consequences
attributablemethod,
to differences
differences which
between thethe financial
financialassetsareforfutureattributabletobetweenassetsand carrying
liabilitiesamounts
are recognized
for theexpected
future tax
attributabledifferences
thetaxfinancialstatementof existing
existing
assetsand liabilities
liabilities
andconsequences
their respective
respective
tax bases
basestoandandoperatingbetween
losses andandcreditstatement
carrying amounts
amounts ofofassets
and
and
their
tax
operatinglossestax credit
creditstatement
carrying
existing
assetsandliabilities
and
their
respective
tax
bases
and
operatinglossesandtax
carryforwards.
Deferredtax
assetsandliabilities
aremeasuredusingenactedtax
rates
expected
to
apply
to
taxableincomeincarryforwards. DeferredDeferred tax
tax assets
assets andand liabilities
liabilities areare measured
measured using
using enacted
enacted tax
tax rates
rates expected
expected toto apply
apply toto taxable
taxable income
income inincarryforwards.
the
years
in
which
those
temporarydifferencesareexpectedtoberecoveredorsettled.
The
effectondeferredtax
assetsandthe years
years in which
which those
those temporary differences
differences areare expected to
to bebe recovered
recovered oror settled. The
The effecteffect on
on deferreddeferred tax
tax assets
assets andtheliabilities indue toto aa changechangetemporary
in taxtax rates
rates isis recognizedrecognizedexpected
in incomeincome inin thethe period
period thatthatsettled.
includes thethe enactment
enactment
date. WeWe evaluate
evaluateandliabilities
due
in
in
includesdate.
liabilities
dueassets
to a change
in taxfor
rates
is recognizedin thoseincomein theperiodthat
includes the enactment date. We evaluate hat
deferred tax
tax
each period
periodrecoverability.
For
assetsthat
do notnotmeet
hatdeferred
assets each
each
for recoverability.
recoverability.
For
those assets
assets
that
do
meet
hat
deferredtax
assetsperiod
for
For
those
that
do
not
meet
they will
will bebe realized
realized inin thethe future,
future, aa valuation
valuation allowanceallowance isis recorded.
recorded.
they
they will be realized in the future, a valuation allowance is recorded.
We report
report aa liability
liability forfor unrecognizedunrecognized tax
tax benefits
benefits resulting
resulting fromfrom uncertain tax
tax positions taken
taken or expected
expected to be
be taken inin aWeWe report
a liabilityinterestfor unrecognizedtax ifbenefits
resulting from uncertain
uncertain tax positions
positions taken oror expected toto be taken
taken in aa
tax
return.
We
recognize
andpenalties,
any,
re
tax
tax return.
return. We
We recognize
recognize interest
interest andand penalties,
penalties, if
if any,any, rereced
theU.S. corporate
incometax rate
from
35%
to
21%
ced
the
corporateincomefrom35%
tocedearnings
the U.S.
U.S.ofcorporateincome tax
tax rate
rate
fromother
35% things,
to 21%
21%thebeginning
in
2018
and
imposeda
one-timetaxondeemedrepatriatedforeignsubsidiaries.
Among
beginning
in
2018
and
imposedaa one-timetaxondeemedrepatriatedearnings
offoreignsubsidiaries.
Among
other
things,thebeginning
in
2018
and
imposed
one-timetaxondeemedrepatriatedearnings
offoreignsubsidiaries.
Among
other
things,
the
U.S.
Tax
ReformAct
also
createdaa new
minimumtax
thatapplieU.S.
Tax
ReformAct
also
creatednewminimumtax
thatapplieU.S.
Tax
ReformAct
also
createdanewminimumtax
thatapplierecognize
deferred taxes
for temporary
basis differences
expected toreverse as
GILTI infuture years.
recognize
recognize deferreddeferred taxes
taxes forfor temporary
temporary basis
basis differences
differences expected
expected toto reverse
reverse as
as GILTIGILTI inin future
future years.
years.
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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)

Excess tax benefits and tax deficiencies from share-based payments are recorded as an income tax expense or benefit in
the consolidated statement of operations. The tax effects of exercised or vested equity awards are treated as discrete items in thereporting period in which they occur.
Foreign Currency Translation
All assets and liabilities of our foreign subsidiaries who have a functional currency other than U.S. dollars are translated
into U.S. dollars at the exchange rate in effect at the balance sheet date, and revenue and expenses are translated at average

Earnings (Loss) Per Common Share

shares outstanding, increased by the weighted-average number of common stock equivalents. Common stock equivalents arecalculated using the treasury stock method and represent incremental shares issuable upon exercise of our outstanding options.
However, potential common shares are not included in the denominator of the diluted earnings (loss) per common sharecalculation when inclusion of such shares would be anti-dilutive, such as in a period in which a net loss is recorded.
Share-Based Payments
We account for share-based payments in accordance with ASC Subtopic 718-10. Share-based compensation expense for agiven grant is recognized over the requisite service period (that is, the period for which the employee is being compensated) andis based on the value of share-based payment awards after a reduction for estimated forfeitures. Forfeitures are estimated at thetime of grant and are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
We generally estimate the value of stock options using a binomial-lattice model. This estimate is affected by our stock
price, as well as assumptions regarding a number of highly complex and subjective variables, including our expected stock
price volatility over the term of the awards and projected employee stock option exercise behaviors.
common stock on the date of grant, reduced by the present value of the estimated future dividends during the vesting period.
Certain restricted stock units granted to our employees vest based on the achievement of pre-established performance
conditions, including those that are market-based. For performance-based restricted stock units not subject to market
conditions, each quarter we update our assessment of the probability that the specified performance criteria will be achieved.
We amortize the fair values of performance-based restricted stock units over the requisite service period, adjusting for estimatedforfeitures for each separately vesting tranche of the award. For market-based restricted stock units, we estimate the fair value
at the date of grant using a Monte Carlo valuation methodology and amortize those fair values over the requisite service period,
adjusting for estimated forfeitures for each separately vesting tranche of the award. The Monte Carlo methodology that we use
to estimate the fair value of market-based restricted stock units at the date of grant incorporates into the valuation the possibility
that the market condition may not be satisfied. Provided that the requisite service is rendered, the total fair value of the marketbased restricted stock units at the date of grant must be recognized as compensation expense even if the market condition is notachieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified
market criteria.
For share-based compensation grants that are liability classified, if any, we update our grant date valuation at eachreporting period and recognize a cumulative catch-up adjustment for changes in the value related to the requisite service alreadyrendered.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Loss Contingencies
ASC Topic 450 governs the disclosure of loss contingencies and accrual of loss contingencies in respect of litigation andother claims. We record an accrual for a potential loss when it is probable that a loss will occur and the amount of the loss canbe reasonably estimated. When the reasonable estimate of the potential loss is within a range of amounts, the minimum of therange of potential loss is accrued, unless a higher amount within the range is a better estimate than any other amount within therange. Moreover, even if an accrual is not required, we provide additional disclosure related to litigation and other claims when
it is reasonably possible (i.e., more than remote) that the outcomes of such litigation and other claims include potential material
adverse impacts on us.
3. Recently Issued Accounting Pronouncements
Recently adopted accounting pronouncements
Cloud Computing Arrangements
cloud computing arrangement (i.e., hosting arrangement) that is a service contract. The new guidance requires customers tocapitalize implementation costs for these arrangements by applying the same criteria that are utilized for existing internal-use
software guidance. The capitalized costs are required to be amortized over the associated term of the arrangement, generally ona straight-line basis, with amortization of these costs presented in the same financial statement line item as other costs
associated with the arrangement. We adopted the new standard under a prospective approach during the first quarter of 2020
and it did not have a material impact on our consolidated financial statements.
Goodwill
In January 2017, the FASB issued new guidance that eliminates Step 2 from the goodwill impairment test. Instead, if anentity forgoes a Step 0 test, that entity will be required to perform its annual or interim goodwill impairment test by (1)comparing the fair value of a reporting unit, as determined in Step 1 from the goodwill impairment test, with its carrying
amount and (2) recognizing an impairment charge, if any, for the amount by which the carrying amount exceeds the reporting
allocated to the reporting unit. We adopted the new standard under aprospective approach during the first quarter of 2020 and it did not have a material impact on our consolidated financial
statements.
Financial Instruments - Credit Losses
In June 2016, the FASB issued new guidance related to accounting for credit losses on financial instruments. The update
replaces the existing incurred loss impairment model with a methodology that reflects a current expected credit losses model
which requires the use of historical and forward-looking information to calculate credit loss estimates. It also eliminates theconcept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to berecorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. Thesechanges will generally result in earlier recognition of credit losses. We adopted the new standard under a modified retrospective
basis, with the cumulative effect of adoption recorded as an adjustment to retained earnings during the first quarter of 2020. The
adoption of this standard did not have a material impact on our consolidated financial statements.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Recent Accounting Pronouncements Not Yet Adopted
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued new guidance which is intended to simplify various aspects to accounting for income
taxes by removing certain exceptions to the general principles in Topic 740 for recognizing deferred taxes for investments,
performing an intraperiod allocation and calculating income taxes in interim periods. The amendment also clarifies and amends
certain areas of existing guidance to reduce complexity and improve consistency in the application of Topic 740. The newstandard is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in any
interim period for which financial statements have not yet been issued. Generally the topics must be applied prospectively
upon adoption, with the exception of certain topics which are required to be applied on a retrospective or modified retrospective
basis. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.
4. Cash and Cash Equivalents
The following table summarizes the components of our cash and cash equivalents (amounts in millions):
At December 31,
2020

Cash
Foreign government treasury bills
Money market funds$

Cash and cash equivalents

$

2019

268
34
8,345
8,647

$

437
37
5,320
5,794

$

5. Software Development and Intellectual Property Licenses
The following table summarizes the components of our capitalized software development costs (amounts in millions):
At December 31,
2020

Internally-developed software costs
Payments made to third-party software developers$

Total software development costs

$

2019

485
27
512

$

345
31
376

$

As of both December 31, 2020 and December 31, 2019, capitalized intellectual property licenses were not material.
Amortization of capitalized software development costs and intellectual property licenses was as follows (amounts inmillions):
For the Years Ended December 31,
2020

Amortization of capitalized software development costs and intellectual
property licenses

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$

2019

263

$

2018

241

$

501

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
RecentAccounting
Pronouncements
Not Yet Adopted
6. Property
and Equipment,
Net
Simplifying
the and
Accounting
for Income
Propertyequipment,
net wasTaxes
comprised of the following (amounts in millions):
At Decemberfor
31, income
In December 2019, the FASB issued new guidance which is intended to simplify various aspects to accounting
2020
2019
taxes by removing certain exceptions to the general principles in Topic 740 for recognizing deferred taxes for investments,
performing
an intraperiod allocation and calculating income taxes in interim periods. The amendment
also clarifies$
1 $and amends1
Land
certainareas of existing guidance to reduce complexity and improve consistency in the application of Topic 740.
Buildings
4 The new4
standard is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in any
246
252
Leasehold improvementsinterim period for which financial statements have not yet been issued. Generally the topics must be applied prospectively
704
654
Computerequipment
upon
adoption,with the exception of certain topics which are required to be applied on a retrospective or modified
retrospective
basis.
do notandexpecttheequipment
adoption of this standard to have a material impact on our consolidated financial 95
statements.
91
OfficeWefurniture
other
1,050
1,002
Total cost of property and equipment
4. Cash and Cash Equivalents
Less accumulated depreciation
(841)
(749)
209 $
253
Propertyand equipment,net
The following
table summarizes
the components of our cash and cash equivalents (amounts$ in millions):
At December 31,

Depreciation expense for the years ended December 31, 2020, 2019, and 2018 was $117 million,$124 million, and
$138
2020
2019
million, respectively.
$
268 $
437
Cash
34
37
Foreigngovernment
treasurybills
7. Intangible Assets, Net
8,345
5,320
Money market funds
Intangible
assets,net
consistofthefollowing(amounts
inmillions):$
8,647 $
5,794
Cash and cash equivalents
At December 31, 2020
Estimated
5. Software Development and Intellectual Property Licenses
usefullives

Grosscarrying
amountNet
carrying
amountAccumulated
amortization

Thedefinite-lived
following tablesummarizes
the components of our capitalized software development costs (amounts in millions):
Acquiredintangible
assets:At December
Internally-developed franchises
3 - 11 years $1,154 $
(1,151)$ 31,
32020(601)
2019
Developed software
2 - 5 years
601
$
485 $
345
Internally-developed
software costs
Trade names
7 years
54(40)
14
Payments
madetothird-party
softwaredevelopers
27
31
Other
1 - 10 years
19
(18)
1
$
512
$
376
Total
softwaredevelopment
costs$
1,828 $
(1,810) $18
Total definite-lived intangible assets

As ofboth December
31, 2020assets:
and December 31, 2019, capitalized intellectual property licenses were not material.
Acquiredindefinite-lived
intangible
Activision trademark
Indefinite$
386
Amortization of capitalized software development costs and intellectual property licenses was as follows (amounts in
Acquired trade names
Indefinite
47
millions):$
433
Total indefinite-lived intangible assets
For the Years Ended December 31,$
451
Total intangible assets, net
2020

Amortization of capitalized software development costs and intellectual
property licenses

F-23

$

2019

263

$

2018

241

$

501

Table of Contents

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated
Financial(continued)
ACTIVISIONBLIZZARD,
INC.Statements
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
At December 31, 2019

Acquired definite-lived intangible assets:
Internally-developed franchises
Acquireddefinite-lived
Developed
software intangible assets:
Internally-developed
franchises
Trade names
Developed
software
Other
Trade names
Total definite-lived intangible assets
Other

Estimated
usefullives
Estimated
usefullives

3 - 11 years
2 - 5 years
37 -- 11
10 years
years
21 -- 515years
years
7 - 10 years
1 - 15 years

$
$
$

Gross
Accumulated
carrying
At December 31, 2019
amountamortization
Gross
Accumulated
carrying
amountamortization

1,154
601
1,154
54
601
19
54
1,828
19
1,828

$
$
$

(1,105)(579)(1,105)
(30)
(579)
(16)
(30)
(1,730)(16)(1,730)Net carrying
amount$Net carrying
amount

49
22
49
24
223
24
98
3
98

$
$

$
$
$
Total
definite-lived
intangible
assets assets:
Acquiredindefinite-lived
intangible
Activision trademark
Indefinite$
Acquired
Acquiredindefinite-lived
trade names intangible assets:
Indefinite
Activision trademark
Indefinite$$
Total indefinite-lived intangible assets
Acquired trade names
Indefinite$
Total intangible assets, net$
Total indefinite-lived intangible assets$
Total intangible assets, net
Amortization expense of intangible assets was $80 million, $204 million, and $371 million for the years ended
December 31, 2020, 2019, and 2018, respectively.
Amortization expense of intangible assets was $80 million, $204 million, and $371 million for the years ended
At December
2020,
December31, 2020,31,
2019,
andfuture
2018,amortization
respectively.of definite-lived intangible assets is estimated as follows (amounts inmillions):
At December 31, 2020, future amortization of definite-lived intangible assets is estimated as follows (amounts in
2021$
millions):
2022
2021
$
2023
2022
2024
2023
2025
2024
Thereafter
2025
$
Total
Thereafter$
Total
8. Goodwill

386
47
386
433
47
531
433
531

10
6
10
2
6
2
18
18

The changes in the carrying amount of goodwill by operating segment are as follows (amounts in millions):
8. Goodwill
Activision
Blizzard
King
The changes in the carrying amount of goodwill by operating
segment are
as follows (amounts
in millions):$
6,897 $
190 $
2,675 $
Balance at December 31, 2018
Activision
Blizzard
King
Other
1
1
$$
6,897
$
190
$
2,675
BalanceatDecember31,
2018
6,898 $
190 $
2,676 $$
Balance at December 31, 2019
Other
1
1
1
Other
$$
6,898
$
190
$
2,676
BalanceatDecember31,
2019
6,899 $
190 $
2,676 $$
Balance at December 31, 2020
1
Other
$
6,899 $
190 $
2,676 $
Balance at December 31, 2020
At December 31, 2020, 2019, and 2018, there were no accumulated impairment losses.

At December 31, 2020, 2019, and 2018, there were no accumulated impairment losses.

F-24
F-24

Total

9,762
2
9,762
9,764
2
1
9,764
9,765

Total

1
9,765

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
9. Other Assets and Liabilities
Recent Accounting Pronouncements Not Yet Adopted

consolidated balance sheets are accrued payroll-related costsof$406 million
and $395 million
at December
Simplifying
the Accounting
for Income
Taxes 31, 2020 and 2019, respectively, and the current portion of income taxes payableof $100 million and $436 million at December 31, 2020 and 2019, respectively.
In December 2019, the FASB issued new guidance which is intended to simplify various aspects to accounting for income
10.
Fair
Measurementstaxes
by Value
removing
certain exceptions to the general principles in Topic 740 for recognizing deferred taxes for investments,
performing an intraperiod allocation and calculating income taxes in interim periods. The amendment also clarifies and amends
FASB
literature
regardingvaluemeasurements
for certain
assets andestablishes
a three-level
fair value
certainTheareasof existingguidance
to fair
reducecomplexity
and improveconsistency
inliabilities
the applicationof Topic
740. The newhierarchy
prioritizes
the inputs
to measurefair value. 15,
This2020.
hierarchy
to maximize
the useof in any
standard isthat
effective
for fiscal
yearsused
beginning
after December
Earlyrequires
adoptionentities
is permitted,
including
adoption
TheGenerally
three levels
inputsmust
usedbetoapplied
measurefair value are asinterim period for which financial statements have not yet been issued.
theoftopics
prospectively
follows:
upon adoption, with the exception of certain topics which are required to be applied on a retrospective or modified retrospective
basis. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.
4. Cash and Cash Equivalents

in Level 1, such as quoted prices for similar assets
or liabilities
active markets
or other inputs
thatcashare observableor can be corroborated
by observable market
The following
table insummarizes
the componentsof ourand cash equivalents(amounts in millions):
data; andAt December 31,

2020are significant to2019
no market activity and thatthe fair$ flow methodologies,
268 $
437
value of the assets or liabilities, including certain pricing models, discounted cash
and similar
Cashtechniquesthat use
34
37
Foreign government
treasury
billssignificant unobservable inputs.
8,345
5,320
Money market funds
Fair Value Measurements on a Recurring Basis$
8,647 $
5,794
Cash and cash equivalents
The table below segregates all of our financial assets and liabilities that are measured at fair value on a recurring basis
intothemostDevelopment
appropriate levelthe fairProperty
value hierarchy
based on the inputs used to determine the fair value at the
5. Software
andwithinIntellectual
Licensesmeasurement date (amounts in millions):
The following table summarizes the components of our capitalized software development costs (amounts in millions):
Fair Value Measurements at December 31, 2020 Using
QuotedPrices in Active
Markets for
Identical Assets(Level 1)

Significant
Other
Observable
Inputs(Level 2)

Significant
Unobservable
Inputs $(Level 3)

At December 31,
2020

2019

485
$ Sheet 345
Balance
Internally-developed software costs As of December
Classification
31, 2020
Payments made to third-party software developers
27
31
Financial Assets:
$
512 $
376
Total software development costs
Recurring fair value
measurements:of bothDecember 31, 2020$and December
capitalized
wereandnotcashmaterial.
MoneyAs
marketfunds
8,345 31,
$ 2019,8,345$ intellectual $property licensesCash
equivalents
Foreign government treasury bills
34
34
Cash and cash equivalents
Amortization of capitalized software development costs and intellectual property licenses was as follows (amounts in
U.S. treasuries and government
millions):
164
Other current assets
agencysecurities
164
Total recurring fair value
measurements

$

8,543

$

8,543

$

Amortization of capitalized software development costs and intellectual
Financial
Liabilities:
property licenses
Foreign currency forward(2) $$contracts not designated as hedges $Foreign currency forward$(24) $$
contracts designated as hedges

F-25

$
2020
$

For the Years Ended December 31,
2019

263
(2)

$

(24)

$

$

2018

241 $
501
Accrued expenses andother liabilities
Accrued expenses andother liabilities

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES

Table of Contents

Notes to Consolidated
Financial(continued)
ACTIVISIONBLIZZARD,
INC.Statements
AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Fair Value Measurements at December 31, 2019 Using

As of December
31, 2019
As of December
Financial Assets:
31, 2019
Recurring fair value
Financial Assets:measurements:
Recurringfair value
Money market
funds
$
5,320
measurements:
Foreign government treasury bills
37
Money market funds$
5,320
U.S. treasuries and government
Foreigngovernment treasury bills
37
agency securities
65
U.S.
Totaltreasuries
recurring andfair government
value
agencysecurities
65
$
5,422
measurements
Total recurring fair value$
5,422
measurements
Financial
Liabilities:
Foreign currency forward
Financial
Liabilities:(2)
contracts notdesignated as hedges $Foreigncurrency
forward
Foreign currency forward(2)
contracts designatednot designatedas hedges $$(2)
contracts
as hedges
Foreign currency forward$(2)
contracts designated as hedges
Foreign Currency Forward Contracts

QuotedSignificant
Significant
Fair
Value
Measurements
at December 31,
2019 Using
Pricesin Active
Other
Unobservable
Markets for
Observable
QuotedSignificant
InputsIdentical Assets
InputsSignificant
Pricesin Active
Other2)(Level1)(Level(Level 3)
Unobservable
Markets for
Observable
InputsIdentical Assets
Inputs(Level 1)(Level 2)(Level 3)$

Balance SheetClassification
Balance SheetClassification

$

$

$

5,320
37
5,320
37
65

$

$

Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents
Cashcashassets
equivalents
Otherandcurrent

$

65
5,422

$

$

Other current assets

$

5,422

$

$

$

$

(2)

$

$$

$$

(2)
(2)

$$

$

$

(2)

$

Accrued expenses andother liabilities
AccruedAccrued expenses
expenses andandother liabilities
liabilities
other
Accrued expenses andother liabilities

Foreign Currency Forward Contracts
The total gross notional amounts and fair values of our Cash Flow Hedges, all of which have remaining maturities of 11months or less, are as follows (amounts in millions):
The total gross notional amounts and fair values of our Cash Flow Hedges, all of which have remaining maturities of 11
As of December 31, 2019
months or less, are as follows (amounts in millions): As of December 31, 2020
Notional amount
Fair value gain (loss)
As of December 31, 2020

Notional amount
Fair value gain (loss)
As of December 31, 2019

Foreign Currency:
Notional amount
Fair value gain (loss)
Notional amount
Fair value gain (loss)
Buy USD, Sell Euro
$
542 $
(24)
$
350 $
(2)
Foreign Currency:
Buy USD, Sell Euro
$
542 $
(24)
$
350 $
(2)
The amounts of pre-tax net realized gains (losses) associated with our Cash Flow Hedges that were reclassified out of
to earnings are as follows (amounts in millions):
The amounts of pre-tax net realized gains (losses) associated with our Cash Flow Hedges that were reclassified out of
For the Years Endedto
December
31,are as follows (amounts in millions):
earnings
Cash Flow Hedges

$

2020
2019
2018
For the Years Ended December 31,
2020

(3) $

2019

39

$

2018

$
(3) $
39 $
Cash Flow Hedges
Foreign Currency Forward Contracts Not Designated as Hedges

Statement of Operations Classification

7

Net revenues

Statement of Operations Classification

7

Net revenues

Foreign
ForwardContracts
as ourHedges
TheCurrency
total grossnotional
amounts Not
and Designatedfair values offoreign currency forward contracts not designated as hedges are as
follows (amounts in millions):
The total gross notional amounts and fair values of our foreign currency forward contracts not designated as hedges are as
As of December 31, 2020
As of December 31, 2019
follows (amounts in millions):
Foreign Currency:
Buy USD, Sell GBP
Foreign Currency:
Buy USD, Sell GBP

Notional amount
Fair value gain (loss)
As of December 31, 2020$$

Notional amount

Fair value gain (loss)

Notional amount
Fair value gain (loss)
As of December 31, 2019

116

$

(2)

$

116

$

(2)

$

F-26
F-26

Notional amount

Fair value gain (loss)

25

$

(2)

25

$

(2)

Table of Contents
Table of Contents

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Notes to Consolidated Financial Statements (continued)

During the years ended December 31, 2020, 2019, and 2018, pre-tax net gains and losses associated with these forward
During the years ended December 31, 2020, 2019, and 2018, pre-tax net gains and losses associated with these forward
11. Deferred Revenues
11. Deferred Revenues
We record deferred revenues when cash payments are received or due in advance of the fulfillment of our associatedWe record
deferred revenues
when cash
are non-current
received or due
in advanceof therevenues
fulfillment
our associatedperformanceobligations.
The aggregateof thepayments
current andbalancesof deferred
as of December
31, 2019
performanceobligations.
The
aggregateofthecurrent
andnon-current
balancesofdeferred
revenues
asofDecember31, 2019
and December 31, 2020, were $1.4 billion and $1.7 billion, respectively. For the year ended December 31, 2020, the additions
andDecember
2020, were
$1.4werebillionand $1.7
For the or
year
ended
December31, 2020,our
theperformance
additionsto ourdeferred31,
revenuesbalanceprimarily
duebillion,
to cashrespectively.
payments received
due
in advanceof satisfying
toobligations,
our deferred
revenuesbalancewereprimarily
due
to
cash
payments
receivedordueinadvanceofsatisfying
ourperformance
while the reductions to our deferred revenues balance were primarily
to the recognition of revenues uponobligations,while
reductionsobligations,to our deferredprimarily
due toofthe
recognitionof therevenues
upon
fulfillment of
our theperformancebothrevenuesof whichbalance
were in were
the ordinary
coursebusiness.
Duringyears ended
fulfillmentof
ourperformanceobligations,
both
of
which
were
in
the
ordinary
courseofbusiness.
During
the
years
ended
December 31, 2020, December 31, 2019, and December 31, 2018, $1.3 billion, $1.5 billion, and $1.7 billion of revenues,
December
31,were2020,recognized
Decemberthat
31, were
2019,included
and December
31, 2018,revenues$1.3 billion,$1.5atbillion,
and $1.7of revenues,
respectively,in the deferredbalancethe beginningofbillion
the period.
respectively, were recognized that were included in the deferred revenues balance at the beginning of the period.
As of December 31, 2020, the aggregate amount of contracted revenues allocated to our unsatisfied performance
As of December
31, 2020,
aggregate
contracted
revenues
unsatisfied
obligations
is $2.5 billion,
whichtheincludesouramountdeferredofrevenues
balances
andallocatedamountsto
toour
be invoiced
andperformancerecognized as
obligationsis$2.5
billion,which
includesourdeferred
revenuesbalancesandamounts
tobeinvoicedandrecognizedrevenue in future periods. We expect to recognize approximately $1.9 billion over the next 12 months, $0.4
billion in astherevenueinfutureperiods.
We
expecttorecognize
approximately$1.9
billion
over
the
next
12
months,$0.4
billionin thesubsequent 12-month period, and the remainder thereafter. This balance does not include an estimate for variable consideration
subsequent
12-month
period,andlicense
the remainder
does minimum
not includeguarantee
an estimate
for variablearising fromsales-based
royaltyrevenuethereafter.
in excess Thisof thebalance
contractualor anyestimatedconsideration
amounts ofarisingfromsales-based
royaltylicenserevenueinexcessofthecontractual
minimumguaranteeoranyestimatedamounts ofvariable consideration that are subject to constraint in accordance with the new revenue standard.
variable consideration that are subject to constraint in accordance with the new revenue standard.
12. Leases
12. Leases
Our lease arrangements are primarily for: (1) corporate, administrative, and development studio offices; and (2) data
Ourandlease
arrangements
primarily(1) have
corporate,
administrative,
development
offices;(2) data
centers
serverequipment.are
Our
existingfor:
leasesremaininglease termsand
rangingfrom onestudioto nineyears.andIn certain
centersandserverequipment.
Our
existing
leaseshaveremaining
lease
terms
ranging
from
one
to
nine
years.
In
certaininstances, such leases include one or more options to renew, with renewal terms that generally extend the lease term
instances,leasesforincludeone or more
options of
to lease
renew,renewal
with renewal
that generally
extendthe leaseAlltermby one to such
five years
each option.
The exercise
optionsterms
is generally
at our sole
discretion.
of our existing
by
one
to
five
years
for
each
option.
The
exerciseoflease
renewaloptionsisgenerally
at
our
sole
discretion.
Allof our existing
leases are classified as operating leases.
leases are classified as operating leases.
Components of our lease costs are as follows (amounts in millions):
Components of our lease costs are as follows (amounts in millions):
Year EndedYear EndedYear EndedYear Ended
December31, 2020
December31, 2019
December
31,
2020
December
31,
2019
Operating leases
OperatingleasesOperating lease costs
$
75 $
75
Operating
lease
costs
$
75
$
75
Variable lease costs
20
20
Variable lease costs
20
20
Rental expense prior to our adoption of the new lease standard was $75 million for the year ended December 31, 2018.
Rental expense prior to our adoption of the new lease standard was $75 million for the year ended December 31, 2018.
Supplemental information related to our operating leases is as follows (amounts in millions):
Supplemental information related to our operating leases is as follows (amounts in millions):

Supplemental Operating Cash Flows Information
Supplemental
Cash Flows
Cash paid forOperating
amounts includedin theInformation
measurement of lease liabilities
Cash
paid
for
amounts
includedinthemeasurementof lease liabilities
ROU assets obtained in exchange for new lease obligations
ROU assets obtained in exchange for new lease obligations

Weighted Average Lease terms and discount rates
Weighted
Average
Lease terms and discount rates
Remaininglease term
Remaininglease term
Discount rate
Discount rate
F-27
F-27

Year Ended
December31, 2020
Year Ended
December 31, 2020

$
$

77
77
80
80

Year Ended
December31, 2019
Year Ended
December 31, 2019

$
$

80
80
65
65

At December 31, 2020
At December 31, 2020

At December 31, 2019
At December 31, 2019

4.48 years
4.483.40
years%
3.40 %

5.00 years
5.004.02
years%
4.02 %

TableTable ofof Contents
Contents
ACTIVISION BLIZZARD,
BLIZZARD, INC.
INC. ANDAND SUBSIDIARIESSUBSIDIARIESACTIVISION
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements (continued)(continued)
Notes

Future undiscounted
undiscounted lease
lease payments
payments forfor our
our operating
operating lease
lease liabilities,
liabilities, andand aa reconciliation
reconciliation of
Futureof these
these payments
payments toto ourouroperatingleaseliabilities
atDecember
31,
2020,
are
as
follows(amounts
inmillions):
operating lease liabilities at December 31, 2020, are as follows (amounts in millions):
For thethe years
years ending
ending December
December 31,
31,
For
2021
2021
2022
2022
2023
2023
2024
2024
2025
2025
Thereafter
Thereafter
Total
Total future
future lease
lease payments
payments
Less
imputedLess imputed interest
interest
Total
Total lease
lease liabilities
liabilities

$$

$$
$$

75
75
71
71
64
64
53
53
33
33
18
18
314
314
(24)
(24)
290
290

OperatingOperating lease
lease ROU
ROU assets
assets andand liabilities
liabilities recorded
recorded on
on ourour consolidated
consolidated balancebalance sheet
sheet asas ofof December
December 31,
31, 2020
2020 and
and
December
31,
2019,
were
as
follows(amounts
inmillions):
December 31, 2019, were as follows (amounts in millions):

ROU
ROU assets
assetsAt
At December
December 31,
31, 2020
2020 AtAt December
December 31,
31, 2019
2019
$
243
232
$
243 $$
232

Current$
Current lease
lease liabilities
liabilities$
Non-current
lease
liabilities
Non-current lease liabilities
$
$

66
66
224
224
290
290

$$

63
63
210
210
273
273

$$

Balance
Balance Sheet
Sheet Classification
Classification
Other
Other assets
assets
AccruedAccrued expenses
expenses andand otherother current
current liabilities
liabilities
Otherliabilities
Other liabilities
Total
Total lease
lease liabilities
liabilities

13.
13. Debt
Debt
CreditCredit Facilities
FacilitiesAsAs ofof December
December 31,
31, 2020
2020 andand December
December 31,
31, 2019,
2019, we
we hadhad $1.5$1.5 billion
billion available
available under
under aa revolving
revolving credit
credit facility
facility (the
(the
tober
11,
2013
(as
amendedthereafter
and
from
time
tober 11, 2013 (as amended thereafter and from time toto time,time, thethe
The
The Revolver
Revolver isis scheduledscheduled to
to mature
mature onon AugustAugust 24,
24, 2023.
2023. Borrowings
Borrowings under
under thethe Revolver
Revolver will
will bear
bear interest,
interest, at
at the
the
of
(i)
the
federal
funds
rate,
plus
0.5%,
(ii)
the
prime
of (i) the federal funds rate, plus 0.5%, (ii) the prime commercial
commercial
lending
lending rate
rate ofof Bank
Bank ofof America,
America, N.A.
N.A. andand (iii)(iii) thethe London
London In
In
month
beginning
on
such
day
plus
1.00%,or(2)
LIBOR,
month beginning on such day plus 1.00%, or (2) LIBOR, inin eacheach case,case, plus
plus anan applicableapplicable interest
interest margin.
margin. LIBOR
LIBOR will
will bebesubject
to
a
floor
of
0%
and
base
rate
will
be
subjecttoaneffectivefloorof
1.00%.
The
applicableinterest
marginsubject to a floor of 0% and base rate will be subject to an effective floor of 1.00%. The applicable interest margin forforborrowings
borrowings under
under thethe Revolver
Revolver will
will range
range fromfrom 0.875%
0.875% to
to 1.375%
1.375% for
for LIBOR
LIBOR borrowings
borrowings andand fromfrom 0%0% to
to 0.375%
0.375% forfor basebase rate
rate
borrowings
and
will
be
determinedbyreferencetoapricingborrowings and will be determined by reference to a pricing
thethe Revolver
Revolver may
may bebe usedused forfor lettersletters ofof credit.
credit.
Under
Under thethe Credit
Credit Agreement,
Agreement, we
we areare subject
subject toto aa financial
financial
Debt
Ratio
(as
definedintheCreditAgreement)
notDebt Ratio (as defined in the Credit Agreement) not toto exceed
exceedofof timetime upon
upon thethe consummation
consummation ofof aa Qualifying
Qualifying Acquisition
Acquisition (as(as defined
defined inin thethe Credit
Credit Agreement),
Agreement), 4.25:1.00.
4.25:1.00. The
The Credit
CreditAgreement
contains
covenants
customaryfortransactions
of
this
type
for
issuerwithsimilarcreditratings.
These
Agreement contains covenants customary for transactions of this type for issuer with similar credit ratings. These include
include those
those
restricting
liens,
debt
ofnon-guarantor
subsidiaries
andcertainfundamental
changes,
in
each
case
with
exceptions,
restricting liens, debt of non-guarantor subsidiaries and certain fundamental changes, in each case with exceptions, including
including
exceptions
exceptions forfor secured
secured debt
debt andand debt
debt ofof non-guarantor
non-guarantor subsidiaries
subsidiaries ofof thethe Company,
Company, inin eacheach case
case upup to
to an
an amountamount not
not exceedingexceeding
7.5%
of
Total
Assets(asdefinedintheCreditAgreement).
We
were
in
compliance
with
the
terms
of
the
CreditAgreement
7.5% of Total Assets (as defined in the Credit Agreement). We were in compliance with the terms of the Credit Agreement as
as ofof
December
31,
2020.
December 31, 2020.
F-28

F-28

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Unsecured Senior Notes
As of December 31, 2020 and December 31, 2019, we had $3.7 billion and $2.7 billion, respectively, of gross unsecured
senior notes outstanding. A summary of our outstanding unsecured notes is as follows (amounts in millions):
At December 31, 2020
Unsecured Senior Notes

Interest
Rate

Semi-Annual Interest
Payments Due On

Maturity

2021 Notes
2022 Notes
2026 Notes
2027 Notes
2030 Notes
2047 Notes
2050 Notes

2.30%
2.60%
3.40%
3.40%
1.35%
4.50%
2.50%

Mar. 15 & Sept. 15
Jun. 15 & Dec. 15
Mar. 15 & Sept. 15
Jun. 15 & Dec. 15
Mar. 15 & Sept. 15
Jun. 15 & Dec. 15
Mar. 15 & Sept. 15

Sept. 2021
Jun. 2022
Sept. 2026
Jun. 2027
Sept. 2030
Jun. 2047
Sept. 2050

Total gross long-term debt
Unamortized discount anddeferred financing costs
Total net carrying amountAt December 31, 2019

Principal

Fair Value(Level 2)

Principal

Fair Value(Level 2)

$

$

$

$

850
400
500
400
1,500
$ 3,650(45)$ 3,605

970
454
490
525
1,462

650
400
850
400
400

653
405
893
417
456

$ 2,700(25)$ 2,675

On August 5, 2020, we issued the 2030 Notes and 2050 Notes in a public underwritten offering, for an aggregate principal
amount of $2.0 billion in new debt. In connection with the issuance, we incurred approximately $26 million of debt discountand financing costs that were capitalized
On September 4, 2020, we redeemed all of our outstanding 2021 Notes and 2022 Notes at a redemption price equal to

We may redeem some or all of each class of the unsecured senior notes. Any such redemption will be at a price equal to100% of the aggregate principal amount thereof plus accrued and unpaid interest as well as, for a redemption prior to theUpon the occurrence of certain change of control events, we will be required to offer to repurchase the notes outstanding
at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest. These repurchaserequirements are considered clearly and closely related to the unsecured notes and are not accounted for separately upon
issuance.
The outstanding notes are general senior obligations of the Company and rank pari passu in right of payment to all of thendebtedness that is secured to the extent of the value of thecollateral securing such indebtedness. The notes contain customary covenants that place restrictions in certain circumstanceson, among other things, the incurrence of secured debt, entry into sale or leaseback transactions, and certain merger orconsolidation transactions. We were in compliance with the terms of the notes outstanding as of December 31, 2020.
As of December 31, 2020, we have no contractual principal repayments of our long-term debt within the next five years.

F-29

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
14. Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) were as follows (amounts in millions):
For the Year Ended December 31, 2020
Foreign currencytranslation
adjustments

Unrealized gain
(loss)
on available-forsale securities

Unrealized gain
(loss)
on forward
contracts

Balance at December 31, 2019
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated othercomprehensive income (loss) into earnings

$

$

$

Balance at December 31, 2020

$

(624)

(3)

8

Total

$

(619)

37

(6)

(39)

(8)

(2)
(589)

4
(5)

3
(28)

5
(622)

$

$

$

For the Year Ended December 31, 2019
Foreign currencytranslation
adjustments

Unrealized gain
(loss)
on available-forsale securities

Unrealized gain
(loss)
on forward
contracts

Balance at December 31, 2018
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other

$

$

$

Balance at December 31, 2019

$

(629)

5

5

(624)

$

(8)
(3)

$

23

Total

$

(601)

24

29

(39)
8

(47)
(619)

$

15. Operating Segments and Geographic Regions
tivision, Blizzard, and King. Our operating segments are consistent with themanner in which our operations are reviewed and managed by our Chief Executive Officer, who is our chief operating decision
related cost of revenues with respect to certain of our online-enabled games; share-based compensation expense; amortizationof intangible assets as a result of purchase price accounting; fees and other expenses (including legal fees, expenses, andaccruals) related to acquisitions, associated integration activities, and financings; certain restructuring and related costs; andcertain 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.

F-30

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Information on the reportable segment net revenues and segment operating income are presented below (amounts inmillions):
Activision

Year Ended December 31, 2020
Blizzard
King

Segment Revenues
Net revenues from external customers
Intersegment net revenues (1)

$

3,942

$

Segment net revenues

$

3,942

Segment operating income

$

1,868

Activision

$

2,164

$

$

1,794
111
1,905

$

2,164

$

7,900
111
8,011

$

693

$

857

$

3,418

Year Ended December 31, 2019
Blizzard
King

Segment Revenues
Net revenues from external customers
Intersegment net revenues (1)

$

2,219

$

Segment net revenues

$

2,219

Segment operating income$

850

Activision

Total

$

2,031

$

$

1,676
43
1,719

$

2,031

$

5,926
43
5,969

$

464

$

740

$

2,054

Year Ended December 31, 2018
Blizzard
King

Segment Revenues
Net revenues from external customers
Intersegment net revenues (1)

$

2,458

$

Segment net revenues

$

2,458

Segment operating income

$

1,011

Total

$

2,086

$

$

2,238
53
2,291

$

2,086

$

6,782
53
6,835

$

685

$

750

$

2,446

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

F-31

Total

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Reconciliations of total segment net revenues and total segment operating income to consolidated net revenues andconsolidated income before income tax expense are presented in the table below (amounts in millions):

Reconciliation to consolidated net revenues:
Segment net revenues
Revenues from non-reportable segments (1)Net effect from recognition (deferral) of deferred net revenues (2)Elimination of intersegment revenues (3)Consolidated net revenues
Reconciliation to consolidated income before income tax
expense:Segment operating income
Operating income from non-reportable segments (1)Net effect from recognition (deferral) of deferred net revenues andrelated cost of revenues (2)Share-based compensation expense (Note 16)
Amortization of intangible assets
Restructuring and related costs (Note 17)
Discrete tax-related items (4)Consolidated operating income
Interest and other expense (income), net
Loss on extinguishment of debt
Consolidated income before income tax expense

2020
$

$

$

Years Ended December 31,
2019

8,011
519
(333)
(111)
8,086

$

3,418
(55)

$

$

(238)
(218)
(79)
(94)

$

2,734
87
31
2,616

5,969
462
101
(43)
6,489

$

2,054
24

$

$

52
(166)
(203)
(137)
(17)
1,607
(26)
$

1,633

2018
6,835
480
238
(53)
7,500

2,446
31
100
(209)
(370)
(10)

$

1,988
71
40
1,877

(1) Includes other income and expenses from operating segments managed outside the reportable segments, including ourDistribution 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 certainof our online-enabled products.
(3) Intersegment revenues reflect licensing and service fees charged between segments.
(4) Reflects the impact of other unusual or unique tax-related items and activities.

F-32

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Net revenues by distribution channel, including a reconciliation
follows (amounts in millions):

Net revenues by distribution channel:
Digital online channels (1)Retail channels
Other (2)Total consolidated net revenues
Change in deferred revenues:
Digital online channels (1)Retail channels
Other (2)Total change in deferred revenues
Segment net revenues:
Digital online channels (1)Retail channels
Other (2)Total segment net revenues

Net revenues by distribution channel:
Digital online channels (1)Retail channels
Other (2)Total consolidated net revenues
Change in deferred revenues:
Digital online channels (1)Retail channels
Other (2)Total change in deferred revenues
Segment net revenues:
Digital online channels (1)Retail channels
Other (2)Total segment net revenues

Activision

Year Ended December 31, 2020
NonElimination ofreportableintersegment
Blizzard
King
segments
revenues (3)

$

2,930
702
57
3,689

$

365
(112)

$
$

$

$

1,672
39
92
1,803

2,167

$

$

2,167

$

$

102

$

(3)

$

$

253

$

102

$

(3)

$

$

3,295
590
57
3,942

$

1,774
39
92
1,905

$

2,164

$

$

2,164

$

$

$

538
538

(19)
(19)

519
519

$

(111)

$

$

(111)

$

$

$

$

$

$

(111)

$

$

(111)

$

Activision

Year Ended December 31, 2019
NonElimination ofreportableintersegment
Blizzard
King
segments
revenues (3)

$

1,366
818
3
2,187

$

$

122
(90)

$
$

$

$

1,580
91
181
1,852

$

$

2,029

$

$

(128)
(5)

$

2

$

32

$

(133)

$

2

$

1,488
728
3
2,219

$

1,452
86
181
1,719

$

2,031

$

$

2,031

$

$

$

F-33

2,029

$
464
464

(2)
(2)

462
462

Total
6,658
741
687
8,086
464
(112)
(19)
333
7,122
629
668
8,419

Total

$

(43)

$

$

(43)

$

$

$

$

$

$

(43)

$

$

(43)

$

4,932
909
648
6,489
(4)
(95)
(2)
(101)
4,928
814
646
6,388

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)

Net revenues by distribution channel:
Digital online channels (1)Retail channels
Other (2)Total consolidated net revenues
Change in deferred revenues:
Digital online channels (1)Retail channels
Other (2)Total change in deferred revenues
Segment net revenues:
Digital online channels (1)Retail channels
Other (2)Total segment net revenues(1)(2)

Activision

Year Ended December 31, 2018
NonElimination ofreportableintersegment
Blizzard
King
segments
revenues (3)

$

$

1,740
998

$

2,738

$

$

(96)
(184)

$

2,009
109
148
2,266
32
(7)

$

2,090

$

$

2,090

$

$

(4)

$

$

(280)

$

25

$

(4)

$

$

1,644
814

$

2,041
102
148
2,291

$

2,086

$

$

2,458

$

$

2,086

$

459
459

21
21

480
480

$

(53)

$

$

(53)

$

$

$

$

$

$

(53)

$

$

(53)

$

es from digitally-distributed downloadable content,
microtransactions, subscriptions, and products, as well as licensing royalties.
Call of Duty League.

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

F-34

Total
5,786
1,107
607
7,500
(68)
(191)
21
(238)
5,718
916
628
7,262

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
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 segm

Net revenues by geographic region:
Americas
EMEA (1)Asia PacificTotal consolidated net revenues
Change in deferred revenues:
Americas
EMEA (1)Asia PacificTotal change in deferred revenues
Segment net revenues:
Americas
EMEA (1)Asia PacificTotal segment net revenues

Net revenues by geographic region:
Americas
EMEA (1)Asia PacificTotal consolidated net revenues
Change in deferred revenues:
Americas
EMEA (1)Asia PacificTotal change in deferred revenues
Segment net revenues:
Americas
EMEA (1)Asia PacificTotal segment net revenues

Activision

Year Ended December 31, 2020
NonElimination ofreportableintersegment
Blizzard
King
segments
revenues (2)

$

2,316
1,061
312
3,689

$

228
36
(11)
253

$

2,544
1,097
301
3,942

$

$
$

$
$

$

$

$

$

794
550
459
1,803

$

58
43
1
102

$

852
593
460
1,905

$

$

$

$

1,384
568
215
2,167

$

(1)
(1)
(1)
(3)

$

1,383
567
214
2,164

$

$

(60)
(37)
(14)
(111)

538
$

538

$

$

$

(19)

$

$

$

(60)
(37)
(14)
(111)

519
$

519

$

$

1,286
691
210
2,187

$

16
12
4
32

$

1,302
703
214
2,219

$

$
$

$
$

$

$

$

$

(62)
(57)
(14)
(133)
760
486
473
1,719

F-35

4,434
2,680
972
8,086

$

$

Activision

$

$

285
59
(11)
333

(19)

Year Ended December 31, 2019
NonElimination ofreportableintersegment
Blizzard
King
segments
revenues (2)
822
543
487
1,852

Total

$

$

1,254
557
218
2,029

$

2

$

$
464

$

464

$

(21)
(16)
(6)
(43)

$

4,719
2,739
961
8,419

$

Total
$

$

$

$

$

$

(2)
$

2

$

$

1,256
557
218
2,031

$

$

(2)

$
462

$

462

$

(21)
(16)
(6)
(43)

$

$

3,341
2,239
909
6,489
(44)
(47)
(10)
(101)
3,297
2,192
899
6,388

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)

Net revenues by geographic region:
Americas
EMEA (1)Asia PacificTotal consolidated net revenues
Change in deferred revenues:
Americas
EMEA (1)Asia PacificTotal change in deferred revenues
Segment net revenues:
Americas
EMEA (1)Asia PacificTotal segment net revenues

Activision

Year Ended December 31, 2018
NonElimination ofreportableintersegment
Blizzard
King
segments
revenues (2)

$

1,622
897
219
2,738

$

(163)
(127)
10
(280)

$

1,459
770
229
2,458

$

$
$

$
$

$

$

$

$

1,004
692
570
2,266

$

1,269
599
222
2,090

$

13
446

$

$

459

$

15
16
(6)
25

$

(3)
(1)

$

$

(4)

$

1,019
708
564
2,291

$

1,266
598
222
2,086

$

$

(28)
(16)
(9)
(53)

Total
$

$

$

$

21

$

$

$

13
467

$

$

480

$

21

(28)
(16)
(9)
(53)

$

$

3,880
2,618
1,002
7,500
(151)
(91)
4
(238)
3,729
2,527
1,006
7,262

(2) Intersegment revenues reflect licensing and service fees charged between segments.
were 48%, 46%, and 46% of consolidated net revenues for the years ended
for each of the
December 31, 2020, 2019, and 2018, respectively. The Comp
years ended December 31, 2020, 2019, and 2018 were 12% of
exceeded 10% of consolidated net revenues for the years ended December 31, 2020, 2019, or 2018.

F-36

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Net revenues by platform, including a reconciliation to each of(amounts in millions):

Net revenues by platform:
ConsolePC
Mobile and ancillary (1)Other (2)Total consolidated net revenues
Change in deferred revenues:
ConsolePC
Mobile and ancillary (1)Other (2)Total change in deferred revenues
Segment net revenues:
ConsolePC
Mobile and ancillary (1)Other (2)Total segment net revenues

Activision

Year Ended December 31, 2020
NonElimination ofreportableintersegment
Blizzard
King
segments
revenues (3)

$

2,668
582
382
57
3,689

$

140
64
49

$

$
$

$

116
1,489
106
92
1,803

$

(8)
115
(5)

$

$

$

102

$

$

2,808
646
431
57
3,942

$

108
1,604
101
92
1,905

$

F-37

2,167

$
(111)

$

538
538

$

$

(111)

$

$

$

$

$

$

$

(3)

253

$

$

96
2,071

$

$

$

Total

(3)

$

(19)
(19)

$
96
2,068

$

2,164

(111)

$

519
519

$

(111)

$

2,784
2,056
2,559
687
8,086
132
179
41
(19)
333
2,916
2,235
2,600
668
8,419

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)

Net revenues by platform:
ConsolePC
Mobile and ancillary (1)Other (2)Total consolidated net revenues
Change in deferred revenues:
ConsolePC
Mobile and ancillary (1)Other (2)Total change in deferred revenues
Segment net revenues:
ConsolePC
Mobile and ancillary (1)Other (2)Total segment net revenues

Activision

Year Ended December 31, 2019
NonElimination ofreportableintersegment
Blizzard
King
segments
revenues (3)

$

1,783
298
103
3
2,187

$

(36)
57
11

$

$
$

$

137
1,346
188
181
1,852
(18)
(110)
(5)

$

$

$

(133)

$

$

1,747
355
114
3
2,219

$

119
1,236
183
181
1,719

$

F-38

$

$
(43)

$

464
464

$

$

(43)

$

$

$

$

$

$

$

2

32

$

2,029

$

$

$

$
117
1,912

Total

2

$

(2)
(2)

$
117
1,914

$

2,031

(43)

$

462
462

$

(43)

$

1,920
1,718
2,203
648
6,489
(54)
(53)
8
(2)
(101)
1,866
1,665
2,211
646
6,388

TableTable ofof Contents
Contents
ACTIVISION BLIZZARD,
BLIZZARD, INC.
INC. ANDAND SUBSIDIARIESSUBSIDIARIESACTIVISION
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements (continued)(continued)
Notes

Net
Net revenues
revenues byby platform:
platform:
ConsoleConsolePC
PC
MobileMobile andand ancillaryancillary (1)
(1)
Other
(2)
Other (2)

Total
Total consolidated
consolidated net
net revenues
revenues
ChangeChange inin deferreddeferred revenues:
revenues:
ConsoleConsolePC
PC
MobileMobile andand ancillaryancillary (1)
(1)
Other
(2)
Other (2)

Total
Total changechange inin deferreddeferred revenues
revenues
Segment
Segment net
net revenues:
revenues:
ConsoleConsolePC
PC
MobileMobile andand ancillaryancillary (1)
(1)
Other
Other (2)
(2)

Total
Total segment
segment net
net revenues
revenues
(1)
(1)
(2)
(2)

Activision
ActivisionYear
Year Ended
Ended December
December 31,
31, 2018
2018
NonElimination
NonElimination ofofreportableintersegment
reportableintersegment
Blizzard
King
segments
revenues
Blizzard
King
segments
revenues (3)
(3)

$$

2,351
2,351
368
368
19
19

$$

$$

2,738
2,738

$$

$$

(257)
(257)
(23)
(23)

$$

187
187
1,711
1,711
220
220
148
148
2,266
2,266

$$

(8)
(8)
33
33

$$

$$

$$

(280)
(280)

$$

25
25

$$

$$

2,094
2,094
345
345
19
19

$$

$$

2,458
2,458

$$

179
179
1,744
1,744
220
220
148
148
2,291
2,291

$$

$$

154
154
1,936
1,936
2,090
2,090

(1)
(1)
(3)
(3)
(4)
(4)

153
153
1,933
1,933
2,086
2,086

$$

$$

$$

459
459
459
459

$$

$$

$$

21
21
21
21

$$

$$

(53)
(53)

480
480
480
480

(53)
(53)

Total
Total
$$

$$

$$

$$

$$

$$

$$

$$

(53)
(53)

$$

(53)
(53)

$$

2,538
2,538
2,180
2,180
2,175
2,175
607
607
7,500
7,500
(265)
(265)
99
(3)
(3)
21
21
(238)
(238)
2,273
2,273
2,189
2,189
2,172
2,172
628
628
7,262
7,262

om mobilemobile devices,
devices, as
as wellwell asas non-platform
non-platform specificspecific gamegameom
relatedrevenues,suchasstandalone
salesofphysicalmerchandise
andaccessories.
related revenues, such as standalone sales of physical merchandise and accessories.
Call ofof Duty
Duty League.
League.
Call(3) Intersegment
Intersegment revenues
revenues reflectreflect licensing
licensing andand service
service fees
fees charged
charged between
between segments.
segments.
(3)
Long-lived assets
assets byby geographic
geographic region
region were
were asas follows
follows (amounts(amounts inin millions):
millions):
Long-lived

Long-lived
Long-lived assets*
assets* byby geographic
geographic region:
region:Americas
Americas
EMEA
EMEA
Asia
Asia PacificPacific

$$

$$

Total
Total long-lived
long-lived assets
assets byby geographic
geographic region
region**At December
December 31,
31,
At
2019
2019

2020
2020
270
270
166
166
17
17
453
453

$$

$$

322
322
142
142
21
21
485
485

2018
2018
$$

$$

The
The only
only long-lived
long-lived assets
assets thatthat we
we classify
classify by
by region
region areare our
our long-termlong-term tangible
tangible fixed
fixed assets,
assets, which
which consist
consist ofof property,
property,plant,
andequipment
assets,
and
our
lease
right-of-use
assets;allotherlong-term
assetsarenotallocatedbyplant, and equipment assets, and our lease right-of-use assets; all other long-term assets are not allocated by location.
location.
Note
Note 2.
2.

For
For information
information regarding
regarding significant
significant custom
custom
F-39

F-39

203
203
62
62
17
17
282
282

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
16. Share-Based Payments
Activision Blizzard Equity Incentive Plans
me effective. Under the 2014
On June 5, 2014, the Activision Blizzard, Inc. 2014 IncentivePlan, the Compensation Committee of our Board of Directors is authorized to provide share-based compensation in the form ofstock options, share appreciation rights, restricted stock, restricted stock units, performance shares, and other performance- orvalue-based awards structured by the Compensation Committee within parameters set forth in the 2014 Plan. As of the effective
date of the 2014 Plan, we had ceased making awards under our prior equity incentive plans (collalthough such plans remain in effect to the extent that they continue to govern outstanding awards.
While the Compensation Committee has broad discretion to create equity incentives, our current share-based
compensation program generally utilizes a combination of options and restricted stock units. The majority of our options havetime-based vesting schedules, generally vesting annually over a period of three years to five years, and expire 10 years from the
grant date. In addition, under the terms of the 2014 Plan, the exercise price for the options must be equal to or greater than theclosing price per share of our common stock on the date the award is granted, as reported on Nasdaq. Restricted stock units
have time-based vesting schedules, generally vesting in their entirety on an anniversary of the date of grant, or vest annually
over a period of three years to five years, and may also be contingent on the achievement of specified performance measures,
including those which are market-based. Achievement against such performance measures typically results in vesting ofamounts that are different than the target shares at grant based on over- or under-achievement against the performance targets.
sufficiently overachieved (and will be cancelled without the vesting of any shares if the threshold level of performancebased on achievement against the performance targets.
As of the date it was approved by our shareholders, there were 46 million shares available for issuance under the 2014
Plan. The number of shares of our common stock reserved for issuance under the 2014 Plan has been, and may be further,increased from time to time by: (1) the number of shares relating to awards outstanding under any Prior Plan that: (i) expire, or
are forfeited, terminated or canceled, without the issuance of shares; (ii) are settled in cash in lieu of shares; or (iii) areexchanged, prior to the issuance of shares of our common stock, for awards not involving our common stock; (2) if the exercise
price of any option outstanding under any Prior Plans is, or the tax withholding requirements with respect to any award
outstanding under any Prior Plans are, satisfied by withholding shares otherwise then deliverable in respect of the award or theactual or constructive transfer to the Company of shares already owned, the number of shares equal to the withheld ortransferred shares; and (3) if a share appreciation right is exercised and settled in shares, a number of shares equal to thedifference between the total number of shares with respect to which the award is exercised and the number of shares actually
issued or transferred. As of December 31, 2020, we had approximately 20 million shares of our common stock reserved for
future issuance under the 2014 Plan. Shares issued in connection with awards made under the 2014 Plan are generally issued as
new stock issuances.
Fair Value Valuation Assumptions
Valuation of Stock Options
The fair value of stock options granted are principally estimated using a binomial-lattice model. The inputs in our
binomial-lattice model include expected stock price volatility, risk-free interest rate, dividend yield, contractual term, andmethods are used to estimate employee termination rates.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The following table presents the weighted-average assumptions, weighted average grant date fair value, and the range of
expected stock price volatility:
Employee Stock Options
For the Years Ended December 31,
2020

Expected life (in years)
Volatility
Risk free interest rate
Dividend yield
Weighted-average grant date fair value
Stock price volatility range:
Low
High

$

2019

2018

7.70
30.89 %
0.70 %
0.53 %
25.93
$

7.85
30.00 %
1.90 %
0.76 %
17.12
$

7.64
32.37 %
3.10 %
0.61 %
21.03

30.00 %
39.00 %

30.00 %
38.17 %

31.72 %
36.73 %

Expected life
The expected life of employee stock options is a derived output of the binomial-lattice model and represents theweighted-average period the stock options are expected to remain outstanding. A binomial-lattice model assumes that
employees will exercise their options when the stock price equals or exceeds an exercise multiple. The exercise multiple isbased on historical employee exercise behaviors.
Volatility
To estimate volatility for the binomial-lattice model, we consider the implied volatility of exchange-traded options on ourstock to estimate short-term volatility, the historical volatility
estimate long-term volatility, and a statistical model to estimate the transition from short-term volatility to long-term volatility.
Risk-free interest rate
As is the case for volatility, the risk-free interest rate is assu
free interest rate, which is based on U.S. Treasury yield curves, reflects the expected movement in the interest rate from one
time period to the next.
Dividend yield
The expected dividend yield assumption is based on our historical and expected future amount of dividend payouts.
Share-based compensation expense recognized is based on awards ultimately expected to vest and therefore has been
reduced for estimated forfeitures. Forfeitures are estimated at the time of grant based on historical experience and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates.

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)

on the date of grant reduced by the present value of dividends expected to be paid on our common stock prior to vesting. We
also grant market-based RSU awards, from time to time, whose fair value is determined using a Monte Carlo simulation. Suchmarket-based RSU awards include performance conditions based on our own stock price, and may also include performance
conditions that compare our stock price performance to an index, such as the S&P 500 Total Shareholder Return index. The
Monte Carlo model simulates performance of our stock, as well as any applicable stock index performance, over the
performance measurement period to determine the performance payout, with the resulting achievement discounted back to thevaluation date, at the risk-free rate, to arrive at the fair value of the awards. Additionally, the Monte Carlo simulation provides
an output of the service period to achieve the market condition in instances where such market condition can impact the vestingdate of the market-based RSU. The valuation assumptions utilized in the Monte Carlo model are generally consistent with those
discussed in the valuation of stock options above. The weighted average risk free interest rate, volatility, and dividend yield
utilized in the Monte Carlo model for market-based RSU awards in 2020 were 0.11%, 37.39%, and 0.47%, respectively.
Accuracy of Fair Value Estimatestermination behavior. Our ability to accurately estimate the fair value of share-based payment awards at the grant date depends
upon the accuracy of the model and our ability to accurately forecast model inputs for as long as 10 years into the future. These
inputs include, but are not limited to, expected stock price volatility, risk-free rate, dividend yield, and employee termination
rates. Although the fair value of employee stock options is determined using an option-pricing model, the estimates that are
produced by this model may not be indicative of the fair value observed between a willing buyer and a willing seller as there
are not current active markets for the trading of employee stock options and other share-based instruments.
Stock Option Activity
Stock option activity is as follows:
Number ofshares (inthousands)

14,029Outstanding stock options at December 31, 2019
GrantedExercised
Forfeited
ExpiredWeightedaverage
exercise priceper stock option$

Weightedaverageremaining
contractual
term (in years)

Aggregate
intrinsic value(in millions)44.31

Outstanding stock options at December 31, 2020

2,419
(4,543)(573)(35)
11,297

78.19
37.49
52.98
52.68
$

53.84

7.68 $

441

Vested and expected to vest at December 31, 2020
Exercisable at December 31, 2020

10,669
3,710

$
$

53.05
41.56

7.60 $
5.75 $

425
190

The aggregate intrinsic values in the table above represents the total pretax intrinsic value (i.e., the difference between our
closing stock price on the last trading day of the period and the exercise price, times the number of shares for options where theclosing stock price is greater than the exercise price) that would have been received by the option holders had all option holders
exercised their options on that date. This amount changes based on the market value of our stock. The total intrinsic value of
options actually exercised was $174 million, $80 million, and $196 million for the years ended December 31, 2020, 2019, and2018, respectively. The total grant date fair value of options that vested during the years ended December 31, 2020, 2019, and2018 was $62 million, $94 million, and $45 million, respectively.
At December 31, 2020, $66 million of total unrecognized compensation cost related to stock options is expected to berecognized over a weighted-average period of 1.25 years.
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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
RSU Activity
We grant RSUs, which represent the right to receive shares of our common stock. Vesting for RSUs is contingent upon
to other conditions (which may include the satisfaction of aperformance measure). Also, certain of our performance-based RSUs, including those that are market-based, include a range ofshares that may be released at vesting which are above or below the targeted number of RSUs based on actual performance
relative to the performance measure. If the vesting conditions are not met, unvested RSUs will be forfeited. Upon vesting of the
RSUs, we may withhold shares otherwise deliverable to satisfy tax withholding requirements.
The following table summarizes our RSU activity with performance-based RSUs, including those with market conditions,presented at 100% of the target level shares that may potentially vest (amounts in thousands, except per share data):
Weightedaverage grant
date fair value
per RSU

Number of shares

7,181

Unvested RSUs at December 31, 2019
Granted
VestedForfeited

2,254(1,513)
(820)
7,102

Unvested RSUs at December 31, 2020

$

54.23
201.25
49.76
55.39

$

82.50

Certain of our performance-based RSUs did not have an accounting grant date as of December 31, 2020, as there is not amutual understanding between the Company and the employee of the performance terms. Generally, these performance terms
relate to operating income performance for future years where the performance goals have not yet been set. As of December 31,
2020, based on the target potential shares that could be earned, there were 2.4 million performance-based RSUs outstanding forwhich the accounting grant date had not been set, of which 1.4 million were 2020 grants. Accordingly, no grant date fair value
was established and the weighted average grant date fair values calculated above excludes these RSUs.
At December 31, 2020, approximately $170 million of total unrecognized compensation cost was related to RSUs and is
expected to be recognized over a weighted-average period of 0.75 years. Of the total unrecognized compensation cost, $154
million was related to performance-based RSUs, which is expected to be recognized over a weighted-average period of 0.75
years. The total grant date fair value of RSUs that vested during the years ended December 31, 2020, 2019, and 2018 was $82
million, $147 million, and $120 million, respectively.
The income tax benefit from stock option exercises and RSU vestings was $61 million, $47 million, and $94 million forthe years ended December 31, 2020, 2019, and 2018, respectively.

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Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Share-Based Compensation Expense
The following table sets forth the total share-based compensation expense included in our consolidated statements ofoperations (amounts in millions):

intellectual property licenses

ftware royalties, amortization, andFor the Years Ended December 31,
2020
2019
2018
$

Distribution Costs
amortization, and intellectual property licenses
Product development
Sales and marketing
General and administrative
Share-based compensation expense before income taxes
Income tax benefit
Total share-based compensation expense, net of income tax benefit

$

14

$

19

$

13

1

1

2

42
21
140
218
(28)
190

1
53
10
82
166
(29)
137

3
61
15
115
209
(46)
163

$

$

17. Restructuring
During 2019, we began implementing 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:
in-game content, mobile, and geographic expansion;
reducing certain non-development and administrative-related costs across our business; andthe business, which we believe will enable us to provide better opportunities for talent, and greater expertise andscale on behalf of our business units.
Since initial implementation in 2019, we have expanded the scope of certain actions within our plan that are aimed at
integrating our global and regional functions to allow continued focus on investing in our largest, internally-owned franchises
and to provide us with the ability to better leverage our scale across the organization. The restructuring actions remain inprogress as we continue to focus on these goals and will continue into 2021.

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Table of Contents

ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Notes to Consolidated Financial Statements (continued)

The following table summarizes accrued restructuring and re
The following table summarizes accrued restructuring and reBalance at December 31, 2018
Balanceat December
31, 2018
Costs charged
to expense
Costs
chargedtoexpenseCash payments
Cashpayments
Non-cashcharge adjustment (1)Non-cashchargeadjustment
Balance at December
31, 2019(1)Balanceat December
31, 2019
Costs charged
to expense
Costs
charged to expense
Cash payments
Cashpayments
Non-cash charge adjustment (1)Non-cashcharge adjustment
Balance at December
31, 2020(1)Severance andemployeerelatedSeveranceandcostsrelated
employee
costs
$
$
76

76
(44)
(44)

$
$

32
32
76

76
(20)
(20)

Facilities andrelated costs
Facilities
andrelated
costs
$
$
29
29
$
$

(29)
(29)
6
6
(6)
(6)

$
$

$
$

Other costs
Other costs

$
$
27
27
(12)
(12)
(12)
(12)
3
$
$
53
(5)5
(5)

Total
Total
132
132
(56)
(56)
(41)
(41)
35
8735

87
(25)
(25)
(6)
91(6)
91

$
88
$
$
3
$
$
88
$
$
3
$
Balance at December 31, 2020
Cumulative charges incurred
$
152
$
35
$
32
$
219
through December
2020
Cumulative
charges31,
incurred
$
152
$
35
$
32
$
219
through December 31, 2020
own of assets from canceled(1)andofassociated
fixed
own
assets fromcanceled(1) projects and the write-down of assets for our lease facilities, inclusive of lease right-of-use assets
assets,that
werevacated.
projects and the write-down of assets for our lease facilities, inclusive of lease right-of-use assets and associated fixed
assets, that were vacated.
Total restructuring and related costs by segment are (amounts in millions):

Total restructuring and related costs by segment are (amounts in millions): Year EndedYear Ended
December 31, 2020
December 31, 2019Year EndedYear Ended$ December 31, 2020
13 $ December 31, 201919
Activision
Blizzard
71
6819
$
13 $
Activision
King
(1)
2068
Blizzard
71
4
2520
Other
segments
(1)
King
(1)
$
874 $
13225
Total segments (1)
Other
$
87 $
132
Total
(1) Includes charges for operating segments managed outside the reportable segments and our corporate and administrative
functions.
(1) Includes charges for operating segments managed outside the reportable segments and our corporate and administrative
functions.
During the year ended December 31, 2020, we incurred additional restructuring charges that are not included in the plan
discussed above. Such amounts were not material.
During the year ended December 31, 2020, we incurred additional restructuring charges that are not included in the plan
discussed above. Such amounts were not material.
During the year ended December 31, 2019, we also recorded $5 million to write-down inventory as a result of changes tocertain of our consumer product activities as part of our restructuring actions, whereby those activities will now operate under aDuring the year ended December 31, 2019, we also recorded $5 million to write-down inventory as a result of changes tocertain of our consumer productactivities
as of
part
of our restructuring actions, whereby those activities will now operate under aatedstatement
operations.
ated statementof operations.
We expect to incur total aggregate
pre-tax
restructuring charges of approximately $310 million associated with the plan,of which the remaining charges that have not yet been incurred are expected to largely be incurred within the next 12 months.
We expect
to incurwith
totaltheaggregate
restructuring
charges ofandapproximately$310 million
associated with
theof
plan,
The charges
associatedplan are pre-tax
expected
to relate to severance
employee-related
costs (approximately
60%
the
of
which
the
remaining
charges
that
have
not
yet
been
incurredareexpectedtolargelybeincurred
withinthenext
12months.
aggregate charge), facilities and related costs (approximately 20% of the aggregate charge), and other costs (approximately 20%
Thecharges
associatedwiththe plancharges
are expected
to relate torelated
severance
and theemployee-related
60% of theof theaggregatecharge),includingfor restructuring
fees andwrite-down of costs
assets.(approximately
A substantial majority
aggregatecharge),facilities
andrelatedcosts(approximately
20%
of
the
aggregatecharge),
and
other
costs
(approximately(approximately 70%) of the total pre-tax charge associated with the restructuring is expected to be paid in cash using amounts20%
ofaggregatecharge),includingchargesexpected
for restructuring
related fees
andtheofwrite-down
ofnot
assets.
A substantial
majority
onthe
hand,
and such
cash outlays
are largely
to be completed
by theend
2021. We do
expectto realize significant(approximately 70%) of the total pre-tax charge associated with the restructuring is expected to be paid in cash using amounts
on hand, and such cash outlays are largely expected to be completed
F-45 by the end of 2021. We do not expect to realize significant
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Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
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 December 31, 2020 and total expected pre-tax restructuring charges related to the planby segment, inclusive of amounts already incurred and inclusive of the inventory write-down discussed above, are presented
below (amounts in millions):

Activision
Blizzard
King
Other segments (1)Total

Total Charges IncurredThrough December 31, 2020
$
32
144
19
29
$
224

Total Charges Expected as ofDecember 31, 2020
$
42
200
25
43
$
310

(1) Includes charges for operating segments managed outside the reportable segments and our corporate and administrative
functions.
18. Interest and Other Expense (Income), Net
Interest and other expense (income), net is comprised of the following (amounts in millions):

Interest income
Interest expense from debt and amortization of debt discountand deferred financing costs
Unrealized gain on equity investment

$

99
(3)

Other expense (income), net
Interest and other expense (income), net

For the Years Ended December 31,
2020
2019
2018
(21) $(79) $

$

F-46

12
87

90
(38)
$

1
(26)

(65)
140

$

(4)
71

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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
19. Income Taxes
Domestic and foreign income (loss) before income taxes and details of the income tax expense (benefit) are as follows(amounts in millions):
For the Years Ended December 31,
2020
2019
2018

Income before income tax expense:
Domestic
Foreign$$

Income tax expense (benefit):
Current:
FederalState
Foreign$

Total current
Deferred:FederalState
Foreign

1,160
1,456
2,616

$

206
92
218
516

$

$

(84)
(10)
(3)
(97)

Total deferred$

Income tax expense

419

328
1,305
1,633

$

136
24
323
483

$

432
1,445
1,877

$

(208)
(15)
280
57

781
(16)
(1,118)
(353)
$

130

(153)
106
19
(28)
$

29

The items accounting for the difference between income taxes computed at the U.S. federal statutory income tax rate andthe income tax expense (benefit) at the effective tax rate for each of the years are as follows (amounts in millions):
For the Years Ended December 31,
2020

Federal income tax provision at statutory rate
State taxes, net of federal benefit
Research and development credits
Foreign rate differential
Foreign-derived intangible income
Change in tax reserves
Excess tax benefits related to share-based payments
U.S. Tax Reform Act
Change in valuation allowance
Intra-entity IP Transfer
Other
Income tax expense

$ 549
49
(70)
(103)
(40)
60

2019

2018

21 % $ 394
1
36
(2)
(46)
(7)
(198)

21 %
2
(2)
(11)

6
3

(30)

21 % $ 343
2
20
(3)
(38)
(4)
(104)
(2)
(1)
2
96
54
(1)
(2)

35
(31)

2
(1)

1
(14)
(1)
8% $

15
(6)
(3)
(18)
3

$ 419

11
(230)
(19)
16 % $ 130

285
(115)
(58)
(340)
61
10
29

jurisdictions in which the Company operates, some of whichhave a statutory tax rate less than the U.S. rate and the relative amount of income earned in each jurisdiction.
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ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
In October 2019, we completed an intra-entity transfer of certain intellectual property rights to one of our subsidiaries in
the U.K., aligning the ownership of these rights with our evolving business. The transfer did not result in a taxable gain;
however, our U.K. subsidiary received a step-up in tax basis based on the fair value of the transferred intellectual property
rights. Such fair value was determined based on our expectations of future cash flows, long-term growth rates, and discountrates. We recorded a one-time benefit of $230 million in the quarter ended December 31, 2019 for the recognition of a $1.1
billion deferred tax asset in the U.K. related to the amortizable tax basis in the transferred intellectual property, net of uncertain
tax positions and a valuation allowance, partially offset by a related $920 million deferred tax liability for U.S. taxes on foreignearnings. The U.K. amortizable tax basis will be recovered over a period of three years to 25 years and the related deferred tax
asset was measured using the enacted U.K. corporate tax rates for the years in which the amortization will be realized. We
recorded a valuation allowance of $110 million in 2019 for the portion of the deferred tax asset for which it is more-likely-thannot that a benefit will not be realized. We will update the measurement and realizability analysis going forward and record theimpact from any change in determination in the period of the change.
During the year ended December 31, 2020, we completed an intra-entity transfer of certain intellectual property rights to
the U.S. to better align the profits related to these rights with our evolving business activities. As a result, a significant portionof these earnings began qualifying for preferential treatment as foreign-derived intangible income during 2020. The transfer
resulted in a one-time benefit of $31 million in connection with the remeasurement of a U.S. deferred tax asset related toforeign earnings.
On June 27, 2018, we entered into a closing agreement with the Internal Revenue Servi
adjustments related to the Closing Agreement were recognized in the second quarter of 2018 and consisted of a tax expense of$70 million and a reduction in unrecognized tax benefits of $437 million. In addition, we recognized $185 million of tax
benefits related to other tax adjustments resulting from the changes in U.S. tax attributes and taxable income caused by the
primary adjustments. The Closing Agreement resulted in federal and state cash tax payments totaling approximately $345
million, of which federal tax payments of $334 million were made in October 2018.
On December 22, 2017, the U.S. Tax Reform Act was enacted. The U.S. Tax Reform Act, among other things, reduced the
U.S. corporate income tax rate from 35% to 21%, beginning in 2018, and implemented the Transition Tax. In the fourth quarterof 2018, we completed our analysis of the effect of the U.S. Tax Reform Act and recorded a net tax benefit of $340
million. This is primarily related to adoption of GILTI deferred tax accounting and remeasurement of deferred tax assets andliabilities partially offset by tax expense related to Transition Tax.

F-48

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Deferred income taxes reflect the net tax effects of temporary differences between the amounts of assets and liabilities foraccounting purposes and the amounts used for income tax purposes. The components of the net deferred tax assets (liabilities)
are as follows (amounts in millions):
As of December 31,
2020

Deferred tax assets:
Deferred revenue
Tax attributes carryforwards
Share-based compensation
Intangibles
Capitalized software development expenses
Other

$

Deferred tax assets
Valuation allowance
Deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Intangibles
U.S. deferred taxes on foreign earnings
Other
Deferred tax liabilities
Net deferred tax assets

$

274
123
51
1,287
21
160
1,916

2019

$

119
93
54
1,289
67
156
1,778

(228)
1,688

(181)
1,597

(147)
(577)
(63)
(787)
901

(142)
(594)
(73)
(809)
788

$

As of December 31, 2020, we had gross tax credit carryforwards of $227 million for state purposes. The tax credit
carryforwards are included in deferred tax assets net of unrealized tax benefits that would apply upon the realization of
uncertain tax positions. In addition, we had foreign net operating loss carryforwards of $46 million at December 31, 2020, mostof which carry forward indefinitely.
We evaluate deferred tax assets each period for recoverability. We record a valuation allowance for assets that do not meetture. To make that determination, we evaluate the likelihood ofrealization based on the weight of all positive and negative evidence available. As of December 31, 2020 and December 31,
2019, we maintained a valuation allowance related to our California research and development credit carryforwards of $107
million and $71 million, respectively. We will reassess this determination quarterly and record a tax benefit if and when futureevidence allows for a partial or full release of this valuation allowance.
In addition, we remeasured the U.K. deferred tax asset related to previously transferred intellectual property rights andcorresponding U.S. deferred tax liability due to the change in the U.K.'s corporate income tax rate during 2020. As of December
31, 2020, the U.K. deferred tax asset net of valuation allowance is $1.1 billion and the corresponding U.S. deferred tax liability
is $881 million.
ation by certain major taxing jurisdictions to which weare subject. The 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
jurisdictions, primarily as a result of transfer pricing matters. We anticipate resolvin
andpost-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 thatchanges 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.

F-49

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
In December 2017, we received a Notice of Reassessment from the French Tax Author
pricing for intercompany transactions involving one of our French subsidiaries for the 2011 through 2013 tax years. The total
illion (approximately $638 million). In December 2019,assessment, including penalties and interest
the Company reached a settlement with the FTA for the 2011 through 2018 tax years, resulting in the recognition of $54 millionof tax expense in the period ended December 31, 2019 and a tax payment of
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 toour taxes or provisions for uncertain tax positions. Such proceedings may have a ma
consolidated financial position, liquidity, or results of operations in the earlier of the period or periods in which the matters areresolved and in which appropriate tax provisions are taken into account in our financial statements. If we were to receive amaterially 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.
As of December 31, 2020, we had $1.2 billion of gross unrecognized tax benefits, $706 million of which would affect oureffective tax rate, if recognized. A reconciliation of total gross unrecognized tax benefits is as follows (amounts in millions):
For the Years Ended December 31,
2020

Unrecognized tax benefits balance at January 1
Gross increase for tax positions taken during a prior year
Gross decrease for tax positions taken during a prior year
Gross increase for tax positions taken during the current year
Settlement with taxing authorities
Lapse of statute of limitations

$

1,037

Unrecognized tax benefits balance at December 31

$

97
(1)
38
(3)
(2)
1,166

2019

$

2018

926

$

1,138

$

103
(123)
132
(312)
(12)
926

151
(168)
291
(163)
$

1,037

As of December 31, 2020, 2019, and 2018, we had approximately $93 million, $72 million, and $87 million, respectively,of accrued interest and penalties related to uncertain tax positions. For the years ended December 31, 2020, 2019, and 2018, werecorded $19 million, $14 million, and $11 million, respectively, of interest expense related to uncertain tax positions.
uncertain. There is significant judgment required in theanalysis of disputes, including the probability determination and estimation of the potential exposure. Based on current
above.

l position, liquidity or results of operations, except as noted

F-50

Table of Contents
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
20. 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 Years Ended December 31,
2020
2019
2018

Numerator:
Consolidated net income

$

2,197

$

1,503

$

1,848

Denominator:
common shares outstanding
Effect of dilutive stock options and awards under the treasury stock
methodcommon shares outstanding plus dilutive common shares under thetreasury stock method

771

767

762

7

4

9

Basic earnings per common share

$

778
2.85

$

771
1.96

$

771
2.43

Diluted earnings per common share

$

2.82

$

1.95

$

2.40

The vesting of certain of our employee-related restricted stock units is contingent upon the satisfaction of predefined
performance measures. The shares underlying these equity awards are included in the weighted-average dilutive commonshares only if the performance measures are met as of the end of the reporting period. Additionally, potential common sharesare not included in the denominator of the diluted earnings per common share calculation when the inclusion of such shareswould be anti-dilutive.
Weighted-average shares excluded from the computation of diluted earnings per share were as follows (amounts inmillions):
For the For the Years Ended December 31,
2020
2019
2018
2
2
4

Restricted stock units with performance measures not yet met
Anti-dilutive employee stock options

1

6

21. Capital Transactions
Repurchase Programs
On January 27, 2021, our Board of Directors authorized a stock repurchase program under which we are authorized torepurchase up to of $4 billion of our common stock during the two-year period from February 14, 2021 until the earlier ofFebruary 13, 2023 and a determination by the Board of Directors to discontinue the repurchase program. To date, we have notrepurchased any shares under this program.
On January 31, 2019, our Board of Directors authorized a stock repurchase program under which we were authorized torepurchase up to $1.5 billion of our common stock from February 14, 2019 until the earlier of February 13, 2021 and adetermination by the Board of Directors to discontinue the repurchase program. We did not repurchase any shares under thisprogram.
Dividends

F-51

3

February 13, 2023 and a determination by the Board of Directors to discontinue the repurchase program. To date, we have notrepurchased any shares under this program.
Table of Contents
On
January 31, 2019, our Board of Directors authorized a stock repurchase program under which we were authorized to
Table
of
Table
of Contents
Contents
AND until
SUBSIDIARIES
Table
Table ofof Contents
Contents
repurchase
up to $1.5 billion of ourACTIVISION
common stockBLIZZARD,
from FebruaryINC.
14, 2019
the earlier of February 13, 2021 and a
ACTIVISIONBLIZZARD,
INC.
AND
SUBSIDIARIES
determination by the Board of Directors
todiscontinue
therepurchaseprogram.
We
did not repurchase any shares under thisACTIVISIONBLIZZARD,
INC.
AND
Notes to Consolidated
Financial(continued)
ACTIVISIONBLIZZARD,
INC.Statements
AND SUBSIDIARIESSUBSIDIARIESACTIVISIONBLIZZARD,
INC.
AND
SUBSIDIARIES
program.
Notes
to Consolidated
Financial Statements(continued)
Notes
Notes toto Consolidated
Consolidated Financial
Financial Statements
Statements (continued)(continued)
Notes
toConsolidated
Financial
Statements(continued)
On February 4, 2021, our Board of Directors declared a cash dividend of $0.47 per common share. Such dividend is
Dividends
payableonFebruary
May 6, 2021,
to shareholders
ofrecord atdeclared
the closeof business
onof
April
15,per
2021.
On
4,
2021,
our
Board
of
Directors
a cashdividend$0.47
commonshare.
Such
dividendisOn
February
4,
2021,
our
Board
of
Directors
declaredcash
dividend
of
$0.47
per
commonshare.
Such
dividendis
On February
February 4,
4, 2021,2021, our
our Board
Board ofof Directors
Directors declareddeclared aaa cash
cash dividend
dividend ofof $0.47$0.47 perper common
common share.
share. Such
Such dividend
dividend isisOnpayable
on
May
6,
2021,
to
shareholders
ofrecord
at
the
close
of
business
on
April
15,
2021.
payable
on
May
6,
2021,
to
shareholders
ofrecord
at
the
close
of
business
on
April
15,
2021.
payableonFebruary
May 6,
6, 2021,2021,
to shareholders
shareholders
ofrecord at
atdeclared
the close
close
of businessbusiness
onof
April
15,per2021.
payableMay
torecord
the
of
on
April
15,
2021.
Onon
6, 2020,
our Board of of
Directors
a cashdividend$0.41
common share. On May 6, 2020,
made anaggregate
cash
dividend
paymentof $316 million
to shareholders
ofofrecord
atper
thecommon
close of share.
businesson
April
15, 2020.
On
February
6,
2020,
our
Board
of
Directors
declaredcash
dividend
$0.41
On
May
6,
2020,
On February
February 6,
6, 2020,
2020, our
our Board
Board ofof Directors
Directors declareddeclared aaa cash
cash dividend
dividend ofof $0.41$0.41 perper common
common share.
share. On
On MayMay 6,
6, 2020,
2020,
On
On
February
6,
2020,
our
Board
of
Directors
declaredacash
dividend
of
$0.41
per
commonshare.
On
May
6,
2020,
F-51
made
aggregate
cash
dividend
payment
of
to
of
at
the
of
on
April
2020.
made anan aggregate
aggregate cash
cash dividend
dividend payment
payment ofof $316$316 million
million toto shareholders
shareholdersof record
record at
at thethe close
close ofof businessbusiness on
on April
April 15,
15, 2020.
2020.
made
of
made anandividend
paymentof $316$316 million
millionto shareholders
shareholdersof record
recordat perthe close
close
of businessbusinessonMay
April9,15,
15,
2020.
Onaggregate
February cash
12, 2019,
our Boardof Directors
declareda cash dividendof $0.37
commonshare. On2019,
wemade anaggregate
cash
dividend
paymentof$283
milliontoshareholders
ofrecord
at
the
close
of
business
on
March
28,
2019.
On February
February 12,
12, 2019,
2019, our
our Board
Board ofof Directors
Directors declareddeclared aa cash
cash dividend
dividend ofof $0.37$0.37 perper common
common share.
share. On
On MayMay 9,
9, 2019,2019, we
weOnOnFebruary12,
ourof
declaredaa cashofpercommonshare.
May
9,
we
Onaggregate
February cash
12, 2019,
2019,
our Board
Board
of Directors
Directors
declared
cash dividend
dividendof $0.37$0.37
percommonshare. On
OnMay9, 2019,
2019,
we
made
an
dividend
paymentof$283
milliontoshareholders
ofrecord
at
the
close
of
business
on
March
28,
2019.
made
an aggregate
cash dividend
payment
of$283 million
to shareholdersof record
at thecloseof businesson March
28,
2019.
made
dividend
payment
of
the
close
business
March
28,
made ananaggregate
cash
dividend
payment
of $283$283 million
milliontoashareholders
shareholders
ofofrecord
recordatper
thecommon
close ofof share.
businesson
March
28, 2019.
2019.
Onaggregate
February cash
8, 2018,
our Boardof Directors
declaredto
cash dividendof$0.34atOnon
May
9, 2018,
wemade anaggregate
cash
dividend
paymentof$259
milliontoshareholders
ofrecord
at
the
close
of
business
on
March
30,
2018.
On
February
8,
2018,
Board
Directors
aa cashdividend
pershare.
On
May
9,
2018,
On
February8,
2018, our
our
Board ofof
Directors declareddeclaredcash
dividend ofof $0.34$0.34
per common
commonshare.
On
May
9,
2018, we
weOnFebruary8,
ourof
declaredcash$0.34
commonshare.
OnMay
9,
we
Onaggregate
February cash
8, 2018,2018,
our Board
Board
of Directors
Directors
declaredtoaashareholders
cash dividend
dividendofof
ofrecord$0.34atperpercommonshare.
Onon
May
9, 2018,
2018,
we
made
an
dividend
paymentof$259
million
the
close
of
business
March
30,
2018.
made
an
aggregate
cash
dividend
paymentof$259
milliontoshareholders
ofrecord
at
the
close
of
business
on
March
30,
2018.
made
an
dividend
madean aggregate
aggregate cash
cash
dividend payment
payment ofof $259$259 million
million toto shareholders
shareholders ofof record
record at
at thethe close
close ofof businessbusiness on
on March
March 30,
30, 2018.
2018.
22.
Commitments
and Contingencies
22.
Commitments
Contingencies
22.
Commitments andandContingencies
22.
and
22. Commitments
Commitments
and Contingencies
Contingencies
Commitments
and Obligations
Commitments
andObligations
Commitments
andObligations
Commitments
andCommitments
and Obligations
Obligations
In the normal
course of business, we enter into contractual arrangements with third parties for non-cancelable operatinglease agreementsforour offices,
for thewe
developmentof products arrangements
which may include
obtainingrightsto intellectual property,Inthenormalcourseofbusiness,
enter
into
contractual
with
third
partiesfornon-cancelable
operatingInthenormalcourseofbusiness,
we
enter
into
contractual
arrangements
with
third
partiesfornon-cancelable
operatingInthenormalcourseofbusiness,
we
enter
into
contractual
arrangements
with
third
partiesfornon-cancelable
operatingInthenormalcourseofbusiness,
we
enter
into
contractual
arrangements
with
third
partiesfornon-cancelable
operatingandforhosting
servicestosupport
our
games
and
our
administrative
functions.
Under
these
agreements,
we commitproperty,
to provide
leaseagreementsforouroffices,forthedevelopmentof
products
whichmayincludeobtainingrightstointellectual
leaseagreementsforouroffices,forthedevelopmentof
products
whichmayincludeobtainingrightstointellectual
property,
lease
agreementsforouroffices,forthedevelopmentof
products
whichmayincludeobtainingrightstointellectual
property,
lease
agreementsforouroffices,forthedevelopmentof
products
whichmayincludeobtainingrightstointellectual
property,
specifiedpayments
toalessor,developer,orhostingprovider,
as
the
case
may
be,
based
upon
contractual
arrangements.
The
and
for
hosting
servicestosupport
our
games
and
our
administrative
functions.
Under
these
agreements,
wecommittoprovideandforhosting
servicestosupport
our
games
and
our
administrative
functions.
Under
these
agreements,
wecommittoprovideandforhosting
servicestosupport
our
games
and
our
administrative
functions.
Under
these
agreements,
wecommittoprovideandforhosting
servicestosupport
our
games
and
our
administrative
functions.
Under
these
agreements,
wecommittoprovidepayments
tothird-party
developers
aregenerally
conditionedupontheachievement
bythedevelopersofcontractuallyspecified
specifiedpayments
aa lessor,
lessor, developer,
developer, oror hosting
hosting provider,provider, as
as thethe case
may
be,
based
contractual
arrangements.
The
specifiedpayments to
to
case
may
be,
based upon
upon
contractual
arrangements.
The
specifiedtolessor,developer,orprovider,
as
the
case
may
be,
upon
contractual
arrangements.
The
specified payments
payments
to aa developers
lessor,developer,or hosting
hostingprovider,upon
asdevelopers
thethecasemaybe, based
based
upon
contractual
arrangements.
The
development
milestones.
Further,thesepayments
to third-party
typically
arethedeemedto be advances
and, asspecified
such,payments
tothird-partyaregenerally
conditioned
achievement
bydevelopersofcontractually
payments
tothird-party
developers
aregenerally
conditionedupontheachievement
bythedevelopersofcontractuallyspecifiedpayments
tothird-party
developers
aregenerally
conditionedupontheachievement
bythedevelopersofcontractuallyspecifiedpayments
tothird-party
developers
aregenerally
conditionedupontheachievement
bythedevelopersofcontractuallyspecifiedarerecoupableagainstfutureroyalties
earnedbythedeveloper
based
on
sales
of
the
relatedgame.
Additionally,
we
also
enter
development
milestones.
Further,thesepayments
tothird-party
typicallyaredeemedtobeadvancesassuch,development
milestones.
Further,thesepayments
tothird-party developers
developers
typicallyaredeemedtobeadvances and,
and,
as
such,
development
milestones.
Further,thesepayments
todevelopers
typicallyaredeemed
to
be
and,
as
such,
development
milestones.
Further,theseearned
payments
to third-party
third-party
developers
typicallyaredeemedtoAdditionally,
be advancesadvances
and,
as
such,
into
arrangements
in whichweroyalties
committospend
specifiedamounts
foronmarketing
to support
and promote
our content
andarerecoupableagainstfuturebythedeveloper
based
sales
of
the
related
game.
we
also
enter
are
recoupableagainstfutureroyalties
earnedbythedeveloper
based
on
sales
of
the
relatedgame.
Additionally,
we
also
enter
are
recoupableagainstfutureroyalties
earnedbythedeveloper
based
on
sales
of
the
relatedgame.
Additionally,
we
also
enter
are
recoupableagainstfutureroyalties
earnedbythedeveloper
based
on
sales
of
the
relatedgame.
Additionally,
we
also
enter
services.
Assuming
allcontractual
provisions
are
met,
the
total
futureminimum
commitments
for
these
and
other
contractual
intoarrangements
in
which
we
committospend
specifiedamountsformarketingtosupportandpromoteourcontent
andintoarrangements inwhich wecommit tospend specified
amountsformarketingtosupport andpromoteourcontent
and
into
in
we
to
amountsformarketingtopromoteourcontent
andinto arrangements
arrangements
inallwhich
which
we commit
committo spend
spend
specifiedamounts
forminimum
marketingto support
supportinandandpromoteourothercontent
andarrangements
in placeatDecember31, 2020,
arespecified
scheduled
to be
paid
as
followscommitments(amounts
millions):
services.
Assuming
contractual
provisions
aremet,
the total
total
future
for
these
and
contractual
services.
Assuming
allcontractual
provisions
are
met,
the
futureminimum
commitments
for
these
and
other
contractual
services.
Assuming
allcontractual
provisions
are
met,
the
total
futureminimum
commitments
for
these
and
other
contractual
services.
Assuming
allcontractual
provisions
are
met,
the
total
futureminimum
commitments
for
these
and
other
contractual
arrangementsin(amounts
inmillions):
arrangements
in place
place at
at December
December 31,
31, 2020,
2020, areare scheduledscheduled to
to bebe paid
paid asas follows
follows(amounts
inmillions):
Contractual
Obligations(1)
arrangements(amounts
inarrangements inin place
place at
at December
December 31,
31, 2020,
2020, areare scheduledscheduled to
to bebe paid
paid asas follows
follows(amounts
in millions):
millions):
Facility andEquipment
Facility
Leasesand
Facility
andFacilityandEquipment
FacilityandEquipment
Equipment
LeasesEquipment
LeasesLeasesLeasesContractual
Obligations
Contractual
Obligations (1)(1)
ContractualLong-Term Debt
Developer andContractual Obligations
Obligations (1)(1)
Hosting
Obligations (2)MarketingLong-Term
Debt
DeveloperandLong-Term
Debt
DeveloperandLong-Term
Debt
DeveloperandHosting
Obligations(2)
MarketingLong-Term
Debt
DeveloperandHosting
Obligations(2)
Marketing
Hosting
Obligations
Marketing
Hosting
Obligations (2)(2)
MarketingTotal

For the years ending December 31,
Total
Total
Total
Total
2021
$
77
$
95
$
158
$
109
$
439
For
the
years
endingDecember
31,
For
the
years
endingDecember
31,
For
For thethe years
years ending
ending December
December 31,
31,
2021
$$
72
77
$$
84
95
$$
166
158
$$
105
109
$$
427
439
2022
2021
77
95
158
109
439
2021
$$
77
95
158
109
439
2021
77 $$
95 $$
158 $$
109 $$
439
72
84
166
105
427
2022
65
85
66
321
2023
72
84
166
105
427
2022
72
84
166
105
427
2022
72
84
166
105
427
2022
54
65
85
3
66
105
162
321
2024
2023
65
85
66
105
321
2023
65
85
66
105
321
2023
65
85
66
105
321
2023
33
54
3
105
138
162
2025
2024
54
3
105
162
2024
54
33
105
162
2024
54
105
162
2024
Thereafter
19
5,057
5,076
33
105
138
2025
33
105
138
2025
33
105
138
2025
33
105
138
2025
Thereafter
19
5,057
5,076
$
320
$
267 $
390 $
5,586 $
6,563
Total
Thereafter
19
5,057
5,076
Thereafter
19
5,057
5,076
Thereafter
19
5,057
5,076
$$
320
$$
267
$$
390
$$
5,586
$$
6,563
Total
320
267
390
5,586
6,563
Total
$
320
$
267
$
390
$
5,586
$
6,563
Total
$
320 $
267 $
390 $
5,586 $
6,563
Total
(1) We have omitted uncertain income tax liabilities from this table due to the inherent uncertainty regarding the timing of thepotential
issue resolution ofincome
the underlying
matters.
Specifically,
either(a) inherent
the underlying
positionshave not
been
fully
(1)
We
have
tax
liabilities
from
this
table
due
to
the
uncertainty
regardingthetiming
of
the
(1)
We
have omitted
omitted uncertain
uncertain
incometax
liabilities
from
this
table
due
to
the
inherent
uncertainty
regardingthetiming
of
the
(1)
We
uncertain
incometax
liabilities
from
this
table
due
to
the
inherent
uncertainty
regardingthetimingof(1) potential
We havehave omitted
omitteduncertain
incometax
liabilities
from
this
table
due
to
the
inherent
uncertainty
regardingthetimingof thethedeveloped
under
audit
to
quantify
at
this
time
or
(b)
the
years
relating
tothemattersforcertainjurisdictions
are
not
issue
resolution
oftheunderlying
matters.
Specifically,
either(a)theunderlying
positions
have
not
been
fully
potential
issue
resolution
oftheunderlying
matters.
Specifically,
either(a)theunderlying
positions
have
not
been
fully
potential
issue
resolution
oftheunderlying
matters.
Specifically,
either(a)theunderlying
positions
have
not
been
fully
potential
issue
resolution
oftheunderlying
matters.
Specifically,
either(a)theunderlying
positions
have
not
been
fully
currently
under
audit.
At
December
31,
2020,
we
had
$466
developed
under
audit
to
quantify
at thistimeor(b) theyears
relating to
the mattersfor certain
jurisdictions arenotdeveloped
under
audit
to
quantify
this
time
or
the
years
developedunder
underaudit.
auditAtto December
quantify at
at31,
this2020,
time weor (b)(b)theyears relating
relating toto thethe mattersmatters forfor certain
certain jurisdictions
jurisdictions areare notnotdeveloped
under
audit
to
quantify
at
this
time
or
(b)
the
years
relating
tothemattersforcertainjurisdictionsarenotcurrently
had$466
currently
currently under
under audit.
audit. AtAt December
December 31,
31, 2020,
2020, we
we hadhad $466$466
currently
under
audit.
At
December
31,
2020,
we
had
$466
Additionally, at December 31, 2020, we have a remaining net Transition Tax liability of $153 million associated with theU.S.
Tax Reform
Act. The remaining
Transition
Tax liability
isTransition
payable overthenext six
yearsmillion
and is notreflectedwith
in ourAdditionally,atDecember
31,
2020,
we
have
aa remainingnet
Taxliabilityof$153
associatedtheAdditionally,atDecember
31,
2020,
we
have
net
TransitionTaxliabilityof$153
millionassociatedwith
theAdditionally,atDecember
31,
2020,
we
have
aa remaining
remainingnet
TransitionTaxliabilityof$153
millionassociatedwith
theAdditionally,atDecember
31,
2020,
we
have
remainingnet
TransitionTaxliabilityof$153
millionassociatedwiththeContractual
Obligations
table
above.
U.S.
Tax
ReformAct.
The
remaining
TransitionTaxliability
ispayable
over
the
next
six
years
and
is
not
reflected
in
our
U.S.
Tax
ReformAct.
The
remaining
TransitionTaxliability
ispayable
over
the
next
six
years
and
is
not
reflected
in
our
U.S.
Tax
ReformAct.
The
remaining
TransitionTaxliability
ispayable
over
the
next
six
years
and
is
not
reflected
in
our
U.S.
Tax
ReformAct.
The
remaining
TransitionTaxliability
ispayable
over
the
next
six
years
and
is
not
reflected
inourContractual
table
above.
Contractual Obligations
Obligations
table
above.
Obligations
table
above.
Contractual
Obligations
table
above. our obligations related to the contractual principal repayments and interest payments(2) ContractualLong-term debt
obligations
representfor
ouroutstanding
unsecurednotes, which
are subjectrelated
to fixed
interest
rates, asprincipalof December
31, 2020.
There
was
no
(2)
Long-term
debt
obligations
represent
ourobligations
tothecontractual
repayments
andinterest
payments(2)
Long-term
debt
obligations
represent
ourobligations
relatedtothecontractual
principal
repayments
andinterest
payments(2)
Long-term
debt
obligations
represent
ourobligations
relatedtothecontractual
principal
repayments
andinterest
payments(2) forLong-term
debt
obligations
represent
ourobligations
relatedtothecontractual
principal
repayments
andinterest
payments
outstandingbalanceunder
our
RevolverasofDecember
31,
2020.
We
have
calculated
theexpectedinterest
obligation
our outstanding
unsecurednotes,
whicharesubject
to fixed
interest
rates,
asof December
31,
2020. There
was
no
for
unsecurednotes,
whicharesubject
fixedinterest
rates,
as
31,
There
was
for our
our outstanding
outstanding
unsecurednotes,
which
areDecember
subject to
to31,
fixed
interest
rates,calculated
as ofof December
December31, 2020.
2020.
There
was nonofor
our
outstanding
unsecurednotes,
whicharesubject
tofixedinterest
rates,
asofDecember
31,
2020.
There
was
no
F-52
outstandingbalanceunder
our
Revolver
as
of
2020.
We
have
the
expectedinterest
obligation
outstanding
outstanding balancebalance under
under our
our Revolver
Revolver as
as ofof December
December 31,
31, 2020.
2020. WeWe havehave calculated
calculated thethe expected
expected interest
interest obligation
obligation
outstandingbalanceunder
our
RevolverasofDecember
31,
2020.
We
have
calculated
theexpectedinterest
obligation

developed under audit to quantify at this time or (b) the years relating to the matters for certain jurisdictions are notcurrently under audit. At December 31, 2020, we had $466
Table of Contents
INC.
AND SUBSIDIARIES
Additionally, at December 31,ACTIVISION
2020, we have BLIZZARD,
a remaining net
Transition
Tax liability of $153 million associated with theTableU.S.
of Contents
Tax Reform Act. The remaining
TransitionTaxliability
ispayableovernext six years and is not reflected in our
Notes to Consolidated Financial Statements the(continued)
Contractual Obligations table above.
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIES
based on thedebt
outstanding
principal
and interest
rate applicableat December
31, 2020.
Refer toNote
13 for(2) Long-term
obligations
represent
obligations
relatedto thecontractual
principal
repayments
andinterest
payments
Notesbalancetoour
Consolidated
Financial
Statements(continued)
additional
informationon our debt
obligations.
for
our outstanding
unsecurednotes,
which are subject to fixed interest rates, as of December 31, 2020. There was nooutstanding balance under our Revolver as of December 31, 2020. We have calculated the expected interest obligation
based
on the outstanding principal balance and interest rate applicable at December 31, 2020. Refer to Note 13 for
Legal
Proceedings
additional information on our debt obligations.
We are party to routine claims, suits, investigations, audits,and other proceedings arising in the ordinary course of
F-52
Legal
Proceedings
business,
including with respect to intellectual property, competition and antitrust matters, regulatory matters, tax matters,
privacy matters, labor and employment matters, compliance matters, unclaimed property matters, liability and personal injury
Weproduct
are party
to routine
claims,suits, matters,
investigations,and otherproceedings
arising
the ordinaryafter
courseofclaims,damageclaims,collection
and/or audits,commercial
claims.
In the opinion
ofinmanagement,
consultation
business,
with routine
respect claims
to intellectual
property,
competition
andantitrust
regulatory
matters,
tax matters,with legalincluding
counsel, suchand lawsuits
are not
significant
and
we do matters,
not expect
them to havea material
adverseprivacylabor and
employment
matters,
matters,
unclaimed property matters, liability and personal injury
effect onmatters,
our business,financialcondition,
resultscomplianceof operations,or liquidity.
claims, product damage claims, collection matters, and/or commercial claims. 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
Lettersof Credit
effect on our business, financial condition, results of operations, or liquidity.
As described in Note 13, a portion of our Revolver can be used to issue letters of credit of up to $50 million, subject toLettersof Creditof the Revolver. At December 31, 2020, we did not have any letters of credit issued or outstanding under thethe availability
Revolver.
As described in Note 13, a portion of our Revolver can be used to issue letters of credit of up to $50 million, subject tothe availability of the Revolver. At December 31, 2020, we did not have any letters of credit issued or outstanding under the
Revolver.

F-53

SCHEDULE II
ACTIVISION BLIZZARD, INC. AND SUBSIDIARIESVALUATION AND QUALIFYING ACCOUNTS(Amounts in millions)Col. B
Balance at
Beginning of
PeriodCol. A Description

At December 31, 2020
Allowances for sales returns and price protection andother allowances
Valuation allowance for deferred tax assets
At December 31, 2019
Allowances for sales returns and price protection andother allowances
Valuation allowance for deferred tax assets
At December 31, 2018
Allowances for sales returns and price protection andother allowances
Valuation allowance for deferred tax assets

Col. C
Additions(A)Col. D
Deductions(B)Col. E
Balance at End
of Period

$
$

118
181

$
$

(29)
49

$
$

(26)
(2)

$
$

63
228

$
$

186
61

$
$

11
127

$
$

(79)
(7)

$
$

118
181

$
$

274

$
$

24
61

$
$

(112)

$
$

186
61

(A) Includes increases and reversals of allowances for sales returns, price protection, and valuation allowance for deferred tax
assets due to normal reserving terms.
(B) Includes actual write-offs and utilization of allowances for sales returns, price protection, and releases of income tax
valuation allowances and foreign currency translation and other adjustments.

F-54
F-54

Table of Contents

EXHIBIT INDEX
Pursuant to the rules and regulations of the SEC, the Company has filed certain agreements as exhibits to this Annual
Report on Form 10-K. These agreements may contain representations and warranties by the parties. These representations andwarranties have been made solely for the benefit of the other party or parties to such agreements and (1) may have been
qualified by disclosures made to such other party or parties, (2) were made only as of the date of such agreements or such otherdate(s) as may be specified in such agreements and are subject to more recent developments, which may not be fully reflected
on of risk among the parties to such agreements, and (4) may
apply
materiality
standards
different
from
what
may
be
viewedas material to investors. Accordingly, these representations andTable of Contents
actual state of affairs at the date hereof and should not be relied upon.
Exhibit Number

Exhibit

3.1

Third Amended and Restated Certificate of Incorporation of Activision Blizzard, Inc., dated June 5, 2014

3.2

Fourth Amended and Restated Bylaws of Activision Blizzard, Inc., adopted as of February 1, 2018

4.1

Indenture, dated as of September 19, 2016, among Activision Blizzard, Inc., the guarantors named therein
and Wells Fargo Bank, National Association, as trustee, with respect to the Co

4.2

Base Indenture, dated as of May 26, 2017, between Activision Blizzard, Inc. and Wells Fargo Bank, National

4.32017).
First Supplemental Indenture, dated as of May 26, 2017, between Activision Blizzard, Inc. and Wells Fargo
Bank, National Association, as trustee, with respect

4.4

filed May 26, 2017).
Second Supplemental Indenture, dated August 10, 2020, between Activision Blizzard, Inc. and Wells Fargo
Bank, National Association, as trustee, with respect

4.5
4.6
4.7
4.8

10.1*

Description of Securities (incorporated by reference toended December 31, 2019).
Activision Blizzard, Inc. Amended and Restated 2008 Incentive Plan, as amended and restated on June 7,

10.2*

Activision Blizzard, Inc. 2014 Incentive Plan, amended and restated as of March 2, 2017 (incorporated by

10.3*

Activision Blizzard, Inc. KDE Equity Incentive Plan, amended as of November 1, 2016 (incorporated byrm 10-K for the year ended December 31, 2016).
Form of Notice of Stock Option Award for grants to unaffiliated directors pursuant to the Activision
Blizzard, Inc. 2008 Incentive Plan (effective as of November 12, 2008) (incorporated by reference to

4.9

10.4*
10.5*

Form of Notice of Stock Option Award for grants to persons other than directors pursuant to the Activision
Blizzard, Inc. 2008 Incentive Plan (effective as of November 12, 2008) (incorporated by reference to

10.6*

Form of Notice of Stock Option Award for grants to unaffiliated directors pursuant to the Activision Blizzard,
Inc. 2008 Incentive Plan (effective as of March 6, 2013) (incorporated by reference to Exhibit 10.5 of the

10.7*

Form of Notice of Stock Option Award for grants to persons other than directors pursuant to the Activision
Blizzard, Inc. 2008 Incentive Plan (effective as of March 6, 2013) (incorporated by reference to Exhibit 10.6

10.8*

Form of Notice of Stock Option Award for grants pursuant to the Activision Blizzard, Inc. 2014 Incentive
E-1
E-1
for the quarter ended June 30, 2014).

10.6*
Exhibit Number

Form of Notice of Stock Option Award for grants to unaffiliated directors pursuant to the Activision Blizzard,
Inc. 2008 Incentive Plan (effective as of March 6, 2013) (incorporated by reference to Exhibit 10.5 of the
Exhibit

andStock
Restated
Certificate
of grants
Incorporationof Activision
Blizzard, pursuantInc., dated
5, 2014
3.1 Third
10.7*
Form Amendedof Notice of
OptionAward forto persons
other than directors
to Junethe Activision
Blizzard, Inc. 2008 Incentive Plan (effective as of March 6, 2013) (incorporated by reference to Exhibit 10.6
3.2 Fourth Amended and Restated Bylaws of Activision Blizzard, Inc., adopted as of February 1, 2018
10.8* Form of Notice of Stock Option Award for grants pursuant to the Activision Blizzard, Inc. 2014 Incentive
4.1 Indenture, dated as of September 19, 2016, among Activision Blizzard, Inc., the guarantors named thereinforquarterended
June
30, 2014).
andthe
Wells
Fargo
Bank,
National
Association, as trustee, with respect to the Co
10.9* Form of Notice of Restricted Share Unit Award for grants to persons other than non-affiliated directors
Table of Contents pursuant to the Activision Blizzard, Inc. 2014 Incentive Plan (effective as of June 5, 2014) (incorporated by
4.2 Base Indenture, dated as of May 26, 2017, between Activision Blizzard, Inc. and Wells Fargo Bank, National
10.10* Form of Notice of Performance-Vesting Restricted Share Unit Award for grants pursuant to the Activision
Blizzard, Inc. 2014 Incentive Plan (effective as of June 5, 2014) (incorporated by reference to Exhibit 10.4 of2017).
Exhibit Number
Exhibit
4.3 First Supplemental Indenture, dated as of May 26, 2017, between Activision Blizzard, Inc. and Wells Fargo
10.11* Form
Notice Association,of Restrictedas
Share
Award
grants pursuant to the Activision Blizzard, Inc. 2014 Incentive
Bank,of
National
trustee,
withfor
respect
10.12*
4.4
10.13*
4.5
10.14*
4.6
10.15*
4.7
4.8
10.16*
4.9
10.17*
10.1*
10.2*
10.18*
10.3*
10.19*
10.4*
10.20*
10.5*
10.21*
10.6*
10.22*
10.7*
10.23*
10.8*

for the quarter ended June 30, 2014).
filed May26, 2017).
Form
of Noticeof Restricted Share Unit Award for grants to persons other than non-affiliated directors
pursuant
to the Activision
Blizzard,
Inc.August
2014(effective
as of July29, 2014)(incorporated
bySecond Supplemental
Indenture,
dated
10, 2020,Planbetween
Activision
Blizzard,
Inc. andWells Fargo
E-2 Incentive
Bank, National Association, as trustee, with respect
Form of Notice of Restricted Share Unit Award for grants to non-affiliated directors pursuant to theActivision Blizzard, Inc. 2014 Incentive Plan (effective as of July 29, 2014) (incorporated by reference toForm of Notice of Performance-Vesting Restricted Share Unit Award for grants pursuant to the Activision
Blizzard, Inc. 2014 Incentive Plan (effective as of July 29, 2014) (incorporated by reference to Exhibit 10.3
Form of Notice of Stock Option Award for grants to U.S. employees pursuant to the Activision Blizzard, Inc.
2014 Incentive Plan (effective as of November 1, 2016) (incorporated by reference to Exhibit 10.44 of theyear ended December 31, 2016).
Form of Notice of Stock Option Award for grants to non-U.S. employees pursuant to the Activision Blizzard,
Inc.
2014 Incentive
Plan (effective
as ofbyNovember
Descriptionof Securities(incorporated
reference1,to2016) (incorporated by reference to Exhibit 10.45 of
e
year
ended
December 31, 2016).
ended December 31, 2019).
Formof
NoticeofRestricted
Share
Unit
Award
grantsto non-U.S.
employees
to theActivision Blizzard, Inc. Amended and Restatedfor
2008
Incentive
Plan, asamendedpursuant
and restatedonActivision
June 7,
Blizzard, Inc. 2014 Incentive Plan (effective as of November 1, 2016) (incorporated by reference to Exhibit
Activision Blizzard, Inc. 2014 Incentive Plan, amended and restated as of March 2, 2017 (incorporated byForm of Notice of Stock Option Award for grants pursuant to the Activision Blizzard, Inc. 2014 Incentive
Plan (effective as of March 2, 2017)
Activision
Blizzard,KDE
forthe quarter
endedInc.
March
31,Equity2017).Incentive Plan, amended as of November 1, 2016 (incorporated byrm 10-K for the year ended December 31, 2016).
Form of Notice of Performance-Vesting Restricted Share Unit Award for grants pursuant to the Activision
Formof
Noticeof
StockOptionAward
forgrantsunaffiliatedpursuant
the Activision
Blizzard, Inc. 2014 Incentive Plan (effective as of toMarch
2, 2017)directors(incorporated
by toreference
to Exhibit 10.3
Blizzard, Inc. 2008 Incentive Plan (effective as of November 12, 2008) (incorporated by reference toForm of Notice of Stock Option Award for grants pursuant to the Activision Blizzard, Inc. 2014 Incentive
Form of Notice of Stock Option Award for grants to persons other than directors pursuant to the Activision
Blizzard,
Inc.year
2008
Incentive
Plan (effective
10-K
for theended
December31, 2018).as of November 12, 2008) (incorporated by reference toForm of Notice of Performance-Vesting Restricted Share Unit Award for grants pursuant to the Activision
Form of Noticeof Stock
OptionAwardfor grants
unaffiliatedpursuant to by
thereference
ActivisiontoBlizzard,
Blizzard,
Inc. 2014
IncentivePlan(effective
as of toNovember26, directors
2018) (incorporated
ExhibitInc. 2008 Incentive Plan (effective as of March 6, 2013) (incorporated by reference to Exhibit 10.5 of theForm of Notice of Stock Option Award for grants pursuant to the Activision Blizzard, Inc. 2014 Incentive
Form of Notice of Stock Option Award for grants to persons other than directors pursuant to the Activision
Blizzard,
Inc.year
2008
Incentive
Plan (effective
10-K
for theended
December31, 2019).as of March 6, 2013) (incorporated by reference to Exhibit 10.6
Form of Notice of Performance-Vesting Restricted Share Unit Award for grants pursuant to the Activision
Form of Noticeof Stock
OptionAwardfor grants
to 4,
the2019)
Activision
Blizzard,byInc.
2014 Incentive
Blizzard,
Inc. 2014
IncentivePlan(effective
as of pursuant
November(incorporated
reference
to Exhibit

10.25*
10.10*
10.26*

for the quarter ended June 30, 2014).
Form of Notice of Stock Option Awards for grants pursuant to the Activision Blizzard, Inc. 2014 Incentive
Form of Notice of Restricted Share Unit Award for grants to persons other than non-affiliated directors
Plan(effectiveof November
18, 2020).
pursuant
to the as
Activision
Blizzard,
Inc. 2014 Incentive Plan (effective as of June 5, 2014) (incorporated byForm of Notice of Performance-Vesting Restricted Share Unit Award for grants pursuant to the Activision
Blizzard,
Inc. 2014
Incentive Plan (effective
as of December2020).for grants pursuant to the Activision
Form of Noticeof Performance-Vesting
Restricted
Share Unit4,Award
Blizzard, Inc.
Incentive
Plan (effective
as of June
5, 2014) (incorporated
reference
to Exhibit
Amendedand 2014
Restated
CEO Recognition
Program(incorporated
by reference by
to Exhibit
10.6
of the 10.4 of

10.27*

Activision Blizzard, Inc. Corporate Annual Incentive Plan (incorporated by reference to Exhibit 10.1 of the10.28*

Employment Agreement, dated as of November 1, 2016, between Chris B. Walther and the Company

10.29*2019).
E-2
Employment Agreement, dated February 25,E-2
2019, between Dennis Durkin and the Company (incorporated

10.24*
10.9*

Table of Contents
10.26* Amended and Restated CEO Recognition Program (incorporated by reference to Exhibit 10.6 of the
10.27*

Activision Blizzard, Inc. Corporate Annual Incentive Plan (incorporated by reference to Exhibit 10.1 of the

10.11*
10.28*

Formof Noticeof Restricted
Sharefor grants
pursuant
to theActivision
Blizzard,Inc.
2014 Incentive
Employment
Agreement,
dated
as ofAward
November
1, 2016,
betweenChris
B. Walther
and theCompany

10.12*
10.29*

forthe quarter ended June 30, 2014).
2019).
Formof Noticeof Restricted
Share
Unit Awardfor between
grants to Dennis
personsDurkin
other than
Employment
Agreement,
dated
February25, 2019,
and non-affiliatedthe Company directors(incorporated
pursuant to the Activision Blizzard, Inc. 2014 Incentive Plan (effective as of July 29, 2014) (incorporated by

10.13*
10.30*

Formof Noticeof Restricted
ShareAward fornon-affiliateddirectors
to theEmployment
Agreement,
dated
as ofUnit
November
22,grants
2016, tobetweenRobert A.
Kotickpursuant
and the Company
Activision Blizzard, Inc. 2014 Incentive Plan (effective as of July 29, 2014) (incorporated by reference to

Exhibit Number

Table of Contents
10.31*
10.14*
10.32*
Exhibit Number

10.15*
10.33*
10.34*
10.16*
10.35*
10.17*

10.36*
10.18*
10.37
10.19*
10.20*
10.38
10.21*
10.22*
10.39
10.23*
10.40
10.24*
10.25*
10.41
10.26*
10.42
10.27*
10.28*
10.43
10.29*
10.44
10.30*
10.31*
21.1
10.32*
23.1
24.1
31.1
31.2

ExhibitForm of Notice of Performance Share Unit Award to Robert A. Kotick (incorporated by reference to Exhibit
Form of Notice of Performance-Vesting Restricted Share Unit Award for grants pursuant to the Activision
Blizzard,
Inc. 2014
Incentive(effective
July 29,2014) (incorporated
Formof Noticeof 2018
StockPlan
OptionAward asto ofRobertA. Kotick(incorporated byby reference
reference toto Exhibit
Exhibit 10.3
10.27
ExhibitForm of Notice of Stock Option Award for grants to U.S. employees pursuant to the Activision Blizzard, Inc.
Form
of Notice Planof 2019
Stock Option
Award to 1,
RobertKotick (incorporated
by reference
Exhibit
10.31
2014 Incentive(effective
as of November2016)A.
(incorporated
by reference
to Exhibitto10.44of theyear ended December 31, 2016).
E-3
Employment
Agreement,
dated asof July
2019,
Naughton
the Activision
Company Blizzard,
Formof Noticeof Stock OptionAward
for24,
grantstobetween
non-U.S.Claudine
employees
pursuantand
to the(incorporated
by reference
to Exhibit
to the 1, 2016) (incorporated by referencee year ended
DecemberInc.
2014 Incentive
Plan (effective
as 10.33
of November
to Exhibit
10.4531,of2019).
e year ended December 31, 2016).
Employment
Agreement,
dated
March
9,Award2020, between
Blizzard,
Inc. and
DanielFormof Noticeof Restricted
Share
Unit
for grantsActivision
to non-U.S.
employees
pursuant
to Alegre
the Activision
Blizzard, Inc. 2014 Incentive Plan (effective as of November 1, 2016) (incorporated by reference to Exhibit
Non-Affiliated Director Compensation Program and Stock Ownership Guidelines, as amended and restated
Form of Notice of Stock Option Award for grants pursuant to the Activision Blizzard, Inc. 2014 Incentive
ended(effective
June 30, as2018).
Plan
of March 2, 2017)
CreditAgreement,
dated
as of
for the quarter ended
March
31,October
2017). 11, 2013, among the Company, as borrower, certain subsidiaries oftheCompany,asguarantors,agroupof lenders,Bankof America,
N.A.,
administrative
andForm of Notice of Performance-Vesting
Restricted
Share
Unit Award
for asgrantspursuant toagent
the Activisioncollateral
agent
for
the
lenders,
J.P.
MorganSecurities
LLC,
as
syndication
agent,
Bankof
America
MerrillBlizzard, Inc. 2014 Incentive Plan (effective as of March 2, 2017) (incorporated by reference to Exhibit
10.3
Lynch and J.P. Morgan Securities LLC, as joint lead arrangers and joint bookrunners, and Goldman Sachs &Co., HSBC Securities (USA) Inc., Mitsubishi UFJ Securities (USA), Inc., Mizuho Securities USA Inc., RBC
Form
Notice ofSunTrust
Stock Option
forBank
grantspursuant
to the Activision
Blizzard, Inc. 2014
Incentive
CapitalofMarkets,
Bank Award
and U.S.
National
Association,
as co-documentation
agents10-K for the year ended December 31, 2018).
First Amendment to the Credit Agreement, dated as of October 11, 2013, by and among Activision
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Employment Agreement, dated as of November 1, 2016, between Chris B. Walther and the Company
Sixth Amendment to the Credit Agreement, dated as of October 11, 2013, by and among Activision Blizzard,2019).
Inc., the guarantors from time to time party thereto, the lenders from time to time party thereto, Bank of
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Power of Attorney of each Executive Officer and Director signing this report (included in the signature pagehereto).
Certification of Robert A. Kotick pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934,E-3
as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
E-3
Certification of Dennis Durkin pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, asTable of Contents
10.44 Seventh Amendment to the Credit Agreement, dated as of October 11, 2013, by and among Activision
Blizzard, Inc., the guarantors from time to time party thereto, the lenders from time to time party thereto,
Bank of America, N.A., as administrative agent and collateral agent, and the several other agents party
Exhibit Number

21.1
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23.1
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24.1
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Subsidiariesof theCompany.
Form of Noticeof 2019
Stock Option Award to Robert A. Kotick (incorporated by reference to Exhibit 10.31
Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP).
Employment Agreement, dated as of July 24, 2019, between Claudine Naughton and the Company
Power of Attorneyof each Executive
in theDecember
signature pagee year ended
31,(incorporated
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2019).
Certification of Robert A. Kotick pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934,
Employment
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dated302
March
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between Activision
Blizzard, Inc. and Daniel Alegre
as adopted pursuant
to Sectionof theSarbanes-Oxley
Act of 2002.

Certification of Dennis Durkin pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as
Non-AffiliatedDirector
Compensation
Program and Stockadopted pursuant
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ActOwnershipof 2002. Guidelines, as amended and restated
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Robert A. Kotick pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.1 ended
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collateral
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to the Credit
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as of October 11, 2013, by and among Activision
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Bank of
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and collateral agent, and the several other agents party
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
10.39 Second Amendment to the Credit Agreement, dated as of October 11, 2013, by and among Activision
Blizzard, Inc., the guarantors from time to time party thereto, the lenders from time to time party thereto,* Indicates a management
contract orcompensatory
plan, contract
or arrangementin whicha director
or executive
officer ofBank of America,
N.A.,
as administrative
agent andcollateral agent,and theseveral otheragents party
the Company participates.
31.2
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10.40

Third Amendment to the Credit Agreement, dated as of October 11, 2013, by and among Activision
Blizzard, Inc., the guarantors from time to time party thereto, the lenders from time to time party thereto,
Bank of America, N.A., as administrative agent and collateral agent, and the several other agents party

10.41

Fourth Amendment to the Credit Agreement, dated as of October 11, 2013, by and among Activision
Blizzard, Inc., the guarantors from time to time party thereto, the lenders from time to time party thereto,
Bank of America, N.A., as administrative agent and collateral agent, and the several other agents party

10.42

Fifth Amendment to the Credit Agreement, dated as of October 11, 2013, by and among Activision Blizzard,
Inc., the guarantors from time to time party thereto, the lenders from time to time party thereto, Bank ofAmerica, N.A., as administrative agent and collateral agent, and the several other agents party thereto

10.43

Sixth Amendment to the Credit Agreement, dated as of October 11, 2013, by and among Activision Blizzard,
Inc., the guarantors from time to time party thereto, the lenders from time to time party thereto, Bank ofAmerica, N.A., as administrative agent and collateral agent, and the several other agents party thereto

10.44

Seventh Amendment to the Credit Agreement, dated as of October 11, 2013, by and among Activision
Blizzard, Inc., the guarantors from time to time party thereto, the lenders from time to time party thereto,
Bank of America, N.A., as administrative agent and collateral agent, and the several other agents party

21.1
23.1
24.1

Subsidiaries of the Company.
Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP).
Power of Attorney of each Executive Officer and Director signing this report (included in the signature pagehereto).
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.
Certification of Dennis Durkin 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.
Certification of Robert A. Kotick pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Dennis Durkin pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Inline 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.
Inline XBRL Taxonomy Extension Schema Document.
Inline XBRL Taxonomy Calculation Linkbase Document.

31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL

E-4
E-4

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: February 23, 2021
ACTIVISION BLIZZARD, INC.
By:/s/ ROBERT A. KOTICK

Robert A. Kotick
Director and Chief Executive Officer of Activision Blizzard, Inc.
(Principal Executive Officer)________________________________________________________________________________________________________________________

POWER OF ATTORNEY
Each individual whose signature appears below constitutes and appoints Robert A. Kotick and Dennis Durkin and each ofthem, his or her true and lawful attorneys-in-fact and agents, with full power of substitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to
file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform eachand every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or
she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or
his, her, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.

By:
By:
By:
By:
By:
By:
By:
By:
By:
By:
By:
By:

Director, Chief Executive Officer(Principal Executive Officer)
Chief Financial Officer(Principal Financial Officer)
Chief Accounting Officer(Principal Accounting Officer)/s/ ROBERT A. KOTICK(Robert A. Kotick)/s/ DENNIS DURKIN(Dennis Durkin)/s/ JESSE YANG
(Jesse Yang)/s/ REVETA BOWERS(Reveta Bowers)/s/ ROBERT J. CORTI(Robert J. Corti)/s/ HENDRIK J. HARTONG III(Hendrik J. Hartong III)/s/ BRIAN G. KELLY(Brian G. Kelly)/s/ BARRY MEYER(Barry Meyer)/s/ ROBERT J. MORGADO(Robert J. Morgado)/s/ PETER NOLAN(Peter Nolan)/s/ DAWN OSTROFF(Dawn Ostroff)/s/ CASEY WASSERMAN(Casey Wasserman)

E-6
E-5

February 23, 2021
February 23, 2021
February 23, 2021

Director

February 23, 2021

Director

February 23, 2021

Director

February 23, 2021

Chairman of the Board and Director

February 23, 2021

Director

February 23, 2021

Director

February 23, 2021

Director

February 23, 2021

Director

February 23, 2021

Director

February 23, 2021

E-6

E-7

E-8

E-9

E-10

E-11

E-12

E-13

E-14

E-15

E-16

Corporate Information
Board of Directors

Officers

Annual Meeting

Corporate Headquarters

Reveta Bowers
Independent Governance andOrganizational Consultant

Robert A. Kotick
Chief Executive Officer,
Activision Blizzard

June 10, 2021, 9:00 am PDT
To be held via live audio webcast.

Activision Blizzard, Inc.
3100 Ocean Park BoulevardSanta Monica, CA 90405(310) 255-2000

Robert J. Corti
Retired Chief Financial Officer,
Avon Products

Daniel Alegre
President and Chief
Operating Officer,
Activision Blizzard

Hendrik J. Hartong III
Chairman and Chief
Executive Officer,
Brynwood Partners

Dennis Durkin
Chief Financial Officer
Activision Blizzard

Brian G. Kelly
Chairman of the Board,
Activision Blizzard

Claudine Naughton
Chief People Officer,
Activision Blizzard

Robert A. Kotick
Chief Executive Officer,
Activision Blizzard

Chris Walther
Chief Legal Officer,
Activision Blizzard

Barry Meyer
Retired Chairman andChief Executive Officer,
Warner Bros. Entertainment

Special Advisors

Robert J. Morgado
Lead Independent Director,
Activision Blizzard
Former Chairman andChief Executive Officer,
Warner Music Group
Peter Nolan
Senior Advisor,
Leonard Green & Partners
Dawn Ostroff
Chief Content andAdvertising Business Officer,
Spotify
Casey Wasserman
Chairman and Chief
Executive Officer,
Wasserman

Thomas Tippl
Vice Chairman,
Activision Blizzard

Transfer AgentBroadridge Corporate
Issuer Solutions(800) 685-4509

AuditorPricewaterhouseCoopers LLP
Los Angeles, California

Worldwide Website
www.activisionblizzard.com

E-mailIR@activisionblizzard.com

Design: AndraDesignStudio.com
Printer: DG3 | Diversified Global Graphics Group© Copyright 2021 Activision Blizzard, Inc.

Annual Reporton Form 10-K
Activision Blizzard’s Annual Reporton Form 10-K for the year ended
December 31, 2020, is available toshareholders without charge, uponrequest, by calling our Investor
Relations department at (310)255-2000 or by mailing a request
to our Corporate Secretary at our
corporate headquarters.

Non-incorporation
Portions of the Company’s 2020
Form 10-K, as filed with the SEC, areincluded within this Annual Report.
Other than these portions of theForm 10-K, all other portions of thisAnnual Report are not “filed” with
the SEC and shall not be deemed so.

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