After announcing a restructure and layoffs this month, Activision has filed its annual report for regulators. Required by the US Securities And Exchange Commission (SEC) to be filed every year by publicly traded companies, Form 10-K gives an outlook of what a company’s current plans are, financial state, possible problems, and statements of revenue.
Activision says that the restructuring is fundamentally a plan to “refocus our resources on our largest opportunities and to remove unnecessary levels of complexity and duplication from certain parts of our business.” This was done to focus efforts on a relatively fewer amount of products. They estimate the severance of employees, shutdown of facilities, asset write-offs, and other expenses will have pre-tax costs of about $150M.
In the report, Activision notes that one of the risks inherent to the company in its current state is a reliance on a relative few projects for revenue. “[A] significant portion of our revenues historically has been derived from video games based on a few popular franchises and these video games have been responsible for a disproportionately high percentage of our profits. For example, the Call of Duty, Candy Crush, and World of Warcraft franchises, collectively, accounted for 58% of our consolidated net revenues—and a significantly higher percentage of our operating income—for 2018,” they reported. Noting this, they declared an intent to focus on established franchises, since “The top titles in the industry are also becoming more consistent as players and revenues concentrate more heavily in established franchises,” and that the top ten best selling games were 38% of all retail sales in the US in 2018, all of which came from established franchises. It is also noted that this is an industry-wide trend and not something specific to Activision.
Looking forward to 2019, Activision expects a “lighter slate of full game releases”. A new Call of Duty, Sekiro: Shadows Die Twice, Crash Team Racing Nitro-Fueled, and DLC for Black Ops 4, Hearthstone, and Overwatch are expected to be the most notable product releases for the newly restructured Activision-Blizzard coming off its best-ever year.