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Activision Blizzard Merger - Case Study Review

Case Study review on the Activision and Vivendi,Blizzard Merger. Strategic Management - University of Utah, Fall 2013
by

Brendan Strain

on 16 February 2015

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Transcript of Activision Blizzard Merger - Case Study Review

The Gaming Industry
Should Activision and Vivendi complete the merger?
Who Is Activision
?

Activision - PC vs. Console Gaming
Merger
The
Presented by:

JP Levesque
Stephanie Snow
Travis Bigelow
Brendan Strain

Published or Developed 528 games
Publisher, Distributor and former Developer

$1.51 BILLION in revenues in 2007

$86 million in net income (thanks CoD)

Direct sales model to mass-market retailers

US Based with offices world wide

Originally developed by Neversoft
15 games since original release in 1999
Tony Hawk's has been worked by16 developers
Games have appeared on 16 different platforms
Strategy:
Strategic Partnerships and License agreements
Tony Hawk's Pro Skater series
Is there any value to the merger?
Activision has a record of acquiring and extending successful franchises

Blizzard has distribution channels in Asia

Blizzard can use Activision's direct sales model to aid in domestic distribution

Transaction synergies of $50 to $100 million


Who Is Vivendi
?

Originally published by RedOctane
24 games in 'Hero'
'Hero' series worked by 4 different developers
Published on 9 different platforms
Competitive Advantages?
Order of presentation
Me
Travis for industry analysis
Stephanie for Competative Advantages
JP for value and pc vs console

Threat of New
Entrants
Threat of Substitutes
Bargaining Power of Buyers
Bargaining Power of Suppliers
Intensity of Rivalry
Industry analysis
General Environment
Demographic Trends
Cultural
Southpark
Guitar Hero
Technological

Acquire strong and diverse brands to
become "A worldwide leader in development, publishing and distribution of entertainment software"
Call of Duty series
Originally developed by Infinity Ward for PC
21 games since original release in 2003
CoD name worked by13 developers
Games have appeared on 18 different platforms
'Hero' series
Durable franchise brands
Developers: Infinity Ward, Neversoft and Red Octane
Titles: Tony Hawk's Pro Skater, Call of Duty and 'Hero' Series
Marvel: X-Men, Spiderman
Dreamworks: Shrek 2, Shark Tale
MGM: James Bond
Hasbro: Transformers
Harrah's: World Series of Poker
Quality Control through Greenlight Process

Product Diversity

Large French media corporation
Created Vivendi Games after purchase of Sierra and Blizzard in 1998
In 2007, Over €1 Billion in revenue
Who Is Blizzard
?

The "crown jewel" of the gaming industry

Originally Silicon and Synapse, created console games

4 of the 5 best selling PC games of all time

in 2007, Revenues of €702.2 Million(est.)

Massive operating margins
Multiple Hit Series
Leader in MMORPGs with over 10 million subscribed players and overall market share of 62%
Multiple expansion packs
World Wide audience with majority of players in Asia
Only game from US dev to successfully penetrate Asia
in 2007, almost $1 Billion in revenue alone
Main Competitors
Capabilities
Valuable?
Rare?
Costly to Imitate?
Competitive Implication
Product Diversity
Partnerships/Licensing
/Contracts
Franchising
Distribution
Greenlight Process
Yes!

Yes!

Yes!

Yes!

Yes!
Yes!

Yes!

Yes!

Yes!

Yes!
Yes!

Yes!

No.

Yes!

Yes!
Sustained Advantage

Sustained Advantage

Temporary Advantage

Sustained Advantage

Sustained Advantage
Capabilities
Valuable?
Rare?
Costly to Imitate?
Competitive Implication
Asian Distribtution
Massively Multiplayer
Online Games
Blizzard Portfolio
Development Lifecycle
Yes!

Yes!

Yes!

Yes!

Yes!

Yes!

Yes!

Yes!

Yes!

Yes!

Yes!

No.

Sustained Advantage

Sustained Advantage

Sustained Advantage

Temporary Advantage
Publishing
Net Revenues
Year End
March 31, 2007
% Publishing
Net Revenues
Year End
March 31, 2006
% Publishing
Net Revenues
% Change
PC
Console
Sony Playstation 3
Sony Playstation 2
MS Xbox 360
MS Xbox
Nintendo WII
Nintendo GameCube
Other
Total

HandHeld
GameBoy Advance
Playstation Portable
Nintendo DS
Total

Total Publishing
Net Revenue
$78,886

53,842
500,927
200,394
54,232
54,636
22,761
3
$886,795


48,478
49,931
54,948
$153,357

$1,119,038
7%

5%
45%
18%
5%
5%
2%
--%
80%


4%
4%
5%
13%

100%
$183,457

--
422,239
102,809
205,864
--
80,964
469
$812,348


79,738
52,016
27,107
$158,861

$1,154,663
$(104,571)

53,842
78,688
97,585
(151,632)
54,636
(58,203)
(466)
$74,450


(31,260)
(2,085)
27,841
$(5,504)

$(35,625)
(57)%

na
19%
95%
(74)%
na
(72)%
(99)%
9%


(39)%
(4)%
103%
(3)%

(3)%
Increase/
(Decrease)
16%

--%
36%
9%
18%
--%
7%
--%
70%


7%
5%
2%
14%

100%
Appendix E
Full transcript