How Large Is Activision Blizzard’s Mobile Gaming Business?

Activision Blizzard (NASDAQ:ATVI) generates its revenues from sales of games for console, mobile, and other platforms. Mobile platform sales makes up close to 35% of the company’s total revenues with roughly $2.3 billion in sales, and it will likely grow in the near term. This compares with roughly a 17% contribution from its mobile platform for Electronic Arts, and over a 90% figure for Zynga. Note that Zynga does not make games for consoles, and most of its revenues are generated on the mobile platform.

Activision Blizzard’s mobile gaming business stems from its acquisition of King Digital in 2016. The company is home to popular social games franchises, including Candy Crush. Mobile gaming globally has been on a rise, and it is the largest platform in terms of revenues. Mobile gaming market likely grew 10% to $68.5 billion in 2019, according to research firm Newzoo. Given the market size and increased penetration of smartphones, several gaming companies have been focused on the mobile platform. In this note we compare Activision Blizzard’s revenues by platform to its peers. Our interactive dashboard analysis on Activision Blizzard’s mobile platform revenues has more details, parts of which we highlight below.

Activision Blizzard is slated to release its Q4 and full year 2019 earnings on February 6, 2020, and the average consensus for revenue is $6.4 billion and that for adjusted EPS is $2.21, which compares with Trefis’ forecast of $6.5 billion revenue and $2.30 adjusted EPS, as shown in our Activision Blizzard’s valuation dashboard.

Activision Blizzard’s Revenue By Platform Type (2019E):

Console:                  $2.6 Bil (40%)
Mobile:                    $2.3 Bil (35%)
PC & Web:              $1.6 Bil (25%)
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Total                         $6.5 Bil

Activision Blizzard’s Business Model

• What Need Does Activision Blizzard Serve?
  • Activision Blizzard is engaged primarily in developing and distributing games for video game consoles, personal computers, mobile phones, and the Internet.
  • It creates popular sports games such as Call of Duty, World of Warcraft, and Candy Crush.
• Who Pays To Activision Blizzard?
  • Hardcore as well as casual gamers pay for the games and in-game purchases to Activision Blizzard.
• What Do Customers Care About?
  • Price
  • Gameplay
  • Graphics
  • Story line
• Who Are Activision Blizzard’s Competitors?
  • Other gaming publishers such as Electronic Arts, Zynga, Take-Two Interactive, and Nintendo.

Activision Blizzard’s Mobile Platform Revenues Are On A Rise

• Activision Blizzard’s mobile platform revenues have grown at a slower pace (11.4%) than Electronic Arts (14.7%) and that of Zynga (14.8%) between 2016 and 2019, as shown in the charts below.
• Activision Blizzard’s mobile revenues jumped sharply in 2017, reflecting the impact of King Digital (maker of Candy Crush franchise) acquisition.
• Zynga’s mobile platform revenues are expected to jump sharply in 2019, also due to the impact of acquisitions.

While Activision Blizzard’s Share In Mobile Platform Gaming Has Hovered Around 43% Over The Recent Years, It Could Decline Going Forward

• Combined mobile platform revenues for Activision Blizzard, Zynga, and Electronic Arts grew at an average annual rate of 15.0% from $2.79 billion in 2016 to $3.66 billion in 2018.
• Activision Blizzard’s share has hovered around 43% over the same period.
• Looking forward, Activision Blizzard’s share could decline to 41.6% in 2020, due to faster growth in Zynga’s mobile platform revenues, due to the impact of acquisitions.

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