Businessmodel of Activision Blizzard

Customer Segments

Activision Blizzard has a mass market business model, with no significant differentiation between customers. The company targets its offerings at a broad selection of consumers, ranging from core gamers to casual players and from children to adults.

Value Proposition

Activision Blizzard offers three primary value propositions: accessibility, risk reduction, and brand/status.

The company creates accessibility by offering a large variety of options. While it is mostly known for its first-person action titles, it develops games spanning a wide range of genres, including the action/adventure, simulation, role-playing, and strategy categories. The firm expanded its selection further by acquiring King Digital Entertainment in 2015, which added mobile games to its portfolio. Moreover, Activision Blizzard makes titles for all major consoles, including Microsoft’s Xbox One and Xbox 360, Nintendo’s Wii and Wii U, and Sony’s PlayStation3 and PlayStation4.

The company reduces the risk of low quality through an evaluation procedure. Called the “Greenlight Process“, it consists of in-depth reviews at critical stages of development by a group that includes high-ranking operating managers and from the worlds of sales, marketing, and development. The firm also vets external game developers who contribute content based on past track record.

The company has established a strong brand as a result of its success. It bills itself as the most successful interactive entertainment company in the world. Its games have over 500 million monthly active users in 196 countries, and provide 42 billion hours of entertainment annually. Its selection includes some of the most prominent titles of all time, including “Call of Duty“, the best-selling Western interactive franchise, and “Skylanders“, “World of Warcraft“, and “StarCraft“.

Channels

Activision Blizzard’s main channels are digital online channels and physical retail outlets. Retail outlets include consumer electronics stores, mass market retailers, game specialty stores, and discount warehouses. Specific retailers include GameStop, Amazon, Target, Best Buy, Toys ”R” Us, and Wal-Mart. The firm promotes its offerings through its website, social media, online/print/TV advertising, industry and in-store promotions, direct marketing, and product sampling.

Customer Relationships

Activision Blizzard’s customer relationship is primarily of a self-service, automated nature. Customers utilize its products while having limited interaction with employees. That said, there is a personal assistance component in the form of phone and e-mail support, as well as 24/7 online support.

Key Activities

Activision Blizzard’s business model entails designing and developing software games for its customers.

Key Partners

Activision Blizzard occasionally utilizes independent third-party developers to create content, chosen for their expertise in specific categories for specific platforms. Doing so enables it to lower fixed development expenses, share development risks, and gain access to proprietary technologies. The company uses sub-contractors for disk duplication, packaging, printing, and manufacturing.

Key Resources

Activision Blizzard’s main resources are its human resources, which include creative, technical, and production professionals. They maintain expertise in programming, animation, script-writing, music development, and sound/special effects. The company also depends heavily on sales/marketing staff.

Cost Structure

Activision Blizzard has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of sales, a variable expense that includes product and online costs, as well as those associated with software royalties and intellectual property licenses. Other major drivers are in the areas of sales/marketing and product development, both fixed costs.

Revenue Streams

Activision Blizzard has two revenue streams:

Product Revenues – Revenues generated from sales of games, including digital full-game downloads and physical products

Subscription, Licensing, and Other Revenues – These include the following:

• Subscription Revenues – Primarily obtained from ”World of Warcraft”, which is typically sold on a subscription-only basis
• Licensing Revenues – Royalties obtained from third-party licensees in China, Taiwan, and Russia that host certain Blizzard games in their countries
• Other Revenues – Primarily include revenues from micro-transactions, digital downloadable content (e.g. multi-player content packs), and the licensing of intellectual property other than software to third-parties