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Digital Channels’ Role in Activision Blizzard’s Growth in Fiscal 3Q15

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Revenue from digital channels saw double-digit growth rate

Previously in the series, we discussed Activision Blizzard’s (ATVI) fiscal 3Q15 earnings. In 3Q15, Activision Blizzard not only beat analysts’ expectations but also raised guidance for the current quarter and full-year fiscal 2015. Let’s take a look at what contributed to this growth. In 3Q15, Activision Blizzard’s revenue from digital channels came in at $697 million, an increase of 38% on YoY (year-over-year) basis. Revenue from digital channels rose to contribute 67% toward the company’s total revenues. Activision Blizzard’s digital channels generate revenue from subscriptions, downloadable content, and other related content.

 

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Digital add-on content drove digital channel revenue growth

Digital add-on content grew 60% year-over-year (or YoY), driving growth in Activision Blizzard’s digital channels. In constant currency terms, this growth was 75%. The company’s digital full-game downloads grew 39% on a YoY basis. In constant currency terms, this growth was 48%. The Destiny expansion launch primarily drove this growth.

In the console space, Electronic Arts’ (EA) FIFA 16 was the number one game. The above chart shows that Activision Blizzard’s Destiny and Call of Duty were among the top five games in the console space. Destiny is the most watched console game on Twitch.

Twitch is a popular website for video game enthusiasts who want to broadcast their video games to other people or watch other people play video games in real time. The company was acquired by Amazon in August 2014 for $970 million. At the time of its acquisition, it was the fifth-largest video-streaming website in the United States. Through this acquisition, Amazon (AMZN) intended to surpass NetFlix (NFLX) and Google (GOOG) (GOOGL), who dominate US Internet traffic.

Later in this series, we’ll discuss Destiny’s increasing customer base and expansion launch. You can consider investing in the SPDR S&P 500 (SPY) to gain exposure to the technology sector. The ETF invests about 18% of its holdings in the technology sector.

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