 Okay guys so we are we are on the call right now for the Activision Blizzard fourth quarter calendar 2018 results conference call that's the that's the official name of it. Basically what they're doing right here is they're gonna be talking about they're going to be talking about basically the results of I mean the fourth quarter I guess is what it is because they do these quarterly but it kind of caps off 2018 and it'll be really interesting to see right because there's I think that wow and really classic wow hype was was really high around Blizzcon time and going up after Blizzcon was really awesome with the demo and stuff going on and then after the demo ended I think a lot of people felt like wow just like what do I do like I don't feel like playing wow you know I know for me I felt the same way and that's why I've been doing variety and stuff lately and you know whether whether you like retail or you don't like retail or whatever I think I think that that you know that's that's a let me turn on the music just a tad I think that's like a different discussion right but I think that a lot of people who maybe have been long time retail players felt like they hit a wall it's like you know I don't have anything to do and I think even with the demo right the demo was totally scuffed it had all kinds of problems I still think even that demo brought about such a strong sense of community and it was such a fun thing that a lot of people were like well like what the crap man like just comparing that to like the the regular gameplay of retail wow just kind of like I'm lugging in I'm doing like my daily stuff and world's questions and that it's just like and I think it gave people a real a real taste of what they could see in classic and I don't think that it necessarily I don't know I'm not gonna say that I directly like having the demo hurt wow but I think for some people it might have actually done that you know what I mean I think for some people it might have actually done that which is a kind of interesting kind of interesting thing about here to see how bad our favorite company is doing yeah pretty much yeah pretty much we'll met them make a new guild up for world first I don't know the plans for classic and method are very very it's not like fully thought out yet like there's there's basically some plans like there's some thoughts right going around here and there I'm still planning on making my own guild because you know I'm US I want to play on a PvP server method doesn't it doesn't necessarily you know just because man it doesn't necessarily mean that it's going to be you but it doesn't necessarily mean that it's going to be PvE I just think that it probably makes more sense for if it's like a serious like world first method guild then it probably makes the most sense for them to go for go on a PvE server so method rate three yeah I don't love that one so that's what happened to me classic maybe decide I was done with retail yeah it's kind of funny how that works for some people I don't know if that was a if that was a universal thing or what but I think it's certainly I think it certainly was the case for a lot of people do that method went a hundred thousand yeah I mean they used a bunch of gold like because they were like I think like you got to do what you got to do like in terms of like getting all the gold that you can whatever to using using pretty much all your resources to get whatever edge you can right I think that's fine I know like all those guilds do the same thing I'm not a loop but it's classic and I have subscription fee so brought up what's going to happen is there's not going to be an initial payment fee for classic it's just that if you have a while sub you have access to classic as well as classic as well as to retail while so frontals thank you for the twitch prime man appreciate that dude I didn't get this background this is from wallpaper engine on steam yeah get a snack on flame hot cheetahs and pray they mention classic I don't particularly expect them to mention classic outside of maybe just like bait you know like oh investors classic is coming out next year it's gonna be you know hopefully it's gonna be really exciting or whatever but I don't think we're gonna get any like real news about classic in terms of I mean I don't know at this point dude I'll take anything right but I wouldn't get my hopes up too much about like real news you can only set a classic it's gonna be at the price no no that's not the case that's not how it's gonna be what name is my guilt gonna have I'm not sure yet I haven't decided yeah okay I haven't decided yeah at pretty it's rough dude because like I mean like whenever gets to the point like the big thing that's going to be interesting is the the layoffs right like if they lay off a bunch of people and because that's what people are expecting and it may have already happened I'm sure they're not gonna wait till the end of the day I'm sure it probably happened like we probably just haven't heard yet you know but it'll I think it'll come out slowly like hey you know I got laid off this or that because there's there's good people that work at Blizzard and then there's people that like are I think I think just because people are frustrated at the company doesn't necessarily mean that you should be frustrated at the people right like I know from like going to blizzcon and talking to like specific people like there's specific people that are good people and they want what's best for wow and they like they're on board with a lot of the stuff that we as a community are on board with the problem is is that there's also and this is like this in any company there's inhibitors any any work such like work environment that okay I thought it was starting any work environment that I've been in there was always like there's always that one guy there's always people out there that are essentially inhibitors and I'm sure you guys feel the same way where you've been you've been working somewhere and you want to do something you want to accomplish something and there's people who are above you that inhibit that that they they basically put down the potential for growth whether it's like for something for the company or whether it's something for you personally right the twitch crash I don't know I don't think so hey that's man I'd like to start watching more of your streams you seem to be very down to earth thank you man appreciate that dude well I play retin classic yeah I will I will super John what percentage do you think the pressure can be welcome to the classic I think it's going to be very small actually relatively small right because you think about anything with like a full release versus like the privacy of our players I think can you guys read the chat on the screen by the way is the call here yet no it's not it's not here yet I do this duplicate investor dude I actually feel like I'm on hold like I actually feel like I'm on hold right now it's kind of hilarious are we starting and welcome to the Activision Blizzard Q4 2018 earnings conference call today's conference is being recorded at this time I would like to turn the conference over to Chris Hickey please go ahead sir please go ahead good afternoon and thank you for joining us today for Activision Blizzard's fourth quarter 2018 conference call with us are Bobby Kotick CEO Cody Johnson COO and Dennis Durkin company CFO and president of emerging businesses and for Q&A Rob Kostich president of Activision Jay Alan Brack president of Blizzard Ricardo Sikoni CEO of King and who mom Sikini president of King will also join us I would like to remind everyone that during this call we will be making statements that are not historical facts forward looking statements in this presentation are based on information available to the company as of the day to this presentation and while we believe them to be true they ultimately may prove to be incorrect what is that supposed to mean and those expressed in any forward-looking statements these include the risk factors discussed in our SEC findings including our 2017 annual reports on NK and those a little bit louder the company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect circumstances after today February 12 2019 I know I know I know it's a normal statement I just think it's funny we provide non-gap financial measures which exclude the impact of expenses related to stock-based compensation the amortization of intangible assets and expenses related to acquisitions including legal fees costs expenses and accruals expenses related to debt financings and refinancing restructuring charges the associated tax benefit of these excluded items and the impact of certain significant discreet tax-related items these non-gap measures are not intended to be considered in isolation from as a substitute for a superior to our gap results we encourage investors to consider all measures before this is as loud as I can make it please refer to our earnings release which is posted on www.activisionblizzard.com for a full gap to non-gap reconciliation and further explanation with respect to our non-gap measures there's also an earnings presentation which you can access with the webcast and which will be posted to the website following the call in addition we will also be posting a financial overview highlighting both gap and non-gap results and now I'd like to introduce our CEO Bobby Kotick thank you Chris and thank you all for joining us today we once again achieved record results in 2018 we delivered record gap revenue and gap and non-gap EPS for both fourth quarter and the year for 2018 we generated record gap revenues across all three platforms and both Activision and King achieved record segment financial results while we had record performance in 2018 it didn't quite live up to our expectations we didn't execute as well as we hope to in 2018 and our current outlook for 2019 falls below what is possible in an industry filled with growth opportunities we measure our success by growth and reach engagement and player investment goals and while we had record financial results in 2018 we didn't achieve the reach engagement and player investment goals we set for ourselves 2019 will require significant change to enable us to achieve our long-term goals and objectives we're making changes to enable our development teams to create better content for our biggest franchises more quickly across our key franchises we're adding development talent to ensure our teams can deliver exactly what our fans have come to expect from our games yeah the distant flow of compelling content we'll also increase our focus on adjacent opportunities with demonstrated potential like eSports for Overwatch League and Call of Duty we're staffing up production on our incubation efforts faster and increasing our investment in live services in our tools in our battle net platform and in new areas like fast-growing eSports and advertising efforts but all with an intense focus on excellence so we never disappoint our players our pipeline is excellent and our development talent the very best in the world but we need to refocus our efforts so that our development and production resources are better aligned with our priorities we're reducing or eliminating investment in games and initiatives that weren't living up to player expectations where our leadership teams have determined may not live up to player expectations in the future to drive improved execution and to fund development investment we will insert in parts of the business reduce complexity and duplication in our back office functions consolidate certain commercial operations and revamp our consumer marketing capabilities to reflect our continued migration to a largely digital network while this isn't the shift in our strategy achieving better execution requires change change that requires new leadership and organizational commitment to change we operate in an industry changes in growth and changes and we haven't grown at the rate reflect the opportunities our industry affords maybe these are good changes we have new business unit leadership committed to serving our players our employees and our shareholders and I'm also very pleased to have Dennis Durkin back at CFO and overseeing our emerging businesses his steady responsible stewardship of our capital and his strong relationships with his colleagues served us well during his five-year prior tenure as CFO as always I want to thank our customers our players and our partners but especially today our employees and our shareholders for their commitment and their support and now before you fire a bunch of thanks Bobby before we discuss lay them off it's two different things we're taking to reinforce the foundation for future growth let's first review our quarterly results in Q4 we generated record gap revenues of 2.38 billion dollars including the net deferral of 454 million dollars net bookings were also a record at 2.84 billion dollars we generated Q4 gap EPS of 84 cents and Q4 non-gap EPS of 90 cents also both Q4 company records including the net deferral of 39 cents while gap revenue net bookings and both gap and non-gap EPS were company records our net bookings fell short of our outlook due to factors I'll explain in our segment results Activision Q4 segment revenues grew 6% year-over-year to 1.41 billion dollars and operating income increased 14% year-over-year to 723 million dollars with monthly active users increasing double digits quarter over quarter to 53 million the primary driver for the Activision segment was call of duty which generated more upfront sales than any other console franchise worldwide in 2018 a feat the franchise has accomplished for nine of the last 10 years black ops 4 sold through more units than black ops 3 in its launch quarter with PC units more than tripling an engagement was strong with average hours per player increasing versus black ops 3 as players enjoyed blackouts multiplayer and zombies we also saw a significant shift to digital this year with full game downloads representing over 40% of console sell-through that's a present versus approximately 30% for World War 2 however sales of black ops 4 in the second half of the quarter were below our outlook due to weaker than expected retail demand lower than anticipated pricing and other promotional activities that didn't meet expectations although black ops 4 in game net bookings started off slower than expected following the introduction of the new in-game system we were encouraged by the response we saw when we introduced more compelling content with the second season of events in late Q4 turning to destiny the mutual agreement with bungee to sell back the commercial rights to destiny and eliminate our ongoing investment in the game did not have a material impact on Activision segment operating income in the quarter but will free up capital and development resources for the future we also continue to drive strong performance for the beloved intellectual property from our library following the successful launch of Spyro in Q4 and the ongoing contribution of Crash Bandicoot was over 10 million units since its 2017 release again highlights the enduring nature of our classic franchises overall I think Activision delivered meaningful year-over-year growth for segment revenue and for operating come and with the changes we're implementing in 2019 we expect to drive is that the word performance in the years to come Blizzard was a more nuanced story in Q4 okay here we go on the one hand we grew Q4 segment revenues to 686 million dollars in operating come to 241 million dollars and Blizzard had 35 million monthly active users in the quarter as Overwatch and Hearthstone saw sequential stability and World of Warcraft saw expected declines post the expansion release this summer on the other hand the relatively consistent monthly active user trends for Blizzard's communities were not matched by in-game net bookings which continue to soften in particular Overwatch and Hearthstone both experienced sequential declines in net bookings from players making in-game purchases hmm lastly Blizzard results benefited from the continued success of our business in China and the extension of our partnership with net ease China building on our 11-year joint venture the expanded agreement runs until January 2023 and reflects the substantial value and opportunity for Blizzard's content in China hmm while the majority of the economics from our renewed arrangement will be recognized over the next four years Q4 did benefit from the agreement which was contemplated in our outlook so I don't understand more detail in a minute but in we're gonna saw expected declines compelling in-game content and upfront releases to serve the needs of our players is the number one goal set by the new Blizzard leadership team going forward finally King grew segment revenue and operating come year-over-year as it continued to recover from the network incident experienced in the second quarter Q4 segment revenues grew 5% year-over-year to $543 million and operating income increased 28% year-over-year to $207 million King monthly active users of 268 million grew sequentially for the first time since we acquired the business in Q1 2016 driven by the successful launch of Candy Crush Friends in October Candy Crush Friends is seeing strong monetization and retention trends contributing incremental growth for the Candy Crush franchise which overall grew net bookings and monthly active users both quarter-over-core and year-over-year this is like that's the foundation for King to ramp its marketing support and drive further growth for friends in 2019 where we're PC gamers now importantly our advertising initiative continued to gain momentum growing net bookings over 50 percent sequentially and again profitably as the team continue to pause this I don't know opportunity now taking a step back and looking at our full-year results for 2018 we delivered record gap revenue gap and non-gap EPS and net bookings we continue to make sure I didn't talk to me chat did advertising and e-sports however in-game execution was inadequate for some of our franchises and we saw weaker than anticipated retail demand as you will hear from Dennis our 2019 outlook assumes that we will not improve in-game monetization as quickly as we would like and that it is a transition year where we have less new major content to release than we should so we have worked with our new business unit leaders to undertake a comprehensive examination of our business to determine the changes we need to make to improve execution and capitalize on the substantial long-term growth opportunities for our company we've determined that we need to refocus our best resources on our biggest opportunities and to remove an unnecessary level of complexity and duplication that is built up in certain parts of the business we have therefore developed a clear plan for this year to refocus and reinforce the foundation for growth this refocus includes initiatives developed by our new business unit leaders each of whom has demonstrated the ability to combine creative excellence with a commercial focus on profitable growth first we are investing more in development for our biggest internally owned franchises across upfront releases in-game content mobile geographic that's good second we are deep prioritizing initiatives that are not meeting our expectations and reducing certain non-development and administrative related costs across our business third we are integrating our global and regional sales and go to market partnerships and sponsorships capabilities across the business enabling us to better leverage talent expertise and scale on behalf of our business units okay our restructuring plan sheds investment in less productive non-strategic areas of our business and will result in a net headcount reduction of approximately right here while also driving a significant increase in investment focus and capabilities around our biggest franchises we're confident that over time this plan will enable our teams to accelerate the delivery of high-quality content to our communities we've already kind of started doing this with here's the storm hire new talent we are planning for the number of developers working on Call of Duty, Candy, Overwatch, Warcraft, Hearthstone and Diablo to increase and aggregate by approximately 20% over the course of the coming year we want to hire more devs Call of Duty Activision Management expects additional resources to deliver more frequent content updates and events for the franchise and accelerate its expansion across platforms and geographies we also intend to build on our experience with the Overwatch League to launch a professional city-based Call of Duty League that drives franchise engagement and represents a sizable incremental economic opportunity we are also increasing coordination across our Call of Duty studios with unified development I think Apex Legends basically just dumped on Call of Duty and leverage our development I think Apex Legends basically just dumped on Call of Duty Call of Duty will increase its focus on outreach and monetization I think Apex Legends is off to a really strong start Candy development resources the advertising business will continue to add engineering and direct sales resources to support our plans for strong revenue and operating income growth in 2019 and beyond the Overwatch team is also growing as it focuses on delivering a significant content pipeline in the coming years and the Overwatch League remains a key strategic focus where we will grow the number of resources involved to drive an expanded product and year-on-year revenue growth World of Warcraft is an example of a franchise where Blizzard has already established a regular cadence of major content and in-game operations Additionally Blizzard is investing in other Warcraft games working on more ways for the community to engage with its enduring and beloved franchise Reforged, Classic Additional development resources will help to release content that is both broader and deeper and to optimize the game to deliver an even better mobile experience for its global audience and Diablo's development headcount will grow substantially as the teams work on several projects underway for the franchise as well as the global launch of Diablo Immortal Overall, Blizzard's management is reinforcing its pipeline with more resources than ever before to support planned mobile titles several PC and console releases and WoW's continued cadence of content Finally, as a company we will continue to invest in breakthrough new ideas and incubation with focused resources and some of our best creative talent With 2019 set to be a quieter year for upfront launches now is the right time to implement this plan Work is already underway across the company as we speak We expect to have completed the North American components of our plan by the end of Q1 with implementation of the international components by end of year and we have already started to increase developer resources on our biggest franchises and will be aggressively hiring talent in the coming quarters As we look forward to the coming years we plan for all of our major franchises to be operating at scale and capitalizing on opportunities that include robust ongoing live operations and regular content launches both large and small strong mobile experiences available for all of their communities to enjoy new engagement and monetization models including where appropriate e-sports and advertising and underpinning all our franchises will be our deep relationships with growing and vibrant communities which are increasingly direct and digital In short, we are refocusing the entire company to return to the franchise focus that has fueled our long-term success and to better leverage the scale of our business for future growth I'll now turn the call over to Dennis to provide our outlook for 2019 Dennis? Thanks, Cotty. It sounds nice, right? Before I discuss the 2019 Q1 outlook, I just wanted to take a moment to say how excited I am to be back It's basically just their speaking of buzzwords exactly a lot of times in terms of more day-to-day operational position as the CFO as well as a leader of our emerging businesses We have a tremendous team and although we have a lot of work in front of us I see a stronger pipeline and more opportunities for long-term growth than ever before As Bobby and Cotty mentioned, 2019 will be a transition year for us as we implement change to enable our teams to create better content for our biggest franchises more quickly Given limited front-line releases, the organizational work underway, and the current competitive environment we are planning for this year to be down year-over-year I'll first go through the segments including Slate to provide some context for the outlook starting with Activision The main driver for the segment will be the Call of Duty franchise Heading into 2019, we have momentum to build on given the launch of Black Ops 4 with the franchise yet again number one globally in upfront sales in 2018 We will continue to optimize in-game content this year to drive ongoing engagement and player investment And in Q4, we will have another major launch for the franchise that will appeal broadly to both existing and new fans with what I can only describe now as a great step forward in the franchise that is also rooted in some of the franchise's most important history We have high expectations for the game So hey, they're basically saying Classic...wait, was that... Were they alluding to Classic? In Q4? Oh, for God. Oh, my bad. I misunderstood I misunderstood Because I was like... Sorry. How is Classic on a major full-time release? Well, these factors will weigh on Blizzard's financials this year Looking further ahead, Blizzard's pipeline of PC and console and mobile content is richer than ever and we expect a significant addition of development resources to accelerate the pace of delivery over time Finally, King is entering 2019 with momentum as it continues to recover from the network incidents it experienced in Q2 The business will continue to face tougher comps in the first few months of the year until it crosses the anniversary of this disruption It doesn't have a separate sub, but it's going to increase the current amount of subs Because people who are not sub? People who are not sub, they're going to sub to WoW to play Classic I think they're underestimating it too, have fair to say No, it's not RIP Classic, they didn't cancel Classic, it's a joke King's segment operating income is planned to be roughly flat as we invest in candy marketing to build on the encouraging start for candy friends Finally, I would note that we are planning for a higher tax rate this year while our 2018 gap tax rate included one-time benefits from U.S. tax reform and our IRS settlement, both our gap and non-gap 2019 rates incorporate the full impact of new international tax provisions With that context, I'll detail the financial guidance for 2019 and Q1 On a gap basis for 2019, we expect revenues of $6.03 billion including gap deferrals of $275 million We expect net bookings of $6.3 billion Product cost, game operations and distribution expenses of 24% Operating expenses including software amortization of 56% and a gap-only charge of approximately $150 million relating to the restructuring plan CAUTI outlined We expect gap and non-gap net interest expense of zero a gap tax rate of 24% gap and non-gap share count of $775 million and EPS of $1.18 For 2019 on a non-gap basis, we expect product costs, game operations and distribution expenses of 24% and operating expenses including software amortization of 46% We expect a non-gap tax rate of 20% and non-gap EPS of $1.85 which includes gap deferrals of 25 cents For Q1 on a gap basis, we expect revenues of $1.72 billion which includes the recognition of gap deferrals of $540 million We expect net bookings of $1.18 billion Product cost, game operations and distribution expenses of 20% Operating expenses including software amortization of 57% and we expect approximately $100 million of the gap-only restructuring charge to be booked in Q1 We expect gap and non-gap net interest expense of zero a gap tax rate of 24% gap and non-gap share count of $772 million and EPS of $0.39 For Q1 on a non-gap basis, we expect product costs, game operations and distribution expenses of 20% and operating expenses including software amortization of 43% We expect a non-gap tax rate of 22% and non-gap EPS of 63 cents which includes the recognition of gap deferrals of 43 cents Turning to capital allocation I wanted to spend a moment to quickly review our historical track record just as context As most of you know, we have always taken a disciplined and balanced approach to capital allocation We view a strong balance sheet as a strategic asset and while our focus in recent years has been on paying down debt with over $4 billion repaid in the last five years we've also returned almost $11 billion to our shareholders over the last decade with around $2 billion in dividends and $9 billion in share repurchases With this balanced approach in mind our board has authorized the following a 9% increase in our dividend to $0.37 per share payable in May and also a new two-year $1.5 billion share repurchase authorization Before I conclude, I wanted to summarize the company's position heading into 2019 We continue to have a tremendous potential in front of us Our combination of leading-owned franchises a direct digital connection to our consumers best-in-class developer talent and geographic, platform and business model diversity creates a powerful foundation for longer-term growth We must and will And we should just talk like normal sometimes Business excellence and quality content delivery that has been the backbone of our company in the last ten years Our plan to increase our focus on our core franchises is consistent with that approach and I am confident that executing against our plan will position us to deliver strong results and shareholder value over the long term Looking ahead, I look forward to updating you on our results as we make progress throughout this year Now I welcome our business leaders, Ricardo, Humam, Rob and Jay So, from what it sounds like right now it seems like they are going to lay off a bunch of people Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to enter your equipment It seems like they're going to lay a bunch of people off or they maybe probably already have it's just not public who all it is But I think that it seems like they're trying to increase the amount of developers they have on the teams So it might be something good for the company it just sucks for the people that work there, you know Sure, thanks Colin. This is Cady I'll take that one You know, I guess stepping back as we shared during the call our plan is focused on delivering growth in reach Oh, Wildhead already said that the major layoffs have gone through One is refocusing on our own franchises where we feel like we have the highest opportunity for growth Two is making sure we have the right amount of development resources to then go deliver great content within those franchises to our player communities Oh, 30 minutes ago they posted And then we're appropriate benefiting from company scale and removing duplication and inefficiency And so to do this with the new leadership teams there's three specific and important changes, you know as we head into 2019 that we plan to deliver The first is investing in development on our main franchises You know, as I mentioned, a 20% increase to drive the content and cadence and pace Second is reducing and eliminating initiatives that are not meeting our expectations and also areas where we can find duplication and remove it And then third, integrating our global and regional sales and go to market and partnerships and sponsorships so we can leverage scale You know, we know we have a global and fan player base that is looking for content on a regular cadence to come more quickly and to come across multiple platforms And we think we have set up each of our operating divisions to be able to deliver on that But we also think we've better set up the company to be able to deliver on that as we leverage those areas where scale can really help to bring our content and our franchises out to the world As for timing, you know, and as you see those effects we're only guiding to 2019 today But what I can say is that we are confident in the growth opportunity ahead of us Our increased focus, you know, our investment leading into our big franchises It's a sign that we are headed towards a place where growth given the right resources, given the right plan can be realized Thanks, Alfred. We have the next question, please We'll now take a question from Evan Wingren with Key Bank Capital Markets Yeah I'm just wondering if you could provide us a bit more commentary on the components of your guidance for fiscal 19, how you see your franchises performing and how you see the seasonality of the year unfolding Yeah, thanks, Evan It's Dennis here Happy to provide some color on that I guess first just kind of helicoptering up a little bit There are a few things to think about as it relates to our outlook I think the first point is obviously the one relative to our release slate which is diminishing this year or down this year and it does obviously impact our outlook In addition, the in-game softness that we saw exiting 18 caused us to enter the year at a slightly lower trajectory than last year and although we have a plan to turn that around it's going to take some time so we don't actually assume a full recovery of that in 2019 And then we also are pretty conservative in terms of how we plan for some of the newer things in our pipeline, like our mobile games We do obviously shoot for breakout hits but it's very hard to prudently plan for those in your outlook so we're obviously more conservative on that And then the last piece I would just say is relative to our tax rate You heard a few of the comments about it being up because of some of our international considerations this year So those are the main considerations I guess just relative to the overall outlook As it relates to seasonality given the limited number of product launches this year Q4 will again be a very important quarter Again, we've tried to take a prudent approach relative to that, assuming that call of duty units are down year over year in our outlook I would say that the team that's building this new game for us in Activision is building what they believe is the best call of duty we've ever built and so that team is certainly targeting growth even though we haven't put in our outlook in that fashion So I guess just stepping back for our approach relative to guidance I do agree that the current call of duty is really good I will agree with that I think the game to come is good I mean, obviously they're going to say that Right? So we'll see it when we see it, you know I do think Apex is better Apex Legends is just better than the current call of duty Have I mentioned Classic? No, not directly Yeah, or not work at all Yeah, or not work at all Fire about 8% No, no, it's different It's a big expansion and geographic expansion, especially in Asia and eSports is what's mentioned on the call already and of course in business models that continue to arise in our industry and create opportunity for us and as a division we have specific initiatives against each of these in progress that we're excited about Now, in terms of Black Ops 4 as Cotty mentioned it delivered better unit sell through than Black Ops 3 in its launch quarter So what we have is a really strong foundation of players right now and our biggest objective is driving ongoing engagement with our community Now, the good news is we have our best in-game content coming still Our next event on February 19 will be what we believe is our biggest and best in-game event and it's going to have significant updates across all modes and we're looking forward to see how that lands and resonates with the community and then if I look even further ahead to what Dennis mentioned again, this fall's launch I think is going to resonate very powerfully with our community It is an amazing game It's going to feature an entirely new campaign a huge and expansive multiplayer world and of course some fun co-op gameplay but from day one what gets me really excited is every time we've shown this title internally it's just created a ton of buzz Now, I wish I could tell you a lot more right now but unfortunately you're going to have to wait but I think it's going to be really worth it We can't wait to share with the world We can't wait either No, they did not cancel classic Dude, the last 10 years of Call of Duty has sucked I'm concerned Call of Duty content The newest one is pretty good I think the last 10 years has been pretty bad Thanks for taking my question One for probably Jay I guess the question, Jay What is the new management team doing to make sure that Blizzard is back on track to executing as one of the top studios that it should be Thanks Thanks for the question I think one of the things that I feel like it's important for us to talk about is we're a bit of a new leadership team and as we've come together it's clear that we believe a lot in our future and that we have a lot to prove from both a game and kind of a content delivery standpoint I think we have a huge amount of opportunity we have fantastic IPs we have lots of games that we want to create and we have a very passionate community that is hungry for all of the things that we can kind of produce So we have two big goals going forward The first one is of course to make excellent video games The second is to find ways to deliver more content to our player communities to meet these goals we need to work to increase the amount of content that we're delivering Right now we have the largest lineup of PC, console and mobile games that we've ever had and we're working to meaningfully increase the development capacity and the development headcount That in veteran and develop the talent is you don't need a lot of games, you just need good games and good games quality of our quantity We're going to reduce our non-development positions and our offices around the world specifically looking at our SGNA and non-core business units This was a very, very difficult It's incredibly vague Top five career difficult kind of moment for me personally but we're committed to doing everything that we can to a good position going forward We really want to serve our players and we want to serve our communities in the best possible ways and be a great creative organization As difficult as all this is, I think we're happy about the things that we're working on We're working very hard to live up to our mission and we really look forward to the community and you all seeing the results of this increased development and work overtime I'd like to say it's really terrific for the company to have Jay's leadership He's humble about his experiences when you think about World of Warcraft and Hearthstone and the Warcraft franchise it's been one of the most successfully led franchises in all of video games and we couldn't be happier to have Jay in the role that he's in Great, thanks We'll now take a question from Alexia Quadrani with JP Morgan Thank you very much I guess my question is given one of your competitors' decision to launch a free to play Battle Royale game Are you rethinking the modernization model for any of your own games maybe including Overwatch? Sure, this is Cotty Thanks for the question I guess maybe a couple key points First, stepping back one of the things that sometimes gets lost is the player They need to do this Our North Star is to deliver compelling and engaging gameplay full stop I think it wouldn't be a bad idea to get into the free to play market I don't know if that means changing Overwatch and free to play necessarily They have to work with the franchise and the community and the gameplay They need to work to reinforce each other We feel like we're in a pretty unique position across the industry in that we have multiple business models running at scale across our franchises today We have free to play games microtransaction based games games with an up front charge or with a subscription and we also now have advertising which is growing as well and we think that provides a range of options for our product and development teams to look across and pair the best economic model with the best gameplay experience is that we need to be able to move more quickly and we need to be able to rapidly evolve with the demands of our players and the market and that's why, as I mentioned we are investing significant development resources in our core franchises to be able to move more quickly on behalf of our players and to be able to take advantage of new business models and on the free to play part of your question in particular obviously the most proven platform is mobile so as we increasingly bring acquisition and blizzard IP through the mobile space you will see us deploy more free to play models embedded in your question that was also the fact that we see competitors now on PC and console going free to play and I just emphasize again that we believe our investment in resources coupled with our strong IP leaves us in a really good position to take advantage of evolving business models in our industry and what I would say and it's just worth mentioning is that the success we see with titles like Call of Duty or even recent competitive launches shows that a really well built well polished AAA experience for players can come still with an up front charge and it can be a great player experience and a great business model so looking ahead we will continue to evaluate all our games across our franchises and use the models that we think best both for the player experience and for our business Thank you very much Our next question will come from Mike Hickey with Benchmark Company I feel like I can't talk I'll talk a little bit after at the end Just focusing on your key segment let's hope you can provide some more color on your candy friend launch I guess how it went from your perspective and how it's performing now is very helpful Thank you Thanks for the question Candy Crush Friends launched in October It's been a great addition to the franchise The game has really got a lot of great new game modes and mechanics and we really think it's our most polished title ever and it's brought a lot of the franchise characters to life like never before What I would say is that after many years of the teams operating the candy franchise at scale they've really poured all their learnings into the candy friend experience and what we're seeing is that that's paid off It's really showing some strong retention and the game's per player monetization metrics are well ahead of where the franchise other titles were at a similar point post launch and again it's really reiterates and demonstrates how kind of the years of experience operating candy were funneled into the candy friends title So we're off to a great start and we have more plans in 2019 The way I think about it is we're still in launch mode with candy friends and this is the year where we make marketing and marketing to support the title and while we're doing that the teams have some really strong plans to drive engagement and monetization trends with some proven features in the pipeline to continue to delight the players So overall very pleased with the momentum and I expect that the game will really help drive the candy crush franchise growth in 2019 Thank you We'll take our next question from Tim O'Shea with Jeffries Yes, thank you for taking my question So with Overwatch League Season 2 launching soon I just thought it made sense for an update to the franchise it's been over two years since the game launched and we've talked on prior calls and again on this call about the lower revenue levels So I'm wondering what's the strategy to address this issue and does Blizzard have the development capacity to deliver sufficient levels of new content into this franchise, thank you Thanks for the question This is Jay I think it's important to mention the job the team has done with Overwatch overall IP, the universe the characters and the story potential along with the global appeal for the game and we've really built Overwatch League around that with early good results Delivery of more content and Overwatch is something that's really important and something that we're focused on The team is delivering new heroes and new maps and new experiences and as you mentioned the game revenue has declined recently I think the community engagement with the game remains strong There are a lot of new ideas for the Overwatch franchise We feel like the Overwatch that you know is just a small part of what we can imagine for the overall franchise and the team has a very clear plan In order to deliver on that we're going to increase the size of the Overwatch team meaningfully but keep in mind that we're going to need to balance live content with new products and different kind of support for Overwatch League I'm really confident that the community will be very excited when we release the things we're working on Regarding Overwatch League specifically we've saw a great community response and lots of early success that took a lot of focus but overall we think it's the right decision it's been the right decision for the game and for the franchise we're about to kick off the second season and that's going to start on February 14th that'll introduce eight new city teams it will introduce home and away matches for some teams for the very first time and the first match that's actually going to kick off is going to be a repeat of the grand finals between London and Philadelphia so Overwatch League.com is where you can see that Overwatch League.com Yeah We'll take our next question from Brandon Ross with BTIG Hi, thanks for taking the question I was just hoping you could provide a little more color on your rationale for parting ways with Bungie and the Destiny franchise and kind of what happened with that game. Thanks Sure, thanks Brandon, this is Cotty I guess let me say first that we're confident that this was the right decision for both parties to focus on the IP that they created and we get to focus on our biggest opportunities on our biggest franchises with our best resources You know our decision was reached via mutual agreement with Bungie to sell back the commercial rights and for us at least it was rooted really in our strategy overall First, as you know, we didn't own the underlying Destiny IP and we do for all our other major franchises which we think is not just a differentiator for us in the industry but also controlling the underlying IP gives us the chance to move in with new experiences and new engagement models which also come with new revenue streams and of course structurally higher economics when you own the IP and that leads to probably the second factor in our decision process which is Destiny it is highly critically acclaimed high quality content but it was not meeting our financial expectations you know as we went through at the end of year our financial planning for 2019 it indicated that Destiny would not have been a material contributor in operating income to our business and third, we had internal resources supplementing Bungie's work and you know that means they're tying up one of our scarcest resources which is developer talent which now under, you know the arrangement we reached will be freed up after a short transition period late last year when we were exploring all our options on Destiny you know in November after our earnings release we learned that Bungie was willing to acquire our rights and we engaged in discussions with them and ultimately we wound up consummating the deal in late December and it was a mutual amicable agreement and I just emphasize I really do think for both parties this is the right path forward and it allows us to go implement the plan that we talked about today thank you Operator can we have the next question please we'll take our next question from Matthew Thornton from SunTrust Hey, good afternoon everybody thanks for taking the question maybe you could just update us on just timing around some of the mobile initiatives at both Blizzard and Activision including China as well as the rest of the world, any updated color there would be helpful thanks everyone Sure, thanks Matt for the question this is Kati again you know as you heard in our prepared remarks mobile is a top priority for us and we think it's one of our largest opportunities for us to bring mobile to the IP which we think is really well positioned to bring to the mobile platform we see this every day with King where you have a franchise at scale globally but we also see it with other great franchise IP like Carstone where bringing that game to mobile brought in tens of millions of new players that are engaging in an ongoing and deep way with us you know the thing to know is mobile game teams while smaller than PC or console we have different types and to test and particularly for us in our franchises where we have high community expectations when we bring them to market we want to do it right that said part of the announcements today and the work that we're doing and that we highlighted is to make sure that we're adding the right resources and enough resources to accelerate our mobile pipeline given the size of the opportunity it's not just internal we are working with external partners we have multiple projects underway across the portfolio in various stages of development and as you know we've announced to Call of Duty Mobile and also Diablo Immortal you asked about both and status they're both hard at work we have no additional announcements to make at this time but in both cases we're looking to make sure that the IP is really well represented for Diablo it's an authentic and immersive deep experience that we think getting it there has large global potential and so it matters to get it right and we'll share more about our titles and release dates as that comes to fruition Operator, we have time for one last question please One last question And we'll take our last question from Kunal Maldi Thank you you mentioned that King advertising net bookings for more than 50% sequentially it'd be great if you could provide us with some more color and your expectations in 2019 Well I would say Oh, go ahead, Bonnie I was just going to say Bobby I'm going to step back and just think about the business in a few phases first we decided that we really needed an ad product that worked and is differentiated so we went and invested in the right teams to drive that and I think it's made off we have a pretty good differentiated native ad product that is working quite well with player satisfaction on the inside and increasing our monetization and in 2017 and what you saw in 2018 was we scaled the business by lighting up more of our inventory and adding more impressions in our network and that was a key driver as we started scaling the business and we hit some important financial milestones in the year in 2018 first profitability in Q1 and then growth in every quarter after that and I think the ad business is going to start to be meaningfully contributing to the king overall so we expected to cross the 100 million booking threshold this year and as I look ahead I think on the next phase about where the ad business is heading it's about continued scaling so we will continue to scale more in the inside the ad network at King and we have more work to do there to enable it in more of our games and we're continuing to educate our demand partners on the power of our ad product and there's really good momentum there and I think after that we will think about even more ways to deploy the ad product that could be in new mobile experiences or e-sports I think the team has potential that could be applied in there I think it's an excellent team the ad product is excellent they've started to make real inroads and getting people to better understand what the opportunities for advertisers is and I think that I'll just echo who I'm sentiment that there's a lot of momentum in that business and that concludes our call today I just wanted to on behalf of our team here thank you all for your time and engagement today and we look forward to seeing many of you on the road or up to our next earnings call so thanks very much and this concludes today's call thank you for your participation you may now disconnect alright so so yeah that's it that is the 2018 results conference call yeah I mean I was kind of surprised by a few things I wish I could have I didn't want to interrupt too much while they were talking obviously so you guys could hear it I might put this on YouTube I might make another video kind of giving a little bit more like in-depth thoughts about it but yeah I think overall I mentioned this before I mentioned this at the beginning of the stream before the actual conference call started I don't know how much stock Blizzard is really putting into classic as far as seeing how big of a financial success it could be it's not a full release or it's not like a they're not launching a product where you go and you buy it and you pay the initial fee and then it's got its own separate sub fee the sub linked in with the current wow fee wow sub fee so if you sub to wow you get retail wow and you get classic wow and I think that is I think that's a good idea honestly I do think that's a good idea for Blizzard because I think that's going to get the most people playing classic make it the most accessible and I think accessibility right now in gaming you've seen it with Fortnite you're seeing it with Apex Legends now Apex Legends has over 600,000 views I believe right now on Twitch and Call of Duty is sitting at around 30,000 you know accessibility I think is a really important thing and I think I think that's good right now if you have that many people who are not currently sub to wow and they decide to sub to wow because they can play classic now which is a significant number of people my thing is I think they're severely underestimating the player base of people who are not currently playing or paying for World of Warcraft that are going to pay to have a sub fee to play classic I think they're I think not only are they underestimating that now I think that if they get the formula for classic right if they do it correctly then you have a cash cow you have just you can just like let it roll and you just like launch fresh servers because if you don't launch fresh servers people are going to go back to private servers they're just going to be able to just sit on it basically now sure they might notice something like okay we got to make a tweak here and there the same thing happens on private servers the same thing happens every fresh we're like okay we did this thing wrong let's fix that we did this thing wrong let's fix that I think if it's done right I think classic is just like a constant stream of revenue for Blizzard and what I'm worried about is I don't think that they I don't think that they're putting enough stock and while as they should so anyway I'm going to stop the recording we'll put this on youtube and then I might make a separate video kind of talking a little bit more about my more about my thoughts and stuff so if you haven't subscribed to my youtube channel yet I'd appreciate it if you sub follow me on twitch twitch.tv sub here of course youtube twitter sfantv instagram facebook everything so do that and I'll see you guys soon