Q2 2019 Earnings Call
Please standby.
Good day and welcome to the Activision Blizzard Q2, 2019 earnings conference call.
Please note today's call is being recorded.
At this time I would like to turn the conference over to Christopher Hickey Senior Vice President of Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us today for Activision Blizzard second quarter 2019 conference call.
This is Bobby Kotick CEO Cody Johnson, COO, Dennis Durkin company's CFO and president of emerging businesses for Q1 night wrote coastal precedence of activation Salem Brock President's visit.
Secondly me personally is 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. The forward looking statements. In this presentation are based on information available to the company as of the date of this presentation and while we could easily be true. They ultimately may prove to be incorrect.
A number of factors could cause the company's actual future results and other future circumstances to differ materially from those expressed in any forward looking statements you didn't see what the risk factors discussed now actually she findings on Tuesday May 2018 annual report on Form 10-K , and those on the slide that is showing.
The company undertakes no obligation to release publicly any revisions to any forward looking statements to reflect events or circumstances. After today August 829 team.
We will present, both GAAP and non-GAAP financial measures. During this call, we provide non-GAAP 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 refinancings restructuring and related charges. The associated tax benefits. These scripts, it's only two wells and significant discrete tax related items, excluding amounts related to changes in tax laws amounts related to the potential final resolution of tax positions and other unusual or unique tax related items on activities.
These non-GAAP measures are not intended to be considered in isolation from as a substitute for or superior to our GAAP results. We encourage investors to consider all measures before making an investment decision. Please refer to our earnings release, which is posted on www Dot Activision Blizzard got called for a full GAAP to non-GAAP reconciliation and further explanation with respect to our non-GAAP measures.
There's also an earnings presentation, which you can access with the west coast, which will be posted to the website. Following the call. In addition, we will also be posting a financial overview I'd like to both GAAP and non-GAAP results.
Now I'd like to introduce our CEO Bobby Kotick.
Thank you, Chris and thank you all for joining us today.
Our second quarter results exceeded our prior outlook for both revenue and earnings per share.
In the first half from 2019, we prioritized investments in our key franchises and we expect to expand reach deepening engagement and drive player investment as a result.
We're very encouraged by the early results of this renewed focus.
Our 300 million players spend tens of billions of hours every you're watching and playing our games and yet we believe we're just scratching the surface in terms of fulfilling the reach engagement and player investment potential of our franchises.
We see even more clearly than ever before the potential for growth across all their franchises as we create great content for new and existing platforms leverage our wide array of business models and capitalize on new engagement models.
Each of our business units is focused on delivering more frequent more compelling more engaging content.
The focus is already delivering better than expected results.
This month Blizzard is proud to be celebrating the 15th anniversary of world of Warcraft for the release of World of Warcraft Classic.
Well over 100 million players have played world of Warcraft since its launch and the upcoming releases a great example of blizzard responding to our players encouragement.
We're excited to welcome over 40000 Blizzard fans at Blizzcon This November and millions more around the world you live stream.
The teams at Blizzard are hard at work to ensure that this is truly the best Blizzcon, we have ever hosted.
At Activision more platforms more countries more players is the new call of duty Battle Cry, we intend to drive call of duty to greater scale than ever before to the release of modern warfare and call of duty mobile and we believe we will achieve greater reach engagement and player investment than ever before.
And the King Candy crush continues to crush it and it was once again the number one app on the U.S. mobile App store.
We remain the industry leader in East sports and we will broaden the audience of call of duty even further to the launch of call of duty globally. We've now sold eight teams all at a premium to the initial Overwatch League team sales and with Super owners.
And the 2019 season of the Overwatch League continues to break viewership records in the second quarter. The season stage two finals live on a B C was the best performing East sports broadcast today across the U.S.P.N. NBC.
And both stage two and stage three recorded double digit growth in hours watched year over year.
Our organization and our team owners are now preparing to host games in their own markets for the next year.
And it really is remarkable that in just the leagues third year, our owners are actually able to host games in their home markets.
And we're excited to see regular season games in cities around the world as well, especially across North America, China, South Korea, France, and the United Kingdom.
This content is creating great opportunities for broadcasters sponsors and advertisers.
We believe no professional sports leagues has accomplished anything like weve accomplished in the three year period in all of sports history.
And our in game advertising initiatives are continuing to grow at incredible rates advertising net bookings doubled year over year in the second quarter and with the foundation for advertising initiatives now in place we are actively exploring opportunities to leverage these capabilities across other parts of the business, especially with our E sports content.
We remain excited about our growth prospects, we're laser focused on our priorities and our opportunities have never been more compelling.
None of our success would be possible without the most talented focused committed employees in our industry and the support of our stakeholders. We are grateful for both.
Thank you and now called he will review the highlights of our operations for this quarter with you.
Thank you Bobby.
Activision Blizzard exceeded its second quarter outlook with strong creative and commercial execution and with topline performance at Activision and favorable cost timing driving operational upside.
In our recent earnings calls I've shared how we're increasing investment in our key franchises. This year cross call of duty Candy crush Warcraft, Hearthstone, Overwatch and deal, though we're expanding our development teams and resources. So that we can accelerate the delivery of content in our pipeline and pursue new business models broaden our communities and delight our players.
These expanded teams are working on innovative new content across console PC and mobile her but in game content and for new releases.
Most of the work underway will set us up for future growth. We also saw encouraging early progress in several of our flagship franchises.
In particular, new in game content for call of duty.
Hearthstone World of Warcraft reinvigorated those communities and drove improved Q2 trends and black ops for is a market improvement dealing gauge what trends since the introduction of the new Alcatraz blackout Nab in April .
And more frequent events throughout the quarter.
Our ongoing work to offer even more compelling in game experiences delivered strong year over year gross or net bookings from in game items first World War two.
And hearthstone.
A great response to the rise of Shadows expansion and to substantial new single pad content led to net bookings growth versus the prior quarter and versus the Q4 expansion and world of Warcraft saw growth in subscribers in the second half of the quarter driven by both the rise of Ashar major update late in the quarter and by building excitement.
Eminent launch of World of Warcraft Classic.
Now we recognize that these are early signs of progress that there is more work ahead.
But the enthusiasm with which our communities are responding again highlights the growth potential of our franchises and we intend to build on this progress as we continue increasing investment in our key franchises in the second half.
I'll now provide more detail on our Q2 results against our three key metrics reach engagement and player investment.
Starting with reach which was 327 million monthly active users in Q2, Activision monthly active users were 37 million.
Reach was lower year over year due to the exclusion of Destiny monthly active users and a decline in call of duty catalog, but importantly, black ops for monthly active users grew year over year and throughout the quarter versus last year's title.
We think this is the result of the increased frequency and quality and live operations, including seasonal events, New game play and immersive new in game experiences across the Black ops environment engagement was high was hours paid in Q2 growing over 50% year over year versus last title and we plan to continue our investment in development talent tools and analytics as we look to build on this momentum in Q3 and beyond.
Elsewhere that division our strategy of re mastering arbitrage library of love. It IP continued to deliver with the Q2 release of crashed team racing nitrate fueled.
The game into a positive critical reviews, and strong sales, particularly through digital channels.
Moving on to Blizzard, which had 32 million monthly active users up slightly from Q1.
Hearthstone monthly active users increased sequentially. Following the release of the rise of Shadows expansion and deeper more engaging single payer content in the quarter.
While the competitive environment is increasingly challenging we see substantial opportunities ahead for the hearthstone franchise.
Our expanded hearthstone team plans to build on the strength of its Q2 content cadence with a strong pipeline of new content and features over the coming months that we think players will love.
And we look forward to the team announcing their plans.
Overwatch monthly active users were relatively stable sequentially with engagement increasing following the release of the workshop, which enables the community to flex their creativity and build their own those hundreds of thousands of new game modes and created and played in millions of sessions already.
And then what are the Warcraft subscriber numbers have increased since midnight. Following the release date announcement and beta for classic and the rise of the shot content update in late June .
The world of Warcraft teams focused on delivering substantial incremental content and not expansion years has resonated with both current and lapsed players.
Can you me excitement around classic continues to build ahead of its August 27 or lease.
Blizzard will be supporting a lease with a major awareness campaign for a large community of players you have been a part of world of Warcraft over the last 15 years.
Q monthly active users were $258 million in Q2.
4% lower year over year due to declining reach for their web titles and for King smaller gains more generally but most importantly.
Candy crush monthly active users grew year over year driven by growth in the original Candy crush saga.
And the addition of Candy crush franchise.
King continues to expand live services features and content across to Kandy franchise to drive both reach and engagement in fact in recent weeks the team at least a 5000 level for candy crush saga.
Just another remarkable milestone for the title.
Which brings me to our second key metric engagement.
The king that we're continuing to engage deeply with total time spent in the candy franchise growing strongly year over year and across our franchise as we continue to see strong engagement from our communities and Activision the call of duty franchise had double digit year over year growth for total hours played in the quarter and a blizzard daily time spent per player increased year over year.
It's Bobby highlighted E sports remains a growth priority for the company, where we celebrate player achievement community passion provide high quality spectating experiences as well as further strengthen the durability of our franchises and generate new revenue and earnings streams.
Overwatch League average you continued to grow year over year and a two stage is held during Q2 season to date.
Viewership in average minute audience have grown well into double digits year over year.
And as we prepare for the new call of duty City based the starting next year call of duty World League continues to enjoy momentum with average minute audience for our two events in Q2 roaming around 50% year over year.
Our third key metric is player investment.
Indian content features and services delivered approximately $800 million of in game that bookings in the second quarter.
King was the biggest contributor the candy crush again, the top grossing franchise in the U.S. App stores as it has been for the last two years.
And kings advertising business continues to ramp.
But net bookings growing sequentially and doubling year over year, the business remains well on track to exceed $100 million in net bookings this year.
Because the rest of the portfolio the largest driver of the year on year decline in gain net bookings is the inclusion of destiny in the year ago quarter as well as the fact that for some of our franchises, we're not yet providing the flow and frequency of content that our communities expense.
We did however.
See clear evidence that our investment in game content.
[noise] Hearthstone that bookings grew sequentially in Q2 bundle either by the Shadows introduction of single content outperforming Q4's expansion.
The call of duty, we saw strong backups for engagement trends matched that players investing in the new content.
Well I've got score net bookings for end game I Didnt really year over year Post World War, two and our head of World War, two on a comparable life to date basis.
Looking forward, we intend to build on the strong engagement in oncology franchise, new experiences in the coming months.
We're continuing to make good progress laying the groundwork for new car E Sports League, which will launch with teams hosting games in their homes cities in 2020.
On the mobile side call of duty mobile is currently in soft launch in Canada and Australia.
The early performance indicators and consumer interests are very encouraging although we continue to plan conservatively on our financials for the launch in October 25th we have the global console and PC launch for modern warfare and incredible rebirth of the celebrated series developed by the team at Infinity Ward.
Built on a new engine with a step change in visual audio and gameplay fidelity.
Modern warfare is.
Breathtaking, there's just no other word for it.
It includes a great campaign set in the current day that we think stands apart from anything else in the industry and will appeal to both existing fans and new players.
Gun sites is new to be to note a dedicated close quarters maps that brings a lot of fun to the franchise.
The fan favorite special ops caught node returns with more replay ability than ever before.
And as we announced last week, we think modern warfare delivers the industrys ultimate multiplayer playground. The game, we're not only feature of the multi player game play that our fans know and love, but also noted that support 20 be 25 sites and an epic large scale experience that will support more than 100 players.
I am also delivers a phenomenal built from the ground up PC experience and for the first time and call of duty history. The game will support cross platform play.
Last week's multiplayer reveal featuring 36 is the world's most prolific streamers thing against one another under one roof held the number one spot on the industry's top gaming platform and response from fans has been the strongest we've seen in years and fans are gonna first taste the action in our multi player open beta in September .
We have a number of surprises in store after that.
Including the largest post launch content pipeline in franchise history.
Now we know we're at an important time for the Cosby franchise.
We feel that we're well prepared to deliver fantastic experiences across key sports mobile and the main game on.
So in summary in Q2, we made good progress in several of our franchises. We saw our communities respond to the improved cadence and quality of in game content enabled by our increased investment in development.
We see this as a proof point that we're taking the right actions to return the core business. The growth. We know is possible and the ongoing momentum in our E sports in advertising initiatives highlights the potential to further enhance the reach engagement and monetization of our portfolio.
I'll now hand, the call over to Dennis to discuss our financial performance.
Dennis.
Thanks Cody.
Today, I will review, our better than expected Q2, 2019 results as well as our outlook for Q3 and the full year.
Q2, GAAP and non-GAAP EPS were ahead of our prior outlook key factors included business over performance and favorable cost timing as well as an equity investment gain and a lower tax rate.
To review the core I'll start with our segment results.
Activism revenue was $268 million down year over year against the comparable that included destiny.
Key quarterly contributors were call of duty in game revenues and the successful launch of crash team racing Nitrile refueled, our operating income was $55 million with an operating margin of 21%, which was four percentage points lower year over year due to lower revenue and mix effects.
Blizzard revenue was $384 million lower year over year due to a decline in game revenues operating income was $75 million with the revenue decline, partially offset by lower costs lizards operating margin was 20%.
King revenue of $499 million was roughly flat year over year and modestly higher in constant currency.
Candy crush net bookings grew year over year with the ads business doubling over the same period.
Operating income was 171 million and an operating margin of 34%, which is consistent sequentially and year over year.
Now, let's turn to our consolidated results unless otherwise indicated I will be referencing non-GAAP figures. Please refer to our earnings release for a full GAAP to non-GAAP reconciliations.
For the quarter, we generated Q2, GAAP revenues of $1.4 billion $81 million above our may guidance. This includes the net recognition of deferrals of $189 million net bookings of $1.21 billion were 57 million above our may outlook.
We incurred a GAAP only restructuring charge of $22 million.
We recognized an unrealized gain on an equity investment of $38 million, which is included in our GAAP and non-GAAP , Yes, and we generated Q2 GAAP EPS of 43 cents and Q2 non-GAAP EPS of 53 cents, which was 18 cents above guidance. These figures include the net recognition of deferrals of 15 cents.
From a cash flow and capital structure perspective, Q2, operating cash flow of $154 million grew strongly year over year due to working capital timing.
We paid a cash dividend of 37 cents per common share, which was up 9% year over year for a total of $283 million in aggregate to shareholders of record as of March 32019.
Our cash and investments at the end of June was approximately $4.7 billion and we ended the quarter with a net cash position of approximately $2 billion.
Now, let's turn to our slate now look for the second half of 2019.
Well isn't released Hearthstone latest expansion saviors of Oldham This week and as launching world of Warcraft Classic globally on August 27, the team will continue to support Overwatch with new content and events and is preparing for the release of Warcraft three re forged later in the year.
King is planning numerous features an innovative live ops across its portfolio and Activision will build on the strong engagement for black ops for with additional features and seasonal content of the call of duty community.
At the same time, the team will be ramping marketing as they prepare for the launch and ongoing support of call of duty mobile and of course modern warfare. Our most important release of the year on October 25th.
Before I discuss the specifics of our outlook I'd like to provide a little context.
First of all I wouldn't know that a significant proportion of the earnings upside in Q2 was driven by timing and lower than forecast costs and given the abundance of potential we see with our franchises, we still intend to invest most of these amounts during the year.
But as we turn our focus to the back half of the year, we continue to feel great about how our key age two releases are shaping up.
Encouraged by our progress against our key initiatives.
At the same time the environment remains competitive the ongoing shift to digital means retail dynamics are a risk factor business models are evolving and FX headwinds have increased since we last provided guidance.
As a result, we see a wider range of possible outcomes in the second half.
With all that said, we feel great about how the second half is shaping up we are maintaining our net bookings outlook for the year and are increasing our full year GAAP and non-GAAP EPS outlook now onto the numbers.
For Q3 on a GAAP basis, we expect net revenues of $1.1 billion, including the recognition of GAAP deferrals of $5 billion. We expect net bookings of $1.1 billion. When you model Q3 bear in mind that last year benefited from the battle for as Ross expansion and Act divisions results included the Destiny Forsaken expansion, we expect product costs game operations and distribution expenses of 29% and operating expenses, including software amortization of 66%.
On a GAAP only restructuring charge of approximately 50 million.
We expect the tax rate of 23% GAAP and non-GAAP share count of 772 million and EPS of five cents.
For Q3 on a non-GAAP basis, we expect product cost game operations and distribution expenses of 29%.
And operating expenses, including software amortization of 53%.
We expect a non-GAAP tax rate of 20% non-GAAP EPS of 20 cents with no impact from GAAP deferrals on a GAAP basis for 2019, we expect net revenues of $6.2 billion, including GAAP deferrals of $110 million, we expect net bookings of $6.3 billion.
Product cost game operations and distribution expenses of 24% operating expenses, including software amortization up 54% and a GAAP only restructuring charge of approximately $150 million, we expect a GAAP tax rate of 22% GAAP and non-GAAP share count of 774 million and EPS of $1.41.
For 2019 on a non-GAAP basis, we expect product cost game operations and distribution expense grew 24%.
And operating expenses, including software amortization of 45%.
We expect a non-GAAP tax rate of 20% and non-GAAP EPS $2 in two cents, which includes GAAP deferrals of 13 cents.
So in summary in Q2, we continued to make progress as we position the company to take advantage of the many growth opportunities we see across our franchises.
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 still.
And the competitive environment as dynamic as ever we're taking the right steps to deliver the world class execution and quality content delivery that is characterized our company for many years I remain confident that executing against our plan will position us to deliver strong results and shareholder value over the long term.
Now I welcome our business leaders, Jay who mom and Rob as they join for the Q and a portion of the call operator.
Certainly and ladies and gentlemen to ask a question star one on your telephone keypad.
Please note that if you're on a speakerphone. Please pick up the handset or de press your mute function to other signal to reach our system again that is star one to ask a question.
And we'll go first to Matthew Thornton of Suntrust.
Hey, good afternoon. Thanks for taking the question maybe just on on war Warcraft his talk a little bit about just the the lift you're seeing from the introduction of the other the classic mode as well as the the recent patch rise of ASRA and just how sustainable you think that is here into the second half from a from an engagement standpoint. Thanks.
Hi, This is Jay first on World of Warcraft more broadly you know the team is always looking for ways to meet the demand.
For more content between expansions.
Recognizing the kind of sort of the deep love that players have of the game and the value of new experiences.
The recent update rise of a sharp is a good representation of how we think about large updates for the game.
Wow Classic is also part of our effort to increase available content.
Players have shown a lot of support for both classic and whereas Musharraf.
Regarding classic specifically you know for many years, we've really heard from players their desire to play at the original version of the game and it was a great experience for me personally to announce the start of that effort at blizzcon.
Overall this has been a pretty significant undertaking there has been a lot of technology technology technology challenges.
But I think the team has really fed a lot off of the excitement that they've seen from the community from the overall player base.
We're really proud of the work that has gone into creating the game and we're also really excited for the launch on August 27.
If you are a subscriber.
Wow Classic is automatically included with your subscription so it's greatly increasing the available content players and is really a good way to maintain their connection to it again.
We've had over 100 million players experience Wow and that's a that's a global number so it's a great opportunity for many players who were once part of the community to return and re experience the game as they as a as it once was.
Now to your specific question there is a lot of excitement around classic and its really exceeded our expectations already but it's really difficult to predict a sustained engagement post launch we have seen a lot of strong interest and we'll see you will see us continue to work to drive awareness around the launch in the coming weeks.
Thank you for the question I really appreciate at classic is something that's really close to my heart.
Operator next question please.
Yes, and that will come from Brian Nowak of Morgan Stanley .
Hi, it's an add on for Brian Thanks for taking the questions. The first one is just looking at the King business can you go over sort of the key drivers and vectors for growth from here and then turning to the core how should we think about M&A you any sort of in game monetization trends heading into the second half. Thanks.
Oh, Hey, so mom.
Thank you for the question.
So after a couple of quarters and the years sequential growth.
Overall, king airs shell a bit too to 58 million in Q2.
Yeah, I mentioned on the last call that we tried to be quite disciplined on user acquisition.
And then we spent less in marketing in Q2 compared to Q1, and so and then use will ebb and flow over the quarters.
But with the headline I know you trigger a you don't necessarily see that.
Trends.
Well one of the most important one I look at his spin or use for candy crush.
Our largest franchise, which were up year on year.
And whats candy and mobile are continuing to represent a larger share of our mix as well and smaller.
Portfolio.
The overall year on year, and then the trends have been improving.
And then specifically on your question on like fishing.
Candy crush bookings grew year on year in Q2 and to me that builds on the growth story for the franchise has started happening in 2017 2018.
Next I would again in Q2.
And these long term trends.
Our.
Really the kind of about what we're doing in the franchise and how we continue to invest in content and new features for our players.
So we know that content drives player engagement and you heard we just released a 5000 barrel endogenous candy crush a great milestone for the game.
The content is much more than just adding levels, we're adding innovative features and life ops that creates many different ways for our players to enjoy games and that means that we offer fresh ways for everybody in the titles to to engage with Mcdonald's whether theyre just starting hardware.
They are at a level 5000.
And on top of all of this we're adding new features which drive monetization.
So as I look forward, though we have a pretty strong pipeline of these features plan for the coming quarters and they'll continue to deliver these features to our players to drive engagement and monetization.
Operator can have the next question please.
Of course, and that question will come from Mike.
Goldman Sachs.
Hi, Thank you very much for the question I was just wondering if you could talk a little bit more about the future of the call of duty franchise, specifically it seems that with a focused toward call of duty titles that might have the potential to sustain over multiple years, we may be going toward a business model that doesn't necessarily involve annual cod releases, but instead a few franchises that are.
Perpetual live service games.
Would that be consistent with what your vision for the future of call of duty looks like thanks.
Hey, Mike It's Rob Thanks for the question and it's a it's a good one at that because were taken some important steps regret the franchise overall and there's probably a few things I imagine here now obviously called it in mobile its going to be an ongoing live service and title or building a huge jemaah content and events.
Keep our players around the globe, having fun for the long haul on this one.
But if I look over on the console and PC side, we do still see new launches is a critical part of our future you releases or have been and continue to be huge engagement drivers for our community and because it bring a robust set of new experiences to our fan.
Now that said, obviously, we want to also build player engagement here over time as well, we're very committed on this front and you guys started talking about in a few ways.
First with modern warfare, we're going to have cross platform play as Connie mentioned and we're also not having a season pass now this is important and we're doing this because we want to build one massive community where everyone can come together and have fun each and every day.
And to support that community as we go forward, we are investing significant resources in post launch content event and new ways to play that we think fans are going to really love.
So what I'd say is we're really looking forward to the launch of modern warfare. It is a great game and we believe its the beginning of an incredible journey for our community. Thanks.
Hey, Mike it's cut it am I just.
Jump onto the question just to talk more broadly not just call of duty but.
So the rest of the franchises in our portfolio.
Because I think the question is broader really about how do we think about live services and you know we recognize that the key to player engagement is really a great ongoing in frequent content coupled with like core gameplay features and services that really keep the players engaged.
And you know you've heard that today the investment that we're putting against that initiative and the resources are bringing to bear and the early results were seeing are really meant to think about our franchises as live services.
That said, we do see that.
No across many of our franchises major upfront launches as a very effective in an important way to refresh the franchise to drive innovation to reach out to new players to expand the community and so in the resources. They are putting into our franchise is as you've seen the additional investment. We think we can get the both the best of both worlds you can get live services, an ongoing way in a major upfront launches to really drive innovation and to refresh the franchise and expand the community.
So you'll see you'll continue to see big launches from us and.
Yeah, we're looking forward to telling you more about those in due course.
Thanks, Mike Operator can we have the next question. Please.
And that question will come from Noelle Moldy of Atlantic equities.
Hi, Thank you could you expand on your comments about the unfortunately performance in the quarter and also kind of talk about what effect do you expect the home and away formats games of next year.
Thanks.
Hey, you bet I could all its Dennis I'll take this one.
It's a great question, obviously because.
Viewership is a great indicator of the health of.
Any league any sports leagues like the Overwatch League and I know from the outside because we are we have some great streaming partners and we're also on TV, it's sometimes hard to get too specific data on that you heard Bobby and comedies comments that when we looked at the two hour stages that were held in Q2, the average minute audience, which is the best probably the best measure of viewership was up strongly and when you look at the season to date average minute audience is up 15% with the U.S. actually up over 30% so encouraging trends there and then demographically when we kind of parse through that.
Even more importantly is that we're seeing growth in our younger U.S. audience as well and that's in a year, where nearly every other major traditional sport is seeing viewership a decline in those audience segments. So I think this really highlights how the expanded roster. This year is driving more interest in more places for the league and that also the work that we've done to enhance the viewing experience is really starting to help deliver some results now that's not saying were gone on that journey, there's still a lot of room for further improvement in the viewing experience and this is a key focus area for us as we think it is critical to continuing to make the broadcast not only compelling but easily digestible for mass market audiences.
On the second part of your question around the home and away format. Yeah. We're excited for next year, we think it will be a big driver of not only for our local fan interest in many of our markets, but also broader viewership as well.
We did see some early indicators of a solid progress on that this quarter with the Dallas and Atlanta homes stands that brought thousands of spectators to that whole marinas in those respective areas and obviously the atmosphere in those arena is actually I think translated well into the broadcast so I think that look that bodes well for us as we roll that format out next year across the league both not only for the Overwatch League, but for the call of duty League as well. So so yeah. It's still early innings to use a sports analogy analogy and there's still plenty of work to do but.
The early signs are very encouraging.
Thanks, Operator can we have the next question please.
And that will come from re social of consumer edge research.
Great. Thanks for taking my question.
One on Blizzard, so how do you balance Blizzard Polish a as you guys call it an increasing demands from consumers around the speed and piece of content. Thanks.
This is Jay you know this is a question that the teams really spend a lot of time, considering on how to be successful and that's a priority for me personally.
You know there is a high demand of Blizzard game content and it's a challenge we face for a long time I think we have made some some headway over the years.
At the same time I think it's very clear that we could be doing better.
And that was one of the driving reasons for us increasing the amount of developer talent at the company as well as really focusing on our priorities this year.
Having more people in place to support the various initiatives that we have in the various features is really critical it supports the process of integration that we feel is really critical to us reaching the right quality level.
It's going to take some time to further ramp up on content delivery across our franchises, but we're happy with the early progress.
We've seen significant new content for Hearthstone and for World of Warcraft, just this quarter and those are both very positively received by both communities.
And ultimately that's how we're thinking about blizzard quality.
Internally, we talk about craftsmanship.
And to US that's about meeting our expectations.
As well as the player expectations in both in terms of frequency of content and in the level of Polish.
And so when we say that we're aiming to release more blizzard game content players. It means that they can start to look forward to not just more blizzard games, but more blizzard quality game experiences across the board.
Thats right operates I can have the next question. Please.
And that will come from Alex Gammel of Jefferies.
Great. Thanks for taking the question I was just hoping to get an overall update on the advertising opportunity, a king and whether you're still confident in the ability to scale that business overtime.
Hey, Alex Thanks for the question or two model. So we have a lot of momentum in advertising right now and I still see substantial opportunities for ongoing growth.
I'm going to give you a little bit of color on that so on the demand side.
The native video Ad products.
Isn't that safe premium environment, and Thats differentiated proposition for advertisers.
And we're seeing both new and returning brands recognize this.
And as we are seeing best we are continuing to build our sales capability. So we have a number of strong partnerships as well around Dodd with AD platforms that have failed engine tardy were making available.
And on the supply side, we recently introduced adds into can be friends.
Our newest can get title and we're working on putting ads into candy crush jelly saga, and Petrescu saga and the back half of the year.
So we've made good progress on both supply and demand and we're continuing to increase impressions.
As you heard add net bookings doubled year on year again in Q2 and were well on track to exceed 100 million tomorrow.
That I talked about.
And as I look ahead, we're planning to continue to grow within the King's network and educate more brands and partners about the strength of this value proposition.
Hey, Alex its kati I might jump in as well here just stepping back for a moment because it's to kings credit they've built a really tremendous AD platform and set of capabilities that are delivering the results that we talked about today and that whom I'm just give some more color on.
We also had the opportunity now to bring this capability elsewhere in the business. We are actively working on this including looking at certain new mobile experiences and also E sports and we think there's a lot of potential there deploy what we've learned across the rest of the company.
Where it makes sense. So overall there is you know there is momentum for us not just in the existing ads business intact, King, but we think plenty of potential for further growth you know across the rest of the business.
Thanks, Alex operator can we have the next question. Please.
And the next question will come from Mike Hickey of the benchmark company.
Hey, Bobby Kotick, Dennis Chris Nice quarter, guys. Thanks for taking my questions.
Just curious traps and your Activision.
Re masters opportunity, obviously, you have a huge library.
IP there to work with so I guess, just how meaningful.
As you read master's business and what's the opportunity.
Floating masters in the future.
Hey, Mike it's good it's Rob I'll take that one so that Activision we have seen great results from re mastering somebody's beloved games over the last couple of years, if you look at yes.
Passion same trilogy, biotechnology reignited trilogy, and crashing racing.
They're all credible games and our teams have done a really great job in modernizing for stage platform.
The player response to each of these have been fantastic and I'd say for example, if you look at crash and seeing trilogy that won't sold through over 10 million copies. So they are obviously, having a big impact on our bottom line and a real impact there, but I'd say, what's really important is that its reaffirming enduring nature of these franchises for us and as you mentioned.
When you look at our IP Library, we think Theres a lot of the IP and their fans are going to want to experience again, so I'll now what I'd say stay tuned for some future announcements, but just beyond pure re masters. There are also a lot of opportunities now to innovate and think about 20, new content within these IP. So as we think about it theres a lot of growth opportunities for the business overtime with in Activision base on our library of IP and frankly more broadly across the company, where the company to collectively has a ton of great IP.
Thanks, Mike Operator next question please.
And that will come from Mike Olson of Piper Jaffray.
Hey, good afternoon speaking of Great IP, you guys have a great track record of creating new IP, but we know how difficult it is to do and.
Just wondering can you talk about new IP development, and how you're thinking about the opportunity there in general thanks.
Sure. Thanks, Mike. Thanks for the question. This Kati a happy to talk about new IP initiatives, but first I you know.
I do want to just pause and emphasize that we feel fortunate to already have a number of largest average franchises with global recognition.
And passionate communities and its worth pausing there because we do feel strongly and see you know results around thinking of those as beach heads that we can build on.
Where there's tremendous scope to innovate inside of them and you know we do feel we execute on that potential.
The company should be and will be substantially larger than it is today. We think this is not just to for ourselves, but didn't broadly and gaming and entertainment where large established franchises really do give you a significant competitive advantage and we're leaning into that.
That said it doesn't mean, we're only focused on the existing portfolio franchises, we have new IP projects underway across each of the businesses.
And as you mentioned we've had a.
We think one of the best or you know one of the top track records of putting out new IP and part of the reason for that is that we have a very vigorous greenlight process through which we put new ideas.
We're looking at creative at commercial at design at every stage of development from prototyping, all the way through to build and testing and.
And it's a high bar and honestly you know many and maybe most I just don't make it through.
So we think this like that rigorous approach is the right one because of.
No the demands of the fans in the industry are increasingly significant.
You have to be disciplined about the process not just because it's the launch of VIP, but it's about sustaining it and growing it over time, that's by far the best experience for the players when you can launch in sustaining it also by the way by far the best business model and its what really drives the returns and so that's what we look for and that high bar means that it takes time for us to bring you know games to bear and it also means we don't talk about our plans to early.
But I went to the rest assured we have new IP initiatives underway and given our track record.
You know, we feel pretty confident about our ability to have success here over the future.
Thanks, Mike Operator, we have time for one last question. Please.
And that last question will come from Ryan <unk> of Bank of America.
Hey, good afternoon. Thanks for taking the questions just two quick ones if I may.
First regarding the soft launch testing you're doing for call of duty on mobile can you maybe share some of the early feedback.
You're getting from the players there and whether there's anything in the data, suggesting hey, this game could be top 10 or top 20 grossing.
On mobile and then along the lines of mobile can you talk briefly on what you and your partners over in China are seeing regarding the approval process there for games like call of duty and Diablo. Thanks.
Hey, Ryan its Rob.
So yes cauldron mobile now it's been a soft launch in Canada, Australia last few weeks and the early indicators, so far very promising and we're seeing very strong and very strong results across all key metrics, including installs and retention of players are reacting to you I think loving the authentic quality to game play the characters in the setting and obviously and ability to play across a wide variety of fun nodes.
And when we look at the pre registrations for the game you know to US It suggests a real high anticipation and organic demand for the game globally.
So like I said I do think the early signs are encouraging and now as we think about mobile now there's another interesting thing for us which is the opportunity here for tens of millions of people to experience call of duty for the first time now if we get that right. This could be a step change for us in the franchises reach.
As you know there are several mobile action games right now that are generating significant reach in revenue. So this game does have potential to be meaningful to us.
All that being said this is a new initiative and we're always particularly careful not to get ahead of ourselves when it comes to forecasting these thing, but as I mentioned, we do feel very good about what we're seeing so far.
Now you asked about China and.
As you'd expect we're planning very prudently, they're working through the process, but we're not going to wait for China to launch this game elsewhere.
We've been keen to get this game in the communities hands as soon as it's ready and they shouldn't have to wait too much along thanks for the question.
All right. Thanks, everyone for joining us today, we greatly appreciate your interest and support and we look forward to seeing many of you in game this fall and and hopefully in person at blizzcon towards the end of October . Thanks again.
And with that ladies and gentlemen that does conclude today's call we'd like to thank you again for your participation you may now disconnect.