Amrita Ahuja - SVP, IR Bobby Kotick - CEO Coddy Johnson - President and COO Spencer Neumann - CFO Dennis Durkin - Chief Corporate Officer Mike Morhaime - CEO, Blizzard Eric Hirshberg - CEO, Activision Riccardo Zacconi - CEO, King

Chris Merwin - Goldman Sachs Laura Martin - Needham Matthew Thornton - SunTrust Tim O’Shea - Jefferies Mike Olson - Piper Jaffray Brandon Hoffman - Morgan Stanley Eric Sheridan - UBS Evan Wingren - KeyBanc Colin Sebastian - Robert W. Baird

Good day, and welcome to the Activision Blizzard Q4 2017 Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Amrita Ahuja, Senior Vice President of Investor Relations. Please go ahead.

Good afternoon and thank you for joining us today for Activision Blizzard’s fourth quarter 2017 conference call. With us are Bobby Kotick, CEO; Coddy Johnson, President and COO; and Spencer Neumann, CFO. And for Q&A, Dennis Durkin, Chief Corporate Officer; Mike Morhaime, CEO of Blizzard; Eric Hirshberg, CEO of Activision; and Riccardo Zacconi, CEO 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. 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 believe them to be true, they ultimately may prove to be incorrect. A number of things could cause the Company’s actual future results and other future circumstances to differ materially from those expressed in any forward-looking statements. These include the risk factors discussed in our SEC filings, including our 2016 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, February 8, 2018. 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, expenses, including legal fees, costs, expenses and accruals related to acquisitions, including the acquisition of King Digital Entertainment; expenses related to debt financings and refinancings; restructuring charges and the associated tax benefits of these excluded items along with significant discreet tax related items such as those results from the Tax Cuts and Jobs Act enacted in December 2017. 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.activisionblizzard.com for a full GAAP to non-GAAP reconciliation and further explanation with respect to our non-GAAP measures. There’s also a PowerPoint overview, 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 GAAP and non-GAAP results in a one-page summary sheet. Starting this quarter, we are introducing a new operating metric, net bookings. Net bookings is defined as the net amount of products and services sold digitally or sold-in physically in the period and is equal to revenues plus the impacts from deferrals. And now, I’d like to introduce our CEO, Bobby Kotick.

Thanks, Amrita, and thank you all for joining us today. This was a record quarter and record year for Activision Blizzard. We delivered record quarterly net bookings of $2.6 billion and record annual net bookings of $7.2 billion. We delivered record segment operating income of $2.4 billion and record non-GAAP EPS of $2.21 per share, above our initial February outlook of $1.70. And we also delivered record annual operating cash flow of $2.2 billion. Each part of our business reached new milestones and demonstrated the durable and enduring nature of our franchises. Activision celebrated strong Call of Duty momentum and their best operating income year ever. Blizzard delivered their highest operating income ever for year with no major game releases. And King returned to growth with the Candy Crush franchise stronger than ever. 2017 was also an important year for us for preparation of our future growth initiatives. We invested in new services, features, content and experiences to connect and engage audiences all across our franchises. One example is the launch of the Overwatch League. Witnessing the passion of players at the opening matches of Blizzard Arena and the millions of spectators connecting via live stream from around the world was a thrilling moment in our history and a milestone in esports growth. Watching fans road trip across the country, spectators in the stands wearing team jerseys, gears in the game wearing team skins, audiences leaping to their feet after daily play and viewing parties around the world; these were awesome moments that created incredibly rewarding experience and demonstrated the emergence of professional competition as a way to celebrate our players. Launching a professional league is an ambitious undertaking and our teams executed on countless fronts, attracting 12 world-class team owners representing cities in Asia, Europe and North America, signing numerous league and team level sponsors, brining esports spectating and production values to new heights, and forming a media strategy that provides broad reach and fair value for our premium content while also preserving distribution on own platforms. Overwatch League matches are broadcast live on our MLG and Twitch, and will be available on other broadcast outlets throughout the world. In its first week, the league reached 10 million unique viewers and had more than 280,000 average viewers on a per minute basis, in the week since we’ve seen sustained levels of viewership globally with new spectators joining each week as the excitement continues to grow. Of course, we are building this league for the long term, and we’re pleased with the early strong momentum that we have which has created value for players, spectators, team owners, partners and sponsors. Our efforts have already led to increased global demand for expansion teams, which we expect to start selling later this year. We also believe in the growth potential of each new opportunity we are pursuing whether in-game advertising, consumer products, cinematic productions or esports, all of these support our communities and help to drive engagement with our franchises. Each new experience we provide that enables our players to demonstrate their passion, creates a virtuous cycle of engagement, investment and growth. It’s still early days for many of these efforts but making progress in these strategic growth areas will be an important focus for us in 2018 and beyond. I have the privilege to lead one of the best teams in the entire business world. And as I begin my 28th year at helm, I have never been more energized to pursue with focus and determination the great growth opportunities that lie ahead. Also, this quarter, we announced that Reveta Bowers joined our Board of Directors, Reveta brings an immense amount of experience and leadership from education and media institutions such as Common Sense Media where she chairs the National Board of Directors and from The Walt Disney Company where she served as a director for 10 years. We’re thrilled to have her as our newest Board member. And now, here is Coddy, to review the highlights of our operations this quarter.

Thank you, Bobby. Activision Blizzard had a record year. And throughout 2017, we broke records and posted strong results each quarter by providing an ongoing year-round scheme of content, services, features and events, both large and small, to our passionate and deeply engaged communities. While achieving these records, we also made important investments to drive future growth. We invested in marketing, to grow our franchise reach, and used services and features to enable more audience engagement and player investment and in new growth verticals to celebrate our fans. Let’s dive into our first strategic pillar, audience reach, which was 385 million monthly active users this quarter, up from 384 million in Q3. Starting with King. On our last call, we discussed a number of initiatives underway to stabilize King’s user base. Those ongoing efforts include releasing fresh and compelling features, events and content into the live games, ROI positive marketing to attract and engage new players, and a strong pipeline of new titles to expand the network. Several of these initiatives enabled King to finish Q4 with 290 million monthly active users and to grow time spent per user to a record of 37 minutes. The Candy Crush franchise in particular was up in monthly active users quarter-over-quarter, while also driving increased engagement with higher daily active users and higher time spent per player. Activision had the top grossing console game releases in North America and two of the top five worldwide, getting at 55 million monthly active users in Q4, up double digits quarter-over-quarter and matching the prior quarterly record. Call of Duty: World War II was the top grossing console game worldwide in 2017, making it the number one franchise globally, a spot that franchise has held for eight of the last nine years. Call of Duty: World War II also set a new franchise milestone with the biggest launch quarter sell-through on current-gen consoles, higher even than Black Ops III. The game also set a PlayStation record as the biggest day one digital release ever. We’ve seen a steady march upward effort on full game downloads for Call of Duty over the last several years, and there’s plenty of runway still ahead. All of this sound performance coupled with a great Black Ops III digital season earlier in the year, means that the most successful video game franchise over the last 20 years continues to be healthy and vibrant and will carry strong momentum into 2018. To that end, this fall, we plan to continue to exceed fans’ expectations with the new release from Activision’s Treyarch, the creators of Black Ops, the most successful sub-franchise in Call of Duty history, and we cannot wait to share more about that with you on future calls. Turning now to Destiny. Destiny 2 had an impressive launch, highly rated and second to Call of Duty as the highest grossing consoles in North America in 2017. It added a critically acclaimed PC version with distribution offered at Battle.net, [ph] and the attach rate of Destiny 2’s first expansion released in December was higher than that of Destiny 1. That said, we haven’t yet sustainably expanded Destiny community. The Bungie is hard at work improving the game. And the good news is that the Destiny community is a deeply committed, vocal passionate player base, as they responded [ph] in the past when we made improvements based on their sentiments. To that end, last week, Bungie released an update outlining what the changes we made and the changes that are coming. So far, these changes have been received positively and the team has a robust slate of services, features and seasonal events still to come. There are also two epic adventures on the horizon with expansion 2 in May and a major content launch later this year. There is magic in this franchise and we’re committed to meeting our own and our players’ expectations in the coming quarters. Crash Bandicoot continued to have strong sales in Q4 after a successful summer launch. Crash’s performance shows how valuable our library of IP can be, and brought back players in the compelling new way. We look forward to growing other beloved IP in future offerings as well. Blizzard is celebrating its 27th anniversary today. Happy birthday, Blizzard. A lot of things have changed over the past 27 years as the business has grown across genres, platforms and geographies but a few things have not including Blizzard’s commitment to put players first and to release games at an incredibly high level of quality. Blizzard finished the year with 40 million monthly active users, continuing a sixth quarter streak of 40 million monthly active users or more. Overwatch continued to attract new players in the most recent Blizzard World content and it’s been well received by the community. Overwatch’s model of delivering year-round content with seasonal events and new heroes and new maps continues to drive strong engagement. Hearthstone’s monthly active users increased year-over-year this quarter as players enjoyed the latest expansion, Kobolds and Catacombs and the introduction of new free content. While net bookings did not match the prior expansion’s record performance, players did log more play time, which brings me to our second strategic pillar, deepening the engagement. For Activision Blizzard and King overall, daily time spent per user was over 50 minutes for the second quarter in a row, placing us on par with Facebook’s time per day across Facebook, Instagram and Messenger. Now, that 50 minutes per day is just the time spent in our games; it does not include the growing popularity of watching our games on other online platforms. For the year, Activision Blizzard had seven of the top 20 games on Twitch; the next closest publisher had just two, demonstrating the broad esports appeal of our franchises. Bobby already shared that launching of the Overwatch League was a key milestone for us and that we’re seeing strong early momentum. And Call of Duty World League also opened its next season in December and is off to a good start selling out each of its World League Global Open events. And the season’s launch event more than doubled viewership hours over the prior year. Turning now to our third pillar, player engagement. In-game services, features and content continue to engage our fans and help drive our results, delivering a Q4 record of over $1 billion of in-game net bookings and an annual record of over $4 billion. We focus on offering compelling content for our communities wherever they play. Activision had some of the industry’s best selling downloadable content in 2017 including Zombies Chronicles for Call of Duty: Black Ops III which was been the number one add-on offering of the year for PlayStation North America. This is notable and impressive given that Chronicles came out nearly two years after Black Ops III launch and illustrates the value of releasing great content to our engaged communities wherever they are playing. Just as impressively, player investment in additional virtual goods and services surpassed investment in downloadable content in 2017 for Call of Duty and for Destiny, and we expect that to be the same for 2018. Activision has a great digital roadmap ahead including Destiny 2’s expansion pass and Call of Duty: World War II’s season pass. King was the biggest contributor to our record year of in-game net bookings. King continues to have two of the top-10 grossing games on U.S. iOS and Android app stores, a level of performance they delivered for over four years now. For the first time, King actually held both the number one and the number two spots at same time of Candy Crush Saga and Candy Crush Soda Saga, respectively, demonstrating their remarkable durability in the Candy Crush franchise. Overall, King had an incredible year in 2017, delivering not only four straight quarters of growth in consumer spend on Candy Crush but also a new mobile net bookings record with their biggest year, their best quarter in Q3 and their best week ever in Q4. Finally, we continue to make progress on our Company-wide mobile pipeline. We are hard at work on initiatives across a number of our franchises. We plan to see some early results later this year, and for the bulk of our new mobile opportunities to be driving growth in 2019 and beyond. In summary, 2017 was our best year yet because of the broad-based success we delivered and because of the groundwork we laid to realize significant growth in years ahead. We have a great slate on the road, [ph] for 2018 and beyond. And we look forward to continuing to serve our passionate fans, communities, and audiences are the world. Spence will now review the 2017 numbers in more detail and discuss 2018 guidance. Spence?

Thanks, Coddy. So, today, I’ll our review our Q4 and 2017 results as well as our outlook for 2018. Q4 was another strong quarter capping off a record-setting year, with record quarterly and annual revenues driven by record annual digital revenues as our business is now 78% digital and record in-game revenues consistent with our entertainment as a service model. With an increasingly diversified business, we generated for the first time over $2 billion in annual revenues on each of three interactive platforms, console, PC, and mobile, and with record profits, record annual non-GAAP operating income and earnings per share, and record cash flows. Each of Activision Blizzard and King contributed to our over-performance for the year, delivering record annual total segment revenues and operating income. And as Bobby noted, this was without the benefit of a new full game release from Blizzard, underscoring the strength of our continuous engagement model. Activision had an impressive fourth quarter, capping off their best year ever with segment records for operating income of over $1 billion and operating margin of over 38%. Activision’s performance was driven primarily by the resurgence of the Call of Duty franchise with the successful launch of Call of Duty: World War II, as well as strong sales for Crash Bandicoot. Q4 segment revenues and operating income increased 16% and 32% over prior year respectively, with the full year growing at similarly strong rates. King had an outstanding year with revenue and operating income up 7% and 12%, respectively, on a pro forma basis that includes the 2016 pre-acquisition period for King. This is a major accomplishment. It’s testament to the strong execution of the King team, their increased prioritization on the Candy Crush franchise and other live titles, and their intense focus on leveraging their platform to drive continuous improvements in engagement, game features and player investment. While margins expanded year-over-year, we did see some compression in Q4 as King strategically invested in marketing live titles to profitably drive reach. Blizzard also delivered a $2.1 billion of revenue and $712 million of operating income. Blizzard generated record results for the year with no major game release, fueled by a steady stream of content and events across their franchises, in particular Overwatch, Hearthstone and World of Warcraft. Revenue, operating income and segment operating income margin were down year-over-year as expected given the difficult comps to last year’s World of Warcraft expansion and Overwatch release. We did see some incremental margin compression in Q4, primarily due to additional marketing initiatives. Nonetheless, with 33% full-year OI margins, the team did a nice job delivering the core business while investing in key growth initiatives across the Overwatch League, mobile incubation and MLG network. Now, before I turn to our consolidated results and 2018 guidance, a brief note on U.S. tax reform. Our 2017 GAAP results include incremental expense of $794 million due to the impact of significant discreet tax-related items, primarily related to the impact of the Tax Cuts and Jobs Act enacted in December of 2017. The charge related to tax reform is a reasonable estimate but is preliminary and includes a onetime tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities. As a result of U.S. tax reform, we expect a reduction in our future effected tax rate which we will reflect in our 2018 guidance. We’ll also now have repatriation opportunities for our international cash that enable more efficient global cash management and capital structure flexibility. So, now, let’s turn to our consolidated results. Unless otherwise indicated, I’ll be referencing non-GAAP figures. Please refer to our earnings release for full GAAP to non-GAAP reconciliations. For the quarter, we generated record GAAP revenues of $2.04 billion, $343 million above our November guidance. This includes the net deferral of revenues of $597 million. As already mentioned, this quarter we are introducing a new operating metric, net bookings which were a record $2.64 billion. We had a GAAP loss per share of $0.77 including a $1.03 expense from the impact of the significant discreet tax-related items that I just mentioned. Adjusted to exclude these discreet tax related items, we would have delivered earnings per diluted share of $0.27, ahead of our guidance of $0.10. We had non-GAAP EPS of $0.49 in Q4, ahead of guidance of $0.36. And both GAAP and non-GAAP EPS figures include net deferrals of $0.45. For the year, we generated record GAAP revenues of $7.02 billion, as $1 billion above our initial 2017 guidance. This includes the net deferral of revenues of the $139 million. Net bookings were a record $7.16 billion. We generated GAAP EPS of $0.36, which includes $1.04 expense from the impact of discreet tax-related items in Q4. Excluding the discreet tax-related items, we would have delivered record GAAP EPS this year of $1.39, ahead of initial guidance last February of $0.72. We generated record non-GAAP EPS of $2.21, ahead of our initial guidance last February of $1.70. These figures include net deferrals of $0.07. So, now, looking at cash flow and capital structure. Our strong business performance for the year also delivered record annual operating cash flow of $2.21 billion and Q4 operating cash flow of $1.16 billion, finishing the year with approximately $4.8 billion in cash and investments. With regard to capital structure, we had positive development throughout the year and continue to take a balanced approach overall. In Q2, we received another upgrade from S&P to BBB and entered into a leverage neutral $1.2 billion refinancing that locked-in attractive long-term interest rates. We paid down $500 million in debt and finished the year with approximately $4.44 billion of aggregate debt outstanding, and we increased our annual dividend 15% to $0.30, paying out $226 million to shareholders in May. Now, we are heading into 2018 with the strong balance sheet and additional flexibility. We ended the year with a net cash position of $335 million. And as discussed, the recent tax reform allows us to repatriate the cash we’re holding overseas, more efficiently. This year, we’ll once again take a balanced approach to capital allocation. Our Board has authorized a 13% increase in our dividend to $0.34 per share, payable in May, and further debt pay down of over $1 billion. In addition, our $1 billion stock repurchase authorization remains in effect for another year. Now, let’s turn to our outlook for 2018, but before doing so -- before I review the numbers, I wanted to quickly discuss ASC 606 and its impact on our guidance. While ASC 606 will affect our GAAP revenue recognition, it’s not expected to materially impact our annual segment results, cash flows or financial performance, as reviewed for internal management purposes. We do expect that there’ll be some quarterly movements within the year. So, please refer to the investor FAQ we’ve provided on our website for more information on ASC 606. Now, turning to our 2018 slate. From an operating income perspective, we expect each of our segment to grow in 2018. While we also continue invest in new releases, mobile pipeline and our future growth initiatives including advertising, esports leagues and MLG network. We expect in-game revenues to be a primary driver of our growth for both the top and bottom line. Coming off a record year in 2017, we expect in-game net bookings to grow by a double-digit percentage in 2018 as we continue to innovate and deliver more engaging content to our players. Now, given the timing of launches in 2018 and the continued ramp of our new initiatives, we expect our performance to be further weighted to the back half of the year relative to what we saw in 2017. We expect Blizzard to grow year-over-year with the release of World of Warcraft’s Battle for Azeroth this summer. I am glad to say the presales for Azeroth kicked off last week and are off to an encouraging start. In addition, Blizzard has exciting plans for live ops and additional in-game content across franchises, including Hearthstone’s three expansions in 2018 and Overwatch’s in-game events. Blizzard will also start to see the benefit of its investment initiatives, as we expect the Overwatch League to be profitable in 2018, its first full year of operations. We expect Activision to grow modestly year-over-year, driven primarily by Call of Duty’s digital season of content and the exciting new release planned for Q4. As Coddy mentioned, Activision and Bungie are hard at work on Destiny 2 to improve the in-game engagement through regular updates and events, which we anticipate will benefit performance later this year with the release of a new expansion in May and a major expansion in the second half of the year. And we expect King to be up year-over-year, driven by ongoing live operations across the portfolio, and two or more new releases during the year including social casino. As we’ve indicated on prior calls, we’ll begin to ramp our ad business in 2018. We expect the minor positive profit contribution weighted towards the back half of the year as we continue to roll out additional video ad products, methodically develop capabilities and infrastructure, and build the business for the significant opportunity that we see over the long term. Now, turning to numbers for guidance. On a GAAP basis, for 2018, we expect revenues of $7.35 billion, including GAAP deferrals of $100 million. We expect record net bookings of $7.45 billion. We expect product costs of 22%, operating expenses of 53%. Our GAAP net interest expense is expected to be $136 million and our GAAP tax rate is expected to be 20%. We expect 776 million fully diluted shares, both for GAAP and non-GAAP, and GAAP EPS is expected to be $1.78. For 2018, on a non-GAAP basis, we expect product costs of 22% and operating expenses of 44%. We expect non-GAAP net interest expense of $95 million and we expect a non-GAAP tax rate of 20%. We also expect non-GAAP EPS of $2.45, including a GAAP deferral of $0.05. Now, let’s turn to our Q1 outlook. On a GAAP basis for Q1, we expect revenues of $1.82 billion including GAAP deferrals of negative $540 million. We expect net bookings of $1.28 billion, growing year-over-year. We expect product costs of 20%, operating expenses of 53%, and our GAAP net interest expense is expected to be $30 million, our GAAP tax rate is expected to be 20%. We expect 771 million fully diluted shares both for GAAP and non-GAAP and GAAP EPS is expected to be $0.47. For Q1 on a non-GAAP basis, we expect product costs of 20%, operating expenses of 43%. We expect non-GAAP net interest expense of $29 million, a tax rate of 20% and non-GAAP EPS of $0.65 including a GAAP deferral of negative $0.34. In closing, in 2017, our inspired teams across Activision, Blizzard and King demonstrated the enduring nature of our franchises. We believe the combination of leading owned IP and franchises, a direct digital connection to our consumers, best-in-class content capabilities and creative excellence, geographic platform and business model diversity, and continued fiscal disciplined, focus and business prioritization provide an incredibly powerful engine for sustained financial performance, driving meaningful growth in 2018 and beyond. Now, I welcome our business leaders, Eric, Mike, Riccardo and Dennis as they join us for the Q&A portion of the call. Operator?

[Operator Instructions] Our first question comes from Chris Merwin with Goldman Sachs.

So, this one is for Riccardo. We’ve seen some pretty impressive growth for King, lately. You’ve invested in some more frequent content updates and we’ve seen improved player engagement as a result. But beyond, I guess, the improvements and monetization for King, can you talk a bit more about the pipeline and the two or more new releases in 2018 that you mentioned in the prepared remarks?

So, we have several teams working on new games, first of all. And those are games using the existing franchise IP as well as new IP. So, we are creating also new IP. And these games are at various stages of production, and it’s a multiyear pipeline. So, as you heard before, in 2018, we plan to release at least two new games including social casino in partnership with PlayStudios. I would like to highlight that we set ourselves a very high bar for new game launches. We will only launch games of the highest quality and we’ll only launch them when they’re ready. When we think about games pipeline, it’s not just about new games, it’s also new content for our existing live games where we develop new features and live ops. In 2017, we focused this development on increasing engagement and increasing monetization, and this has allowed us to hit several mobile bookings milestones. As you heard earlier, we had in Q3, our highest-ever mobile bookings quarter, and in Q4, we hit our highest ever mobile booking week. In 2018, we will continue focusing on engagement and monetization, but we will also focus these new features on rich initiatives. So, we expect to continue to drive positive engagement and monetization as well as we expect to attract new users. So, if I think about it, we exited 2017 with a strong momentum. And I believe that we have a great pipeline, both of new titles and new content for our live games.

We’ll take our next question from Laura Martin with Needham.

Let’s talk about the Overwatch League. It sounds like everything is going great. Could you sort of give us an update on how it did benchmark against your expectations and what surprised you, both on the upside and downside? And then, on the monetization, as we’re modeling 2018, you said you’re going to sell more teams. Could you talk about monetization generally and then where do you think the teams will sell for more than the first 12 teams?

This Mike from Blizzard. First off, I want to take a moment to thank everyone on the Overwatch League team for the amazing job they’ve done. Overwatch League was an ambitious undertaking, it required supported collaboration across Activision Blizzard starting from the Overwatch game team although up to Bobby who as you know has been a strong supporter of the league from the beginning, as well as from a host of stakeholders and the communities. I want to especially thank all the pro players who compete, the team owners who really got behind our vision for the league, our partners over at Twitch and our sponsors who believed in what we were building. I want to also thank the viewers who tune in especially those people who are coming to the studio and bringing their passion and energy and filling up the stands. They’re an inspiration to everyone who works on Overwatch League. It’s really been wonderful to see how everything has worked out so far. We’re very pleased with the high-quality that we have been able to enjoy every week. The games have been exciting to watch and the reception from our viewers has been really spectacular. So, so far everything has either met or exceeded our expectations. We made a landmark two-year media rights deal with Twitch and more than 10 million people tuned in to week one, worldwide. We had an impressive audience per minute of over 400,000 on opening day. We’ve also been very happy that several major brands have partnered with Overwatch League including Intel, HP, Toyota, T-Mobile, and Sour Patch Kids. While we’re pleased, it’s important to note that this is only the beginning. Our focus is going to be on continued growth of the audience through improvements to the broadcast and the live viewer experience. In the mid to long term, we think the audience growth is the key to seeing impact both to the bottom line results and to the Company as a whole, and I think also to drive popularity in the game as well. In terms of selling expansion teams, we are very excited with the reaction and the interest in expansion teams. I’m pretty confident to say that the price is going to go up.

We will take our next question from Matthew Thornton with SunTrust.

Maybe one for Eric on Destiny 2. Can you kind of give us little more color just on the trends you are seeing around player engagements, in-game monetization, and then, again, little more color just about how you are thinking about the game and the plans for 2018?

Yes, absolutely, Matt. Happy to talk about Destiny 2. And I want to start just by putting it all in context because we did have a very successful launch of the game. As Coddy mentioned, it was the number two game in North America, the number four game globally, and it was also very well received, it had an A7 rating, that was the full 10 points of improvement over Destiny 1 and it received a 120 awards and nominations. And on top of that we saw a very positive sentiment and new franchise high levels of engagement for the first couple of months post launch. Now after that meaning after players report a significant amount of hours already into the game, we have definitely seen some real sentiment issues surface in a couple of areas, and we got plans to address those. For example, one of the things we wanted to do with Destiny 2 was to make the game a little bit less of a grind based on feedback we heard and we also wanted to provide players with more direct pass to getting the game’s best rewards. And that actually allowed our core players to consume the content faster than we anticipated. And that has led to an increase in players calling for more challenges and better rewards in the ongoing game. Now, this is a live game, and responding to player feedback is a part of the process in this game and any live game. And we feel we have the right plans in place to address the concern. Last week, Bungie posted a detailed roadmap of the changes that we have coming over the next several months. And thus far, those plans have been very well received as have the changes that we’ve already put into the game itself already and the sentiment is already starting to shift. And also, remember that we have a great expansion coming in May and a major expansion coming at the end of the year. And those events have always been opportunities for us to reengage our community and win back people who have churned out. This is an incredibly passionate group of players and that passion is a good thing, even when the sentiment is critical because it shows how deeply people care about the game. And we think that’s one of the thing that makes us a great franchise. And we are fully committed to listening to and communicating with our community more frequently and more transparently than ever and making the right changes to improve the experience. And we think we have the right path forward.

We’ll take our next question from Tim O’Shea with Jefferies. TimO’Shea: So, Coddy touched on this in the opening remarks, but I wanted to get a better sense for where Call of Duty finished the year in terms of full game downloads. And then, maybe if you could give us little color on what your expectations are going forward?

See, as you’ll recall, I mentioned last quarter that we’re seeing a consumer-led shift to full game downloads in our console business. It’s similar to what we’ve already experienced in the games business on PC platforms, and of course digital transition is not unique to gaming; it’s impacting pretty much every form of entertainment consumption. So, the good news for us is, as I also discussed last call that it’s good for our business; it brings us closer to our consumer and with better economics. So, with that context, Call of Duty finished the year at 30% digital mix. And we mentioned last year that our digital mix was about 20% to 25% on Call of Duty. So, this year’s performance -- it’s essentially in line actually, a bit of an acceleration in that historical 5 percentage-point increase we’ve been seeing the past few years. And I should underscore that these are big absolute numbers, when we’re talking about Call of Duty because it’s such a mass market game. As Coddy mentioned, Call of Duty: World War II is the biggest day one digital release ever of PlayStation, and in aggregate, it represented the biggest Activision digital title ever released on console. As we look forward, Tim, we’d expect the mix shift in 2018 to be similar to what we saw for Call of Duty this year. It obviously a bit tough to predict with certainty given that it’s ultimately consumer-driven but I know there’re teams that are -- they’re going to continue to innovate with compelling digital offers and other strategies that deliver value to the community and will also continue to support our important retail partners. So, overall, the trends remain strong and they’re positive for our business and the good news is we got quite a bit of runway ahead of us.

Up next, we have Mike Olson with Piper Jaffray.

I just have one. You talked about the opportunity for the actual league. But, could you talk about the Overwatch League impact on Overwatch, the game itself, as it relates to engagement, monetization and/or core game sales?

The Overwatch League has increased overall engagement with the franchise, between viewership and game play. When you consider the hundreds of thousands of fans watching each match and average watch time of over an hour each night, we’re tapping into a whole new avenue for players to express their passion for Overwatch. Of course, there are other positives for the game overall. The Overwatch League has driven a ton of buzz and awareness for the game. And so as that increases, our players have new ways to customize their playing experience with in-game digital skins as well as physical merchandise. And we’ve seen our players respond well to both of those. We’re also looking forward to launching additional initiatives to tie the viewing experience better with the play experience. We think that over the long term, the league will bring in new players as people see the excitement around the league and may even start to train to become the next pro player. Outside of league, we have additional plans to keep Overwatch fresh and players engaged. We already released a new map called Blizzard World in January. We have the Lunar New Year event launching today and there’s additional plans later this year for new heroes and seasonal events to come out. That’s all.

Our next question comes from Brian Nowak with Morgan Stanley.

Hi. This is Brandon Hoffman on for Brian Nowak. So, you had strong performance from Call of Duty: World War II and there’s excitement about digital in 2018. Can you talk a bit about the CoD pipeline forward?

Absolutely, the CoD pipeline is one of my favorite topics. Before we talk about World War II, I think it’s worth stepping back and talking about how pleased we’re with the Call of Duty franchise overall. Obviously, Call of Duty: World War II was the number one console video game in the world in 2017 and that makes Call of Duty the number one franchise in world eight of the last nine years and the Call of Duty: World War II also delivered the biggest launch quarter we’ve seen on current generation console, even higher than Black Ops III as I think Coddy mentioned. And engagement on World War II has also been strong, not quite as strong we’ve seen from the Black Ops franchise which of course has been our stickiest games but we have seen strong participation with our first two seasonal events, the Winter Siege and the Resistance. And we have actually a more robust calendar of those types of events in the game than we’ve ever had before. So, our strategy of bringing Call of Duty content to whatever game our fans are choosing to play is really continuing to pay off because also in 2017 we saw that in Black Ops III, the Zombies Chronicles piece was the number one top selling add-on content on PlayStation last year which is more remarkable given that it was released almost few years after the launch of the original game. So that of course sets the stage for the game we have planned later this year which is being developed by our team at Treyarch. Now, as you know, they have developed some of our most successful games ever. And they’ve proven time and again that they know how to keep our players engaged for the long haul. So, overall, I would say our strategy for Call of Duty is working. World War II is a blockbuster; we’ve got a thriving Black Ops community who is excited for the upcoming Treyarch developed game. And I honestly really wish I could say more about what we have in the pipeline because I’m so excited about it but suffice it say. I think we have the best three-year slate in Call of Duty’s history which is really staying something given this franchise’s history. And I think we’ve got multiple different game universes that we know our players love on tap. So, obviously more to come on that.

Our next question comes from Eric Sheridan with UBS.

I wondered if you could talk a little bit about some of the moves you’ve made, whether it would be investments, acquisitions to position the Company for the advertising opportunity across King. And then, maybe the second one would be how do you think about extending those capabilities or assets across other brands or platforms of the Company in the coming years?

Advertising for us is a strategic focus given the opportunity we have with our large and engaged audience. So, we are prioritizing investments across multiple areas. First of all, we are building a world-class team and we are investing in our teams on several dimensions on the ad product, in engineering, in sales and in analytics. And we have already people in place. And this year, we plan to scale these teams further. Second, we are investing in creating great ad products. And by that I mean ad experiences that resonate with our highly engaged players and that are well-integrated into the game play, and also deliver real value to our advertisers. So, to get these right, we have embedded the X [ph] teams within our game teams including in Candy. So, third, we are investing in our own ad tech infrastructure. In 2017, we’ve seen early success with a dozen of global brands buying advertising across a number of territories in five different games. And we have seen repeat buys as a result of the strong completion and viability metrics. In 2018, as you heard Spence earlier, we’re expecting only a modest bottom line contribution from ads as we plan to ramp individual ads opportunity, and as we continue to invest in the significant opportunity for the long term. For the second part of the question, I will hand over to Coddy.

I think first, just to step back, and you know that we have several key initiatives underway. We’re building our capability in one area of the business, enables flexibility and option value to bring that capability to other areas of the business over time. Overwatch League could be a great example of this. So, the focus now is completely and solely on Overwatch success. But over time, the professional city-based league approach, infrastructure, the knowhow, the team, the processes, the support structure could logically go on to support other franchises that have strong esports momentum. And broadly, the way to think about this, Eric, advertising we think is another good example of this. And perhaps specifically, we have the opportunity probably in a couple of areas that are impacting. The first and foremost one is the opportunity that Riccardo just spoke to. Ads for the key mobile network is our primary focus right now. It’s the first step in building our internal ad products, tech deck, team and infrastructure. The second, we do have a near-term opportunity to bring relevant advertising to our esports audiences. We are already off to a good start there with Overwatch League, media rights, sponsorships, advertiser interest, but we see further opportunity in our owned MLG platform. And over time, third, there could be opportunities in other areas of the Company, particularly as we explore ad-based experiences across new games that are suited to that form of media. If you then just step a little bit back, we have over 50 minutes of engagement per day in our games right now, and that’s not yet including all the time spent watching games in our franchises. So, we think there’s a pretty compelling opportunity to do what you said, which is to be able to bring advertising to other brands and platforms across our network.

Our next question comes from Evan Wingren with KeyBanc.

This is for Mike. Just wondering, what are your expectations for World of Warcraft: Battle for Azeroth in terms of the size, engagement or any other innovation in the game for this expansion?

So, at Blizzard, we always get excited about new launches. And we in addition to our players are very excited about Battle for Azeroth’s features, which include new Allied Races, to give players even more character customization options, players who preordered the expansion have been enjoying early access to some of the Allied Races already, and that has helped drive early preorders. We’re very pleased with the results so far. Battle for Azeroth also includes two huge continents for players to explore as well as some new game play modes. Warfronts is a new cooperative mode where players will band together in massive battles inspired by Warcraft’s RTS roots. And the Island Expeditions mode will include randomized elements for small groups to enjoy with great replayability which is very important in the game like Global Warcraft. Content always drives engagement. So, just like we did with Legion, we are planning a steady stream of content after launch to maintain engagement. As for what’s ahead in 2018 with Battle for Azeroth, we’re looking forward to sharing more in the months to come and releasing expansion this summer. There’s a ton of buzz right now in the community and at Blizzard. The team is very excited about this expansion.

And our last question comes from Colin Sebastian with Robert Baird.

I guess, I just wanted some clarification on where development stands for some of the new mobile titles in the pipeline, not only in King, which I think was already addressed but across Blizzard and Activision following up on some of the announcements on personal, last year perhaps.

So, you are right. I’d probably break them, mobile efforts and new games into two buckets. The first you mentioned which is the ongoing efforts at King on their mobile pipeline. It’s just worth highlighting and they’re taking a very focused approach to development. And as mentioned, expect to have two or more new releases during the year, in addition to the ongoing updates inside their existing live games, which really are just in the live games initiatives in and of themselves that drive new players and bring in new audiences. So, there is as you know and as we speak to a lot, there is real focus there. But the second opportunity is to take our very successful PC and console franchises and extend them to mobile. And we think this is the time to do it and it’s an exciting opportunity for few reasons. First, mobile gaming is of course not very much at scale, large and growing with billions of people around the world who essentially have a mini console or PC in a pocket. And kind of the second reason that the technology we feel has advanced to a point where we feel the mobile platform now that can fulfill the requirements of our core IP. There is also for us we think a really important opportunity in Asia where we already have some of the most successful non-mobile franchises. And as you know, many of the top mobile games there now are based on existing console or PC IP. That was their roots in console and PC and they moved to mobile. And we think there is an opportunity for us as well over time to explore our IP on mobile in that region. We obviously want to get this right, we want to do it well at super high quality for our players and audiences who matter a great deal to us. So, it takes the investment and time. But we do plan to see some early results there this year from our mobile investments and we expect more meaningful impact in 2019 and beyond. So, we’re working hard in the pipeline and we will let more news to share down the road.

Okay. I think that was the last question. Right? So, well, thank you all for joining the call today. We appreciate it. We appreciate your time. And we look forward to seeing or speaking with you -- and speaking with you over the next few weeks and months. Thanks.

And that does conclude today’s conference. We thank you for your participation.