Activision: Sell-Through Vs. Sell-In

Nov. 6.13 | About: Activision Blizzard, (ATVI)

Activision (NASDAQ:ATVI) today gave a reason to expound on two very important retail concepts. The concepts of "Sell-Through" and "Sell-In."

When a company sells into a distribution channel, these concepts are central to its success. The nature of sales which just fill the channel with inventory is very different from the nature of sales which reach the end customers. That's the key difference between sell-through and sell-in.

Sell-through refers to sales which reached the end consumer. Sell-in refers to sales into the retail channel - sales which just put product in the shelves, which the consumer might - or might not - buy.

These concepts are incredibly important. If you are selling to the consumer, then inventories will need to be replenished, and the company will sell more. If you are just filling up the retail channel, stuffing it with inventory, not only won't there be the need to replenish it if the product doesn't move, but you're also likely to get the product put back to you.

And why was this important with Activision today? Well, because last year Activision referred to selling through when it reported Black Ops II first-day success (Source: Press release):

The highly-anticipated Call of Duty: Black Ops II has achieved an estimated sell-through of more than $500 million worldwide in the first 24 hours of its release, according to Chart-Track, retail customer sell-through information and internal company estimates.

And this year, it wasn't quite the same. This year, when reporting Call of Duty: Ghosts sales, Activision instead switched to sell-in to claim $1 billion in sales (Source: Press release):

SANTA MONICA, Calif.--(BUSINESS WIRE)-- Activision Publishing, Inc., a wholly owned subsidiary of Activision Blizzard, Inc. , announced today that the company sold more than $1 billion of Call of Duty: Ghosts into retail stores worldwide as of day one.

And as to sell-through? Activision had this to say:

Although it is too early to assess sell-through for Call of Duty: Ghosts, it's launching at a time when the franchise has never been more popular.

This change wasn't innocent. There was an intent to pump up the reported number. Sell-in numbers would always be higher. And there might also have been an intent to hide poor performance, if we take into account the reviews for Call of Duty: Ghosts which haven't been that good.

Either way, it was misleading to change the reporting from sell-through to sell-in. And in a market where trust is paramount, such moves are hardly worthy of praise.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.