Activision Blizzard
Activision Blizzard, Inc. is an American video game holding company based in Santa Monica, California, and since October 2023 a subsidiary of Microsoft. It comprises three operating units: Activision, Blizzard Entertainment and King.
| Activision Blizzard, Inc. | |
|---|---|
| Type | Subsidiary |
| Industry | Video games |
| Founded | July 2008, through the merger of Activision, Inc. and Vivendi Games |
| Headquarters | Santa Monica, California, United States |
| Area served | Worldwide |
| Key people | Bobby Kotick (CEO, 2008 to 2023) |
| Products | Call of Duty, World of Warcraft, Diablo, Overwatch, StarCraft, Candy Crush Saga, Tony Hawk's, Crash Bandicoot, Spyro, Guitar Hero, Skylanders |
| Parent | Microsoft Gaming |
| Subsidiaries | Activision, Blizzard Entertainment, King, Infinity Ward, Treyarch, Sledgehammer Games |
| Website | activisionblizzard.com |
Formed in July 2008 through the merger of Activision and Vivendi Games, the company became the largest video game publisher in the Americas and Europe by revenue and market capitalisation. Its titles have repeatedly set records for the largest entertainment launches ever recorded.
It has also been the subject of one of the most consequential workplace controversies in the technology industry. A 2021 lawsuit by a California state agency alleging sexual harassment and discrimination triggered a regulatory investigation, employee walkouts, resignations and the loss of sponsors, and formed part of the background to the company's acquisition by Microsoft for 68.7 billion dollars.
History
Background and formation, 2007 to 2008
The original Activision was founded in 1979 as the first third-party developer of games for the Atari Video Computer System. In 1988 it expanded into non-gaming software and renamed itself Mediagenic, a venture that failed and produced heavy losses. In 1991 a group of investors led by Bobby Kotick bought the company. Kotick restructured it to reduce debt, restored the Activision name and moved it to Santa Monica, returning it to profitability by 1997. Over the following decade he expanded it through the acquisition of around 25 studios, producing successful series including Tony Hawk's, Call of Duty and Guitar Hero.
By around 2006 the strategic problem was clear. Massively multiplayer online games were growing rapidly and provided a continuing revenue stream rather than a single purchase, making them a more valuable proposition than boxed titles. No Activision subsidiary had such a game or could build one quickly. The company also faced tougher competition from Electronic Arts and slowing sales in its key franchises.
Kotick approached Jean-Bernard Lévy, chief executive of the French conglomerate Vivendi, which owned Vivendi Games, principally a holding company for Sierra Entertainment and Blizzard Entertainment. Kotick wanted access to Blizzard's World of Warcraft. Lévy countered by offering to merge Vivendi Games with Activision, but only if Vivendi retained majority control of the combined business.
Those close to Kotick reported that he was reluctant, since the terms required him to cede control of the company he had rebuilt. After discussions with Blizzard's chief executive Mike Morhaime he concluded that Vivendi would give the business a route into the growing Chinese video game market, and proposed the merger to his board, which agreed in December 2007.
The European Commission cleared the transaction in April 2008, and shareholders approved it on 8 July. The deal closed the next day at an estimated 18.9 billion dollars. Vivendi held 54 per cent of outstanding shares, and Lévy replaced René Penisson as chairman, with Kotick as president and chief executive.
Blizzard retained its autonomy and leadership. Other Vivendi Games divisions, including Sierra, ceased operation, Kotick stating that Sierra products that did not meet Activision's requirements would not likely be retained. Several titles were published elsewhere, including Ghostbusters: The Video Game, Brütal Legend and The Chronicles of Riddick: Assault on Dark Athena, while franchises including Crash Bandicoot, Spyro and Prototype were retained.
Record releases, 2009 to 2012
In early 2010 the independent studio Bungie entered a ten-year publishing agreement with the company. By the end of that year Activision Blizzard was the largest video game publisher in the world.
The Call of Duty series produced a sequence of record launches. Modern Warfare 2 took 310 million dollars on its first day in 2009, Black Ops 360 million dollars in 2010, and Modern Warfare 3 grossed 400 million dollars in the United States and United Kingdom alone within 24 hours of its 2011 release, at the time the biggest entertainment launch ever recorded. Black Ops III took 550 million dollars worldwide in its opening weekend in 2015.
In 2011 the company launched Skylanders, which combined physical figures with game software and was credited with creating and popularising the toys-to-life category. Skylanders: Spyro's Adventure was nominated for Game of the Year and Innovative Toy of the Year by the Toy Industry Association.
Independence from Vivendi, 2013 to 2014
On 25 July 2013 Activision Blizzard announced the purchase of 429 million of its own shares from Vivendi for 5.83 billion dollars, reducing Vivendi's stake from 63 per cent to 11.8 per cent by the close of the transaction in September. The company became independent, with a majority of shares publicly held. Kotick and Brian Kelly retained a 24.4 per cent interest between them, Kotick remaining president and chief executive and Kelly becoming chairman. The buyback completed on 12 October 2013 following approval by the Delaware Supreme Court. Vivendi sold half its remaining stake in May 2014 and exited entirely two years later.
Destiny, released on 9 September 2014, took more than 500 million dollars in retail sales on its first day, a record for a new gaming franchise. Call of Duty: Ghosts, released in November 2013 with a script by the screenwriter Stephen Gaghan, sold one billion dollars into retail on its first day. In 2014 Activision Blizzard was the fifth largest gaming company in the world by revenue.
Expansion, 2015 to 2021
The company joined the S&P 500 on 28 August 2015, becoming one of only two gaming companies on the index alongside Electronic Arts. In November 2015 it acquired the social gaming company King, creator of Candy Crush Saga, for 5.9 billion dollars, adding a mobile business with a very different revenue model to its console franchises.
Also in November 2015 it formed Activision Blizzard Studios to produce films and television based on its franchises, co-headed by the producer Stacey Sher and the former Disney executive Nick van Dyk. It joined the Fortune 500 in June 2017, the third gaming company to do so after Atari and Electronic Arts.
Blizzard invested substantially in esports, most notably the Overwatch League and the Call of Duty League, which sold city-based franchise slots to investors at high prices.
In the February 2019 earnings call Kotick stated that despite a record revenue year the company would lay off approximately 775 people, around eight per cent of its workforce, in non-management divisions, de-prioritising initiatives not meeting expectations and reducing non-development and administrative costs. Shortly before this, Activision Blizzard and Bungie agreed to terminate their distribution arrangement for Destiny 2, with Bungie retaining all rights to the franchise, allowing the company to report 164 million dollars in its 2018 filings. During 2018 Activision was among 90 Fortune 500 companies to pay an effective federal tax rate of zero or less following the Tax Cuts and Jobs Act of 2017.
Daniel Alegre replaced Coddy Johnson as president from 7 April 2020. Digital revenue reached 1.44 billion dollars in the second quarter of 2020 as pandemic lockdowns increased demand, and by January 2021 the company was valued at approximately 72 billion dollars. The Public Investment Fund of Saudi Arabia acquired 14.9 million shares worth 1.4 billion dollars in February 2021.
In April 2021 the company announced that Kotick would remain chief executive through April 2023, having agreed to a 50 per cent reduction in base pay to 875,000 dollars and a 50 per cent reduction in target bonus, while remaining able to earn up to 200 per cent of base pay on performance.
Microsoft acquisition, 2022 to 2023
On 18 January 2022 Microsoft announced that it would acquire Activision Blizzard for 68.7 billion dollars in cash, approximately 95 dollars a share. The stock rose nearly 40 per cent in pre-market trading. The transaction would make Microsoft the third largest gaming company in the world, behind Tencent and Sony, and the largest headquartered in the Americas. Shareholders approved almost unanimously in April 2022.
Regulatory review was contested. The European Union and China cleared the deal, but the United States Federal Trade Commission and the United Kingdom Competition and Markets Authority challenged it as anticompetitive, the central concern being that Microsoft could withhold Call of Duty from rival platforms. To resolve the objections Microsoft agreed to divest the cloud gaming rights to Activision Blizzard titles to Ubisoft, which satisfied regulators. The acquisition completed on 13 October 2023.
The company's final annual results as an independent business, reported on 6 February 2023, showed revenue of 7.54 billion dollars and net income of 1.52 billion dollars. Kotick announced his resignation on the day the acquisition closed, remaining through the end of 2023 to assist the transition, and departed on 29 December 2023.
Controversies
Workplace misconduct litigation
On 20 July 2021 the California Department of Fair Employment and Housing filed suit alleging sexual harassment, employment discrimination and retaliation. The complaint described a pervasive culture in parts of the company and became one of the most widely reported employment actions in the technology industry.
The consequences were immediate and extensive. The U.S. Securities and Exchange Commission opened an investigation. Employees staged walkouts. Several executives and staff resigned or were dismissed, sponsors withdrew from company events, and hundreds of further harassment allegations were made public.
A shareholder suit alleging that the company had falsified its knowledge of these problems in financial statements was dismissed for failure to meet the threshold for claims. The Equal Employment Opportunity Commission filed its own suit following a separate investigation, which the company settled on the day it was filed, establishing an 18 million dollar relief fund for affected employees. The state action concluded in December 2023 with a 54 million dollar settlement covering pay and promotion inequities, both parties agreeing that there was no substantial evidence of widespread harassment, a formulation criticised by some former employees and advocacy groups.
Executive pay and leadership
Kotick's compensation was among the most contested in American business. Shareholder advisory firms repeatedly recommended votes against the company's pay arrangements, and a substantial minority of shareholders opposed them. Reporting in 2021 alleged that Kotick had been aware of misconduct allegations without informing the board, which he disputed. His continued tenure through the Microsoft acquisition, and his departure package, drew further criticism.
Blizzard and Hong Kong
In October 2019 Blizzard suspended the professional Hearthstone player Ng Wai Chung, known as Blitzchung, and withheld his prize money after he expressed support for the Hong Kong protests during a broadcast interview. The decision produced widespread accusations that the company was protecting its commercial interests in China at the expense of free expression. Blizzard subsequently reduced the suspension and restored the winnings, but the episode caused lasting reputational damage and prompted employee protests at its headquarters.
Patent and royalty disputes
The company has been involved in litigation over alleged patent infringement and unpaid royalties, including long-running disputes with musicians and with the creators of franchises it acquired, among them the founders of Infinity Ward, whose 2010 dismissal led to litigation settled in 2012.
Esports league economics
The Overwatch League and Call of Duty League sold franchise slots to investors at prices reported in the tens of millions of dollars, on projections of audience and sponsorship growth that were not realised. Several owners subsequently sought to exit, and the structures were substantially revised, leaving investors with heavy losses and prompting wider scepticism about franchised esports leagues.
See also
References