Activision Blizzard

The original Activision company was founded in 1979, as a third-party developer for games on the Atari Video Computer System. In 1988 the company expanded into non-gaming software and renamed itself Mediagenic. This venture was not successful, incurring heavy losses. In 1991 a group of investors led by Bobby Kotick bought the company. Kotick instituted a large restructuring to reduce debt, including renaming the company back to Activision and moving it to Santa Monica, California. By 1997 the company was profitable again. Kotick spent the next decade expanding Activision's products through acquisitions of around 25 studios. This resulted in Activision publishing several successful series of games, including Tony Hawk's, Call of Duty, and Guitar Hero. However, by around 2006, the popularity of massively multiplayer online (MMO) games started to grow. Such games provide a constant revenue stream to their publishers, rather than only a single purchase, making them a more valuable proposition. None of Activision's subsidiaries had an MMO or the capability to make one quickly. Activision was also facing tougher competition from companies like Electronic Arts, as well as slowdowns in sales of their key game series.[25]

Around 2006, Kotick reached out to Jean-Bernard Lévy, the CEO of the French media conglomerate Vivendi. Vivendi at that time had the games division Vivendi Games, a holding company principally for Sierra Entertainment and Blizzard Entertainment. Kotick wanted to get access to Blizzard's World of Warcraft, a successful MMO, and suggested a means to acquire this to Lévy. Lévy instead offered that he would be willing to merge Vivendi Games with Activision, but only if Vivendi kept majority control of the merged company. According to those close to Kotick, Kotick was concerned about this offer as it would force him to cede control of Activision. However, after talking to Blizzard's CEO Mike Morhaime, Kotick recognized that Vivendi would be able to give them inroads into the growing video game market in China.[25]

Kotick proposed the merger to Activision's board, which agreed to it in December 2007. The new company was to be named Activision Blizzard and would retain its central headquarters in California. Bobby Kotick of Activision was announced as the new president and CEO, while René Penisson of Vivendi was appointed chairman.[26] The European Commission permitted the merger to take place in April 2008, approving that there weren't any EU antitrust issues in the merger deal.[27] On July 8, 2008, Activision announced that stockholders had agreed to merge, and the deal closed the next day for an estimated transaction amount of US$18.9 billion.[28]

Bobby Kotick (pictured in 2012) has been CEO of Activision Blizzard since its inception in 2008.

Vivendi was the majority shareholder, with a 52% stake in the company.[28][29] The rest of the shares were held by institutional and private investors, and were to be left open for trading on the NASDAQ stock market for a time under Nasdaq: ATVID, and subsequently as Nasdaq: ATVI (Activision's stock ticker). At this point, Lévy replaced René Penisson as chairman of Activision Blizzard.[30] The merger was completed on July 10.[31] While Blizzard retained its autonomy and corporate leadership in the merger, other Vivendi Games divisions such as Sierra ceased operation.[32] With the merger, Kotick was quoted stating if a Sierra product did not meet Activision's requirements, they "won't likely be retained."[32] Some of these games ultimately were published by other studios, including Ghostbusters: The Video Game, Brütal Legend, The Chronicles of Riddick: Assault on Dark Athena, and 50 Cent: Blood on the Sand.[33] However, a number of Sierra's games such as Crash Bandicoot, Spyro, and Prototype were retained and are now published by Activision.[34][35]

In early 2010, the independent studio Bungie entered into a 10-year publishing agreement with Activision Blizzard.[36][37] By the end of 2010, Activision Blizzard was the largest video games publisher in the world.[38] The 2011 release of Activision Blizzard's Call of Duty: Modern Warfare 3 grossed $400 million in the US and UK alone in its first 24 hours, making it the biggest entertainment launch of all time.[39] It was also the third consecutive year the Call of Duty series broke the biggest launch record; 2010's Call of Duty: Black Ops grossed $360 million on day one; and 2009's Call of Duty: Modern Warfare 2 brought in $310 million.[10] Call of Duty: Black Ops III grossed $550 million in worldwide sales during its opening weekend in 2015, making it the biggest entertainment launch of the year.[11][12]

In 2011, Activision Blizzard debuted its Skylanders franchise,[40] which led to the press crediting the company with inventing and popularizing a new toys-to-life category.[40][41][42] The first release Skylanders: Spyro's Adventure was nominated for two Toy Industry Association awards in 2011: "Game of the Year" and "Innovative Toy of the Year".[43] Skylanders: Spyro's Adventure and its sequels were released for major consoles and PC, and many were released on mobile devices as well.[40]

Activision Blizzard at Gamescom 2013, where the company exhibited 2013 titles such as Call of Duty: Ghosts and Skylanders: Swap Force.

On July 25, 2013, Activision Blizzard announced the purchase of 429 million shares from owner Vivendi for $5.83 billion, dropping the shareholder from a 63% stake to 11.8% by the end of the deal in September.[44] At the conclusion of the deal, Vivendi was no longer Activision Blizzard's parent company,[45] and Activision Blizzard became an independent company as a majority of the shares became owned by the public. Bobby Kotick and Brian Kelly retained a 24.4% stake in the company overall. In addition, Kotick remained the president and CEO, with Brian Kelly taking over as chairman.[44] On October 12, 2013, shortly after approval from the Delaware Supreme Court, the company completed the buyback, along the lines of the original plan.[46] Vivendi sold half its remaining stake on May 22, 2014, reducing its ownership to 5.8%.[47] and completely exited two years later.[48]

Activision Blizzard released a new title, Destiny, on September 9, 2014. The game made over $500 million in retail sales on the first day of release, setting a record for the biggest first day launch of a new gaming franchise.[49] On November 5, 2013, the company released Call of Duty: Ghosts, which was written by screenwriter Stephen Gaghan.[50] On its first release day the game sold $1 billion into retail.[49] In 2014, Activision Blizzard was the fifth largest gaming company by revenue worldwide,[51] with total assets of US$14.746 billion and total equity estimated at US$7.513 billion.[52]

Activision Blizzard joined the S&P 500 stock index on August 28, 2015, becoming one of only two companies on the list related to gaming, alongside Electronic Arts.[53] The company released the next iteration of the Skylanders franchise in September 2015, which added vehicles to the "toys to life" category.[54] On September 15, 2015, Activision and Bungie released Destiny: The Taken King, the follow-up to the Destiny saga. Two days later, Sony announced that the game broke the record for the most downloaded day-one game in PlayStation history, in terms of both total players and peak online concurrency.[55]

Activision Blizzard acquired social gaming company King, creator of casual game Candy Crush Saga, for $5.9 billion in November 2015.[5]

In November 2015, Activision Blizzard announced the formation of Activision Blizzard Studios, a film production arm that would produce films and television series based on Activision Blizzard's franchises.[8] The outfit is co-headed by producer Stacey Sher and former The Walt Disney Company executive Nick van Dyk.[56][57]

In June 2017, Activision Blizzard joined the Fortune 500 becoming the third gaming company in history to make the list after Atari and Electronic Arts.[58]

In its 2018 fiscal year earnings call to shareholders in February 2019, Kotick stated that while the company had seen a record year in revenue, they would be laying off around 775 people or around 8% of their workforce in non-management divisions, "de-prioritizing initiatives that are not meeting expectations and reducing certain non-development and administrative-related costs across the business", according to Kotick.[59] Kotick stated that they plan to put more resources towards their development teams and focus on esports, Battle.net services, and the publisher's core games which include Candy Crush, Call of Duty, Overwatch, Warcraft, Diablo, and Hearthstone. Prior to this, Activision Blizzard and Bungie agreed to terminate their distribution deal with Destiny 2 as it was not bringing in expected revenue for Activision, with Bungie otherwise retaining all rights to Destiny.[59] This transaction allowed Activision Blizzard to report US$164 million as part of its 2018 fiscal year filings.[60]

The company announced that Daniel Alegre would replace Coddy Johnson as president of Activision Blizzard effective April 7, 2020, with Johnson transitioning to special advisory role.[61]

During the second quarter of 2020, the company's net revenues from digital channels reached $1.44bn due to the growing demand for online games driven by COVID-19 lockdowns.[62] By January 2021, the company's net value was estimated to be $72 billion based on its stock trading price due to the ongoing demand for video games from the COVID-19 pandemic.[63]

The Public Investment Fund of Saudi Arabia acquired 14.9 million shares of Activision Blizzard, valued at $1.4 billion, in February 2021.[64]

In April 2021, Fernando Machado, former Brazilian executive at Burger King, joined the company as chief marketing officer (CMO).[65] The company also announced in April 2021 that Kotick will remain CEO through April 2023, through Kotick agreed to take a 50% cut of his pay, equal to $875,000. Kotick will remain eligible to receive annual bonuses, and while he agreed to reduce his target bonus by 50% as well, he potentially can earn up to 200% of his base pay based on the company's performance.[66]

On July 20, 2021, the California Department of Fair Employment and Housing (DFEH) filed a suit alleging sexual harassment, employment discrimination and retaliation on the part of Activision Blizzard. A second lawsuit was filed against the company by its shareholders asserting it falsified knowledge of these problems in their financial statements,[67] though this suit was dismissed due to failure to meet thresholds for claims,[68] The Equal Employment Opportunity Commission had also filed suit against Activision-Blizzard from their own investigation of the workplace conditions but the company had settled the same day it was filed, which included setting aside an $18 million relief fund for affected employees.[69]

On January 18, 2022, Microsoft announced that it would be acquiring Activision Blizzard for $68.7 billion in an all-cash deal, or approximately $95 per share. Activision Blizzard's stock price jumped nearly 40% that day in pre-market trading. The deal would make Microsoft the third-largest gaming company in the world and the largest headquartered in the Americas, behind Chinese company Tencent and the Japanese conglomerate Sony. Activision Blizzard's shareholders approved of the acquisition near-unanimously in April 2022.[70] While the deal has been approved by several countries ahead of the planned October 18, 2023, deal closure, including the European Union and China, both the United States' Federal Trade Commission and the United Kingdom's Competition and Markets Authority have challenged the merger as anticompetitive and have initiated legal procedures in their respective countries. To resolve these issues, Microsoft agreed to give rights to cloud gaming of Activision Blizzard's games to Ubisoft, which was cleared by regulators. The acquisition was completed on October 13, 2023.[71] As part of the acquisition deal, Kotick announced his resignation as CEO the same day, along with other high level executives, though Kotick will remain onboard through the end of 2023 to help with the transition.[72]

Worlds, Inc. was issued several United States patents around 2009 related to "System and method for enabling users to interact in a virtual space", which generally described a method of server/client communications for multiplayer video games, where players would communicate through avatars. In early 2009, Worlds, Inc. stated its intent to challenge publishers and developers of MMOs, naming Activision as one of its intended targets.[90] Worlds, Inc. had already challenged NCSoft for its MMOs in 2008. The companies ultimately settled out of court by 2010.[91]

Worlds, Inc. launched its formal lawsuit against Activision Blizzard, including both Blizzard Entertainment and Activision Publishing, in March 2012, stating that Call of Duty and World of Warcraft infringed on their patents.[15][14] Activision Publishing filed a separate patent infringement lawsuit in October 2013, asserting that Worlds, Inc. was using two Activision-owned patents in its Worlds Player software,[14][92][93] but this suit was dismissed with prejudice by June 2014.[94]

In Worlds, Inc. case against Activision, the judge issued a summary judgement in Activision's favor, as they had demonstrated that Worlds, Inc. had demonstrated the technologies of their patents in their client programs AlphaWorld and World Chat, released before the 1995 priority date, though this was related to filing irregularities that were subsequently corrected by the Patent Office.[95] Activision did not challenge the updated patents through an inter partes review (IPR), and subsequently after a statutory one-year waiting period, Worlds, Inc. filed a subsequently lawsuit against Activision, asserting Call of Duty: Ghosts violated their resolved patents.[96] Later, Worlds, Inc. stated the intent to add Bungie to the lawsuit contending that Destiny also fell afoul of their patents. Bungie subsequently filed three IPRs with the Patent Office for each of the three Worlds, Inc. patents at the core of the lawsuit. While Bungie initially won its IPR ruling at the USPTO, on appeal in September 2018, Worlds, Inc. won a ruling questioning whether Bungie had legal standing to file its IPRs.[97][98]

The new Worlds, Inc. case against Activision Blizzard was heard on October 3, 2014. With Bungie's IPRs pending at the Patent Office, the judge put the trial on hold pending the outcome of the IPRs. Worlds, Inc. challenged the IPRs at the Patent Office, as they did not include Activision as an interested party, a requirement that would have been necessary given the publisher/developer relationship between Activision and Bungie. The Patent Office did not accept this argument, and subsequently agreed with the Bungie IPRs that portions of Worlds, Inc. patents were invalid. Worlds, Inc. appealed to the Federal Circuit Appeals Court, challenging the validity of the IPRs due to the lack of Activision's involvement. The Federal Circuit court ruled in favor of Worlds, Inc. in September 2018, invalidating the Patent Office's decision.[99] Worlds, Inc.'s case presently remains at the Patent Office stage, which is re-reviewing the IPRs in consideration of the Federal Circuit's ruling.[100] The lawsuit was dismissed in 2021, when a US district court ruled that "Worlds' patents were abstract ideas that were not sufficiently transformative to be legally patentable."[101]

In early 2010, Activision fired Vince Zampella and Jason West, two of the founders of its studio Infinity Ward, on the basis of "breaches of contract and insubordination"; the move caused several other Infinity Ward staff to resign. Zampella and West created a new studio, Respawn Entertainment, with help from Electronic Arts' partner program, hiring the majority of those that departed Infinity Ward in their wake.[102][103][104]

Zampella and West filed a lawsuit in April 2010 against Activision, claiming unpaid royalties on the studio's Call of Duty: Modern Warfare 2. Activision filed a countersuit against the two, accusing the pair of being "self-serving schemers".[16] Activision later sought to add Electronic Arts to their suit, discovering that Zampella and West had been in discussions with them while still working for Activision, and further added claims against Zampella and West that the two had not returned all material related to Call of Duty while they were working at Respawn. A separate lawsuit was filed against Activision in April 2010 by several current and former members of Infinity Ward on the same basis of lack of unpaid royalties.[105]

All parties came to an undisclosed settlement to end all suits by May 2012. Electronic Arts and Activision had settled separately on Activision's charges of poaching employees, while the suits between Activision, Zampella, West, and the Infinity Ward employee group were settled by the end of May 2012. All settlements were made for undisclosed amounts.[106]