Activision Blizzard

In 1991, Bobby Kotick and a group of investors had acquired the failing Mediagenic, the company that Activision had become from former leadership. Kotick instituted a large restructuring to pull the company out of debt, including renaming the company as Activision and moving it to Santa Monica, California. After bringing the company back to profitability by 1997, Kotick spent the next decade expanding Activision's products through acquisitions of an estimated 25 studios, which resulted in 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. Furthering this, Activision was facing tougher competition from companies like Electronic Arts, as well as slowdowns in sales of their key game series.[15]

Around 2006, Kotick reached out to Jean-Bernard Lévy, the CEO of the French media conglomerate Vivendi. Vivendi at that time had a small 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.[15]

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.[16] The European Commission permitted the merger to take place in April 2008, approving that there weren't any antitrust issues in the merger deal.[17] 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.[18]

Vivendi was the majority shareholder, with a 52% stake in the company.[18][19] 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.[4] While Blizzard retained its autonomy and corporate leadership in the merger, other Vivendi Games divisions such as Sierra ceased operation.[20] With the merger, Kotick was quoted stating if a Sierra product did not meet Activision's requirements, they "won't likely be retained."[20] 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.[21] However, a number of Sierra's games such as Crash Bandicoot, Spyro the Dragon, and Prototype were retained and are now published by Activision.[22][23]

Activision Blizzard does not publish games under its central name and instead uses the Activision Publishing subsidiary and its studios to publish games.[24] In early 2010, the independent studio Bungie entered into a 10-year publishing agreement with Activision Blizzard.[25][26] By the end of 2010, Activision Blizzard was the largest video games publisher in the world.[27] 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.[28] 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.[11] 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.[12][13]

In 2011, Activision Blizzard debuted its Skylanders franchise,[29] which led to the press crediting the company with inventing and popularizing a new toys-to-life category.[29][30][31] 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".[32] Skylanders: Spyro's Adventure and its sequels were released for major consoles and PC, and many were released on mobile devices as well.[29]

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.[33] At the conclusion of the deal, Vivendi was no longer Activision Blizzard's parent company,[34] 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.[33] On October 12, 2013, shortly after approval from the Delaware Supreme Court, the company completed the buyback, along the lines of the original plan.[35] Vivendi sold half its remaining stake on May 22, 2014, reducing its ownership to 5.8%.[36] and completely exited two years later.[37]

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.[38] On November 5, 2013, the company released Call of Duty: Ghosts, which was written by screenwriter Stephen Gaghan.[39] On its first release day the game sold $1 billion into retail.[38] In 2014, Activision Blizzard was the fifth largest gaming company by revenue worldwide,[40] with total assets of US$14.746 billion and total equity estimated at US$7.513 billion.[41]

Activision Blizzard joined the S&P 500 on August 28, 2015, becoming one of only two companies on the list related to gaming, alongside Electronic Arts.[5] The company released the next iteration of the Skylanders franchise in September 2015, which added vehicles to the "toys to life" category.[42] 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.[43]

Activision Blizzard acquired social gaming company King, creator of casual game Candy Crush Saga, for $5.9 billion in November 2015.[7]

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.[10] The outfit is co-headed by producer Stacey Sher and former The Walt Disney Company executive Nick van Dyk.[44][45]

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.[46]

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.[47] 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.[47] This transaction allowed Activision-Blizzard to report US$164 million as part of its 2018 fiscal year filings.[48]

The company announced that Daniel Alegre will replace Coddy Johnson as president of Activision-Blizzard effective April 7, 2020, with Johnson transitioning to special advisory role.[49]

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.[50] 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.[51]

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.[68] Worlds, Inc. had already challenged NCSoft for its MMOs in 2008. The companies ultimately settled out of court by 2010.[69]

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.[70][71] 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,[71][72][73] but this suit was dismissed with prejudice by June 2014.[74]

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.[75] 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.[76] 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.

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.[77] 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.[78]

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 several of those that departed Infinity Ward in their wake.[79][80]

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".[81] 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.[82]

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.[83]