This Week in Business is our weekly recap column, a collection of stats and quotes from recent stories presented with a dash of opinion (sometimes more than a dash) and intended to shed light on various trends. Check back every Friday for a new entry.
Activision Blizzard dominated the news again this week, as Blizzard Entertainment president J. Allen Brack and senior VP of global HR Jesse Meschuk became the first high-profile departures in the wake of the California Department of Fair Employment and Housing lawsuit alleging a culture of harassment and discrimination, as well as violations of civil rights and equal pay laws.
And I get it. It looks bad. The optics here are terrible, and Activision Blizzard CEO Bobby Kotick is being pilloried for overseeing such a horrid state of affairs. But sometimes the easy narrative is a little too easy, glossing over all kinds of inconvenient details and bigger picture history that don't quite fit, the sort of details that take an easily digestible black and white picture and turn it all into shades of gray.
So this week we're going to play devil's advocate... Wait, no, that's a pretty clearly slanted term. Let's say "Bobby's advocate" instead, because if we can just look a bit beyond the biggest headlines, we might just find that things aren't quite as dire as they're made out to be.
So let's fire up the Quotes 'N' Stats Machine and let it serve up some of that bigger picture nuance and context we crave!
QUOTE | "We remain intensely focused on the well-being of our employees and we are committed to doing everything possible to ensure that our company has a welcoming, supportive and safe environment where all of our team members can thrive." In announcing the company's financial results this week, Activision Blizzard CEO Bobby Kotick emphasizes just how much he cares for the people working for him, and how concerned he is that they feel welcomed, supported, and safe.
Cheers to Kotick on this entirely appropriate and necessary statement. Whether the allegations of the California lawsuit have merit or not -- and I will remind you Activision Blizzard is innocent until proven guilty -- they need to be taken seriously, and clearly Kotick is stepping up in his role as a leader of the company and remaining intensely focused on employee well-being. The "remaining" part is key because Kotick want us to know he has always deeply cared about his employees' mental state.
QUOTE | "I think we definitely have been able to instill the culture, the skepticism and pessimism and fear that you should have in an economy like we are in today. And so, while generally people talk about the recession, we are pretty good at keeping people focused on the deep depression." - Activision CEO Bobby Kotick speaking to investors in February of 2010, explaining that actively stoking the stress and uncertainty of precarious employment during a global economic crisis makes the peons work harder.
Gah. Leave it to the Quotes 'N' Stats Machine to randomly pick that quote to bring up here. Ok, I admit that looks bad. But you have to understand it was in the context of a speech where he said his goal was to take all the fun out of making video games and he was laser-focused on rewarding profit and nothing else, and... Ah, crud. Look, this was a while ago and let's just give him the benefit of the doubt and call that a misjudged attempt at humor. We're taking a mulligan on that one.
QUOTE | "I have asked the law firm WilmerHale to conduct a review of our policies and procedures to ensure that we have and maintain best practices to promote a respectful and inclusive workplace." - Kotick, in a letter to employees acknowledging that the publisher botched its initial response to the California lawsuit but rest assured it's absolutely on the right track now.
This is more like it. You know the review is going to be impartial because it's external. I mean, sure, it's being paid for by Activision Blizzard and companies typically want to please their clients, but reasonably Activision Blizzard is the one who should be footing the bill for this. So there's really no cause for skepticism here.
QUOTE | "Sarbanes-Oxley and Dodd-Frank broadened whistleblower protections to include other federal offenses and enhance remedies, and protect corporate whistleblowers bringing claims of fraud and SEC violations against their employers. Countering such claims effectively requires not only an excellent employment law team, but also skilled securities and corporate lawyers. The depth and collaboration of WilmerHale's Labor and Employment, Corporate, and Securities Practices mean we can successfully counsel and defend clients on all aspects of the matter." - WilmerHale's website, proudly selling their expertise at making nasty whistleblower headaches go away.
This is ridiculous. You're being ridiculous, Quotes 'N' Stats Machine. First, this scandal is about Activision Blizzard blatantly violating the civil rights of its employees, not SEC violations. Second, lawfirms have areas of expertise and WilmerHale understands this area of the law well. In addition to the SEC defenses, its litigation achievements include its "complete and total" victory in an employee discrimination case. Just, uh, don't ask which side WilmerHale was representing.
If WilmerHale is advertising itself as good at protecting companies from employee allegations, that's only because a lawfirm is a business and it's going where the money is. I mean, what company is going to go out and spend a bunch of money on a lawfirm that will do anything that could possibly validate a whistleblower's claims against it?!?
...I mean, besides Activision Blizzard right here, because its sole concern is clearly ensuring it has and maintains best practices to promote a respectful and inclusive workplace. It's just trying to take care of its employees!
QUOTE | "Bobby will take care of you. Don't worry about repercussions." - What former Activision IT director Thomas Fenady testified he was told by the company's chief legal officer as part of Project Icebreaker, a 2009 scheme in which he was asked to hack into the work email, computers and phones of Infinity Ward founders Jason West and Frank Zampella to "dig up dirt" on the pair so the company could fire them.
That's not what I meant.
Granted, West and Zampella were responsible for the franchise that Activision is still riding high on to this day so I will concede that trying to gin up an excuse to fire them comes across as a bit ungrateful and running counter to the whole "rewarding profit and nothing else" ethos. But after West and Zampella were fired, they filed a $36 million lawsuit for unpaid royalties! $36 million! That's like $18 million each, which is just an exorbitant, unconscionable amount of money to hand over to anyone just for making games, especially when it's not even part of their normal pay but just a bonus on top! If they weren't willing to renegotiate for a more reasonable sum, clearly they had to go. Activision Blizzard is a business and a responsible business doesn't just throw money around like that.
STAT | Nearly $200 million - Kotick's approximate bonus compensation as the result of an incentive clause in his contract that was triggered after the publisher's stock price soared during the pandemic.
No, that's different! Kotick was the strategic genius who realized that Call of Duty was popular and they should make more of it. That kind of insight and leadership is irreplaceable!
STAT | $21,052.63 - Roughly the extra compensation that could have been given to each of Activision Blizzard's 9,500 employees last year if Kotick's bonus had instead been split between them.
Well, now you're just hating on capitalism.
QUOTE | "While we had record performance in 2018, it didn't quite live up to our expectations." - Kotick, explaining in a 2019 post-earnings call why the company would be laying off about 800 people despite the company having just posted record full-year profits in 2018.
I mean, that's rough. Nobody likes layoffs, but we can all understand that expectations are expectations and there are going to be consequences for not living up to them, right?
STAT | $7.5 billion - Activision Blizzard's net revenues for 2018, $145 million above its expectations for the full year. The company's earnings per share of $2.35 was also well above its expected $1.79.
Oof. Well come on, remember that Activision Blizzard had just ended its relationship with Bungie so there wasn't any need for the whole publishing operation built around Destiny anymore. This was just a one-off circumstance and in no way indicates Kotick takes layoffs lightly or treats its employees like cattle.
STAT | 5 - Since 2010, the number of times Activision Blizzard has announced record profits and followed that up with celebratory layoffs in the same month (or even the same day).
Well, I'm sure the people he does business with would speak highly of him?
QUOTE | "His obligation is to his shareholders. Well, he doesn't have to be as much of a dick about it, does he? I think there is a way he can do it without being a total prick. It seems like it would be possible. It's not something he's interested in." - Double Fine Productions founder Tim Schafer in 2010 drops his ordinarily affable demeanor for a moment to share his feelings about Kotick after Activision Blizzard cancelled Double Fine's Brütal Legend, and then sued the studio to stop it from releasing the game through Electronic Arts.
Ok, I give up. Whatever anyone might think of the lawsuit against Activision Blizzard, Kotick's own words and actions over the years would suggest a few things about where his priorities lie, and it honestly doesn't seem like the safety and well-being of his employees is at the top of the list.
Besides, this all boils down to the same question posed to Ubisoft CEO Yves Guillemot during the company's scandals last summer.
QUOTE | "Regarding what's happened recently, there are kind of three options. Either as CEO, you didn't know this was happening, which is not great. Or you perhaps didn't know enough and should have asked more, maybe that's the answer. Or you knew, which of course would not be good. Now those are my possibilities. You may answer the question differently. But I'd like to ask what would be your answer to the question about your responsibility as CEO." - Jeffries equity research analyst Ken Rumph asks Guillemot a pointed question during the first earnings conference call after the Ubisoft scandals broke last year.
Guillemot dodged that question, both in the moment and in the bigger picture. Ubisoft jettisoned the head of HR and some high-profile names, but Guillemot remains in charge and it doesn't currently appear as if he's going anywhere.
I don't think the two situations are the same, but to this point Kotick's response certainly looks familiar, and similarly inadequate.
Well, that's enough about Kotick, I think. Let's transition gradually to some of this week's other news.
QUOTE | "We need unionization. Unions were started in this country to protect workers from abusive, cruel, abhorrent, unacceptable and illegal treatment from companies. That's their entire purpose. If this week does not show us that our industry colleagues -- even the most entry-level QA tester -- need true support and baseline protection, I can't imagine how much worse it will have to get." - Former Blizzard employee and co-founder of ArenaNet and Undead Labs Jeff Strain suggests a solution to labor woes in an open letter to the industry.
QUOTE | "We've seen far too many studios become successful and grow rapidly without investing in creating a positive work culture." - IGDA executive director Renee Gittins talks about the need for greater emphasis on cultural development in order to make the games industry a better career option for everybody.
QUOTE | "Steve stepped down in March 2021 after it became clear that the steps that were already being taken to improve his interactions with the team were only yielding temporary results. More drastic action was needed for the health of the team." - A representative with Gone Home developer Fullbright explains why co-founder Steve Gaynor is no longer a creative lead and manager, but will continue working at the studio as a writer.
QUOTE | "It's important for a company to show your employees you're taking this seriously, that you're going to investigate any complaints. Trust is difficult to create, but it's easy to break" - Splash Damage's Cinzia Musio talks on our podcast about how to deal with discrimination and harassment in the industry.
QUOTE | "Due to a changing regulatory climate, we've had to make the difficult decision to sunset a very popular sales mechanism for content in Second Life." - Linden Lab announces that it will no longer allow gacha/loot box mechanics for user-created content sold in the game.
STAT | $313 million - The amount Embracer Group paid to add eight more studios to its years-long acquisition spree, including Ghost Ship Games, DigixArt, and 3D Realms.
STAT | Almost all of them - The number of gaming companies who reported financial results this week that showed year-over-year declines on some key metrics, including Nintendo, Sony, Activision Blizzard, Electronic Arts, Take-Two, and Square Enix. Turns out it's tough to compete against the start of a global pandemic where everyone was locked inside and games were one of the few entertainment options around. However, a common refrain was that the latest results were still well above the comparable quarter from two years ago, suggesting publishers are maintaining some of their gains from the start of the pandemic.
The one exception was Zynga, which saw year-over-year gains in revenues, bookings, and net income. But even then, Zynga executives were tempering investor expectations.
QUOTE | "Toward the end of Q2, as communities began to reopen and reduce their COVID-19 restrictions, we saw softness in our bookings primarily driven by declines in player cohorts who installed our games in the early part of 2021." - Zynga CEO Frank Gibeau and CFO Ger Griffin make it clear that even though the quarter's numbers were good, the initial pandemic boost they received is at least partially receding.