Taking a Look Into Activision Blizzard Part 2

PART 2





February 10, 2010: After modest sales of their new “Guitar Hero” (about ~25 titles in only 4 years) and “Tony Hawk” titles, Activision does a sweeping blow:

1> http://kotaku.com/5469802/prototype-developer-radical-cut-in-half

2> http://kotaku.com/5469858/activision-takes-axe-to-guitar-heros-neversoft-shuts-down-luxoflux

3> http://kotaku.com/5470149/activision-shutters-guitar-hero-creators-gh-van-halen-developers

Radical Entertainment (Prototype, Scarface, Hulk: Ultimate Destruction) – they fire over 90 employees (about half the staff),
Luxoflux (True Crime, Kung Fu Panda, Transformers: Revenge of the Fallen) – closed down,
Neversoft (Guitar Hero, Tony Hawk, Spider-Man) – fire over 50 employees,
RedOctane (Guitar Hero and Plastic Instruments) – closed down,
Underground Development (Guitar Hero: Van Halen, BMX XXX, Freestyle BMX, X-Men) – closed


The very same day this was decided, later Kotick mentioned in an Interview as if to spite those fired:

1> http://kotaku.com/5468976/activision-boasts-156-billion-better-than-expected-q4

"Our significant accomplishments in 2009 are the result of the expertise and skills of our employees around the world. Their hard work and commitment to excellence made us stronger even during difficult times"

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February 28, 2010: A fan project called “King’s Quest 9 – The Silver Lining” is being terminated by Activision, shortly before its release. You could say… sure this always happens, but this time it was a bit different.

The team of hobby-developers, which started working on the project back in 2002 (about 8 years ago) and got a cease-and-desist from Vivendi Universal in 2005, managed to negotiate a deal for a “non-commercial fan license”, which allowed them to develop and publish “The Silver Lining” after all.
2010, nearly done with the work on the project, they handed in a copy for review as agreed in said contract, upon which (the rights to it now belonging to Activision) Activision decided it had no interest in doing anything of the likes and sent another cease-and-desist instead, forcing them to take down their website and forums and to stop working on the project immediately, which they had to do.



1> http://kotaku.com/5482221/activision-terminates-fan+made-kings-quest-extension

2> http://www.tsl-game.com/

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March 2-4, 2010: A bunch of security people raid the Infinity Ward offices, both studio heads/CEOs Jason West and Vince Zampella get fired, they were replaced by internal Activision Publishing employees (who worked for Procter & Gamble and Nestle before).

Just 2 days later, the 2 ex-CEOs file a lawsuit against Activision regarding the rights to “Modern Warfare” and 36$ million of royalties + damages.

A few excerpts from said “lawsuit”:


23. West and Zampella were not as eager as Activision to jump into the development of Modern Warfare 2. Despite assurances by Activision that West and Zampella would have complete freedom to run Infinity Ward as an independent studio, Activision had begun to intrude upon Infinity Ward's ability to create quality games. For example, Activision forced Infinity Ward's employees to continue producing the games at a break neck pace under aggressive schedules, and West and Zampella were concerned that Activision was emphasizing quantity over quality. Given Activision's insistence that Infinity Ward continue to focus on sequels to Call of Duty games instead of new intellectual property, West and Zampella were also concerned that Activision's demands risked "burning out" the Infinity Ward employees' creativity. Nurturing a creative environment had been one of the cornerstones of Infinity Ward's success. West and Zampella were not eager to extend their employment; especially as they watched their games receive countless awards and make Activision billions of dollars, while many Infinity Ward employees were not being provided a fair share.

25. To induce West and Zampella to create a game they had no obligation to create and to extend an Employment Agreement that was just months from expiring, Activision made several important promises in the MOU. First, the MOU gives West and Zampella creative authority over the development of any games under the Modern Warfare brand (or any Call of Duty game set in the post-Vietnam era, the near future or the distant future) including complete control over the Infinity Ward studio. The MOU explicitly provides that no such game can be commercially released without the written consent of West and Zampella. Second, the MOU gives West and Zampella the right to operate Infinity Ward independently and to choose to develop new intellectual property after they completed Modern Warfare 2.

30. In wake of Modern Warfare 2's success, Activision chose not to honor the MOU or Employment Agreement with West and Zampella. Activision chose, instead, to launch a pre-textual investigation against West and Zampella to create a basis to fire the two co-heads of Infinity Ward before the first Modern Warfare 2 royalty payment would be paid in the ordinary course, on March 31, 2010.
...
Activision refused to tell either West or Zampella what specific acts or omissions Activision believed they had committed or what was prompting the investigation, insisting instead in Orwellian fashion that West and Zampella "already have a clear understanding of what they have or have not done." West and Zampella were told only that Activision was investigating potential "breaches of contract" and "violations" of Activision policies, and threatened that anything less than their full cooperation with the inquisition would constitute "insubordination", which itself would justify their termination.

32. Activision conducted the investigation in a manner designed to maximize the inconvenience and anxiety it would cause West and Zampella. On little notice, Activision insisted on conducting interviews over the Presidents' Day holiday weekend; West and Zampella were interrogated for over six hours in a windowless conference room; Activision investigators brought other Infinity Ward employees to tears in their questioning and accusations and threatened West and Zampella with "insubordination" if they attempted to console them; Activision's outside counsel demanded that West and Zampella surrender their personal computers, phones and communication devices to Activision for review by Activision's outside counsel and, when West and Zampella asserted their legally protected privacy rights, Activision's counsel said that doing so constituted further acts (of) insubordination.

West and Zampella are also entitled to exercise creative authority over the development of any games to be published under the Modern Warfare brand over any of the conduct of Infinity Ward Studio. But the day after it fired West and Zampella, Activision announced new strategic and personnel plans for Call of Duty franchise and has asserted complete control over the Modern Warfare brand and the Infinity Ward Studio.



In the aftermath Jason and Vince create “Respawn Entertainment”, and over 30+ key Infinity Ward employees leave Activision, some of them joining them there (after themselves filing another group lawsuit against Activision regarding them not being paid/withheld their bonuses to force a “Call of Duty: Modern Warfare 3”)

1> http://g4tv.com/thefeed/blog/post/704273/infinity-ward-employee-group-files-lawsuit-against-activision-over-unpaid-royalties-alleges-devs-held-hostage.html

I've obtained a copy of a lawsuit filed this morning in the Los Angeles Superior Court by 38 plaintiffs, calling themselves the "Infinity Ward Employee Group," against Activision. The Infinity Ward Employee Group (whom I'll refer to as IWEG throughout the rest of this story) alleges breach of contract, breach of the implied covenant of good faith and fair dealing, violation of California labor code and more. The group is after a large amount of unpaid royalties.
"Activision owes my clients approximately $75 million to $125 million dollars," said Bruce Isaacs, one of the IWEG's attorneys at Wyman & Isaacs LLP, over the phone this afternoon. "Activision has withheld most of the money to force many of my people to stay, some against their will, so that they would finish the delivery of Modern Warfare 3. That is not what they wanted to do. Many of them. My clients' entitled to their money. Activision has no right to withhold their money -- our money."


1> http://kotaku.com/5484026/activisions-new-plans-for-call-of-duty-include-new-developer-new-genres

2> http://kotaku.com/5485703/ousted-infinity-ward-founders-lawsuit-against-activision-the-court-documents/gallery/

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March 30, 2010: In a "Activision Blizzard restructuring move", the above often quoted CFO (Chief Financial Officer) Thomas Tippl is, according to Massively and the L.A. Times put in charge as COO (Chief Operations Officer) of the "Blizzard business unit", with Mike Morhaime directly reporting to him, according to Joystiq Tippl basically gets paid more, the more revenue the company makes:

1> http://www.massively.com/2010/03/31/acti-blizz-restructuring-assigns-new-executive-to-blizzard/

2> http://www.joystiq.com/2010/03/30/activision-cfo-thomas-tippl-now-coo/

3> http://latimesblogs.latimes.com/entertainmentnewsbuzz/2010/03/activision-quietly-restructures-senior-management-and-internal-organization.html


The new company map features one business unit focused squarely on the Call of Duty franchise, another overseeing Activision-owned brands such as Tony Hawk and Guitar Hero, and a third unit to handle licensed properties. Blizzard Entertainment rounds out the fourth unit but interestingly, Blizzard's Mike Morhaime now reports directly to newly appointed chief operating officer Thomas Tippl, who in turn reports to Activision CEO Bobby Kotick.

"THIS IS AN IMPORTANT CHANGE AS IT WILL ALLOW ME, WITH THOMAS,
TO BECOME MORE DEPLY INVOLVED IN AREAS OF THE BUSINESS WHERE I BELIEVE WE CAN CAPTURE GREAT POTENTIAL AND OPPURTUNITY," Kotick said in the employee memo.

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"Performance shares" are, according to Investopedia, "shares of company stock given to managers only if certain company wide performance criteria are met, such as earnings per share targets." Meaning, in so many words, that Activision has to meet a certain performance level in order for Tippl to earn said shares. That they will "vest ratably" is only to say that on Feb. 15 of each year for the next four years, he will earn part of that eventual 225,000-share goal (in 2014) ... should he stay in his position for all that time, of course. And finally, this is all based on the prediction that he delivers a higher or equal to non-GAAP earning per share when compared to the previous year. In short, he has to either break even or make money to get the stocks, and he has to maintain that for the next four years. Quite a tall order, sir!

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May 5, 2010: After already having developed the “World of WarCraft Armory App” for Facebook, it is decided to be integrated into the new Battle.Net 2.0 full time and Blizzard already announced further features coming from said “partnership”…

1> http://kotaku.com/5531740/starcraft-ii-hooks-up-with-facebook

Blizzard concerning privacy:
Should I be concerned about the privacy settings on my Facebook account?

Both Blizzard Entertainment and Facebook take the security of personal information very seriously.

FaceBook CEO concerning privacy:

1> http://www.businessinsider.com/well-these-new-zuckerberg-ims-wont-help-facebooks-privacy-problems-2010-5

""
Zuckerberg: Yeah so if you ever need info about anyone at Harvard
Zuckerberg: Just ask.
Zuckerberg: I have over 4,000 emails, pictures, addresses, SNS
[Redacted Friend's Name]: What? How'd you manage that one?
Zuckerberg: People just submitted it.
Zuckerberg: I don't know why.
Zuckerberg: They "trust me"
Zuckerberg: Dumb f*cks. ""


[why FaceBook made it into Battle.Net 2.0 over several dozen other features]

From 2008:

1> http://kotaku.com/383589/activision-worried-aboutfacebook

2> http://www.mcvuk.com/news/30332/Kotick-Facebook-is-a-threat-to-games

Activision CEO Bobby Kotick isn't worried about Guitar Hero growing stale or Tony Hawk losing out to Skate. Or, at least that stuff isn't keeping him up at night. The bigger threat to Activision games is (dun dun dun) social networking. He explains:

Figuring out how to make the game experience more fun than any one of a hundred Facebook applications is going to be a challenge.

It seems like baby boomers and even some Gen Xers still don't grasp the more modern concept of multitasking. Mr. Kotick, you may want to sit down for this. We may use ten apps within Facebook, but we often do so while playing a game..



From 2009:
1> http://nukezilla.com/2010/02/11/kotick-on-social-games-interesting-but-unproven/

Zynga’s wildly popular FarmVille has made a lot of traction in the modern gaming industry, but Activision’s Bobby Kotick has said that while the phenomenon is ‘interesting’ , social games remain ‘characterized by [an] unproven business model’ .

The current model includes selling in-game items for real cash, as well as in Zynga’s case, ‘offers’ , where the user takes a trial of a product in exchange for in-game money. (Something which has landed them in a little trouble.)

Accordingly to Kotick, Activision will continue to examine the idea of social gaming, saying ‘[currently,] these opportunities are better utilized as a means to connect our community and extend the brand, and less about financial scale or huge financial return’.

While the nature of these games is currently supplementary, Kotick also spoke of the company’s $1.3 billion revenue from digital sales. This includes DLC, subscriptions and mobile incomes, and could easily accommodate social gaming revenue. Develop also points out Activision’s $300 million purchase of PlayFish, an online game developer which could form the basis of Activision’s social gaming team.

What this will ultimately result in is a surge of new titles designed for use on Facebook and other networking sites, with Kotick mentioning both Call of Duty and Guitar Hero franchises as a possible way to cash in on some of that social gaming dough.

The main problem, however, is that a lot of these games develop organically in the community and Activision, known for its blitz-like marketing, could simply start pushing games onto people who don’t want them. If Activision does enter the market, be sure that it’ll be in a sufficiently aggressive manner. It’ll probably result in a ton of crappy Facebook games that you or I will never play, but causal gamers will flood to them, so why not, eh?





He finally found out how to do it by now, using the Battle.Net and some of the other new Activision titles:

1> http://investor.activision.com/releasedetail.cfm?releaseid=472272

By seamlessly integrating an innovative "Share" button, Blur lets players choose to light up the competition in both single and multi-player modes by sending game challenges to friends and posting in-game photos, racing stats, unlockable items and much more on their Facebook pages.

"Blur's innovative integration with Facebook makes it easy for players to interact with their real friends to share game play, emotions, and the racing experience," said Dan Rose, Vice President of Partnerships and Platform Marketing, Facebook. "Blur is leading the next generation of console games integrating with Facebook to make gaming more social for our more than 400 million users."

"Blur is the first multi-platform videogame that connects the television to Facebook, and for the first time, videogame audiences on the Xbox 360, PlayStation 3 and PC will be able to link their console gameplay to their network of friends," said Robert Kotick, CEO, Activision Blizzard. "Facebook has become a fantastic platform for videogames and Blur elevates it even further."

Blur is the ultimate powered-up racing experience, where players collect addictive and intense Power-ups throughout each course, including the ability to blast other cars out of the way with huge bursts of energy, boost speed with Nitros, drop Mines and even generate defensive shields to fend off other racers. Blur offers online multiplayer supporting competitive and cooperative gameplay for up to 20 racers, including team racing and objective based events, and also supports 4-player split-screen. For more information on Blur, please visit the official game web site located at 1> www.blurthegame.com, and check-out Blur on Facebook at 2> www.facebook.com/blurthegame

Blur is released nationwide May 25th for the Xbox 360(R) video game and entertainment system from Microsoft, PLAYSTATION(R)3 computer entertainment system, and the PC, and is rated "E10+" by the ESRB.

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To be continued Part 3

A good read as always. Thank you sir.