Activision Blizzard CEO Addresses Toxic Workforce Claims Amid Microsoft Deal

Bobby Kotick has a secret: He was ready to buy Time Warner a few years ago.The CEO of Activision Blizzard drops this nugget early on while sitting at the company’s Santa Monica headquarters for his first extensive interview since 2012. It’s a Friday afternoon in mid-April, which means the office is mostly deserted. Huge replicas of characters and actual backdrops from the video game giant’s roster of franchises — including Call of Duty, Diablo, Overwatch and Candy Crush — dot the landscape of the open-architecture space. The quiet in the building and the low midafternoon light give the place a slightly spooky, fun house vibe.

“We’d take their IP and turn it into games. They’d take our IP and turn it into film and television, and we’d have an extraordinary company,” Kotick says, sketching out his vision for a deal in an alternate universe in which AT&T never bought Time Warner and Activision took it on instead. In reality, the Justice Department lost its lawsuit to block the sale of Time Warner to AT&T. But during the first half of 2018, when the fate of the $85.4 billion Time Warner purchase hung in the balance, Activision Blizzard took a cue from its “Call of Duty” commandos: It stockpiled financial ammunition and waited patiently for an opening to pounce.

“We raised all the capital and were ready to go in the event that AT&T couldn’t get the deal done,” Kotick says with a grin. He claims to be dispassionate about the missed moment with Time Warner, but his excited vision of what might have been suggests otherwise.

Kotick, 60, is remarkably sanguine for a CEO fighting battles on multiple fronts. He’s in a similar predicament to the one that AT&T and Time Warner were five years ago, as he’s spent the past 18 months (and counting) lobbying regulators to approve the sale of Activision Blizzard to Microsoft for $69 billion in cash.

What’s more, Activision Blizzard over the past five years has been the focus of harassment and gender equality probes from an alphabet soup of federal and state agencies, from the Equal Employment Opportunity Commission to the Securities and Exchange Commission to California’s Civil Rights Department. Kotick has been accused of turning a blind eye and failing to act to address internal culture issues, particularly at the Blizzard unit.

In a lawsuit filed against Activision in 2021, California’s Civil Rights Department alleges that “women were subjected to constant sexual harassment, including groping, comments, and advances, and that the company’s executives and human resources personnel knew of the harassment and failed to take reasonable steps to prevent the unlawful conduct, and instead retaliated against women who complained.” The complaint also accused Activision of having “fostered a sexist culture and paid women less than men, and assigned women to lower level jobs than men.” Last year, Activision filed a counterclaim against  the Civil Rights Department, accusing it of ethical lapses in its investigation and of attempting to interfere with the separate EEOC investigation and $18 million settlement reached in September 2021.

The executive says he has been both humbled and outraged by what he considers malicious distortions about the company that he has taken to great heights over 32 years. He makes no apologies for Acti­vision or its culture. He says that the company is preparing to release a slew of data drawn from the EEOC investigation that he hopes will combat the perception that Activision was run as a “frat house.”

For a company with 17,000 employees worldwide, Kotick asserts, Activision has had a relatively low level of harassment and assault complaints. Though he says he’ll release a transparency report that will provide exculpatory data from outside entities, he acknowledges that the stain left by the sweeping allegations will be hard to combat with pie charts and statistical tables.

“We’ve had every possible form of investigation done. And we did not have a systemic issue with harassment — ever. We didn’t have any of what were mischaracterizations reported in the media,” Kotick asserts. “But what we did have was a very aggressive labor movement  working hard to try and destabilize the company.”

Kotick places the blame for most of Activision’s image problems on what he calls “outside forces” and labor activity around the company. The Communications Workers of America and Activision employees have filed a stream of complaints against the company with the National Labor Relations Board. Kotick believes labor organizers are influencing the state and federal investigations into harassment and gender discrimination claims, as well as the Activision employee walkouts that have been staged periodically since 2021.

“Corporations choose to be disruptive when they run anti-union campaigns,” says Beth Allen, communications director for the CWA. “Workers who join together to improve their workplaces intend to make constructive changes for the benefit of all. When employers voluntarily recognize unions and engage in good faith contract bargaining, it builds trust and strengthens companies.”

In fact, the heat between Activision and the CWA has cooled a bit of late. The CWA successfully organized workers at Activision’s Raven Software division earlier this month, while the CWA-backed Game Workers Alliance organized workers at an Activision unit in Albany , N.Y., in December. Contract talks for those workers begin next week. “Over the last few months, we worked thoughtfully and productively with the CWA,” Kotick explains, “and we’ve engaged in a dialogue that will be beneficial for our people, the union and the company.”

In November 2021, after allegations about the company were reported in depth by The Wall Street Journal, about 1,000 employees signed a public petition urging Kotick to resign as CEO. Again, Kotick sees regulators fanning the flames that led to the Journal’s exposés. He believes his biggest mistake was failing to forcefully defend the company and his legacy to the Journal and in his public statements.

“I wouldn’t be sitting here talking to you if any of what you read in the inflammatory narrative was truthful,” Kotick says. Although he has become synonymous with Activision, he’s quick to point out that he does not have control of the company through voting rights — as some media moguls do — and that he owns less than 5% of its shares. “No board of directors in a noncontrolled company is going to allow the CEO of an enterprise to stay running the enterprise if those things were truthful,” he says of Activision’s spree of bad press and investigations.

In a statement, a Wall Street Journal spokeswoman told Variety: “We stand by our fair and accurate reporting on Activision.”

Kotick didn’t launch Activision. But as a young investor who was drawn to the 1980s tech boom, he acquired the company that was near bankruptcy in late 1990 and became CEO in February 1991. Under Kotick’s leadership, Activision has tripled its market value. It has grown significantly through savvy acquisitions. Today, Activision Blizzard is the world’s fifth-largest maker of video games, with a balance sheet and loyal customer base that any Hollywood studio would envy. (In Kotick’s view, Hollywood is only now starting to catch up on building the kind of fandoms and franchises that power the $200 billion global video game industry.)

Michael Pachter, media analyst at Wedbush Securities, who has covered Activision since 2002, says Kotick is a force-of-nature leader who has proven his ability to galvanize teams to take massive swings on properties that take years and many millions of dollars to develop and produce. One of Activision’s hallmarks has been a willingness to delay planned releases if the company doesn’t feel that a new edition of Call of Duty or World of Warcraft or another franchise title is worthy of its predecessors. More than a decade ago, Kotick also bucked the trend by opting to double and triple down on upgrades and new iterations of its biggest-selling titles rather than diversify along a wider range of properties. In 2022, Call of Duty, World of Warcraft and Candy Crush accounted for 79% of the company’s $7.5 billion in annual net revenue. The company is eagerly awaiting next week’s global launch of a next-generation installment of Blizzard’s Diablo franchise, Diablo IV.

“The basis of his success is that he’s a really good judge of game talent,” Pachter says. “He gives his people enough authority to make good decisions, and he backs them up. What Activision did better than anyone else was to focus on fewer and bigger. Activision did to games what Disney did to movies. Disney said, ‘We’re not going to make 50 movies a year; we’re going to make 20.’ Activision used to make 30 to 40 games a year. Now they make five.”

That said, serious problems within Activision’s workplace culture were also Kotick’s responsibility — and on those issues the CEO  fell short,  Pachter says. He believes the Microsoft transaction was spurred in part by Activision being on the ropes in late 2021 and Kotick being ready to move on after three decades at the helm. “Bobby inherited and allowed to thrive a culture of male domination. He presided over a culture that was toxic at times — that is bad,” Pachter says. “Ultimately, he’s relieved that Microsoft came along.”

Kotick’s current contract as Activision CEO runs through March 2024. Two more key dates on the horizon are July 18 — when the initial Microsoft acquisition agreement expires (which can be extended if both companies agree) — and Aug. 2, when an evidentiary hearing will be held in the Federal Trade Commission’s lawsuit to nix the Microsoft-Activision nuptials. The Justice Department and the U.K.’s Competition and Markets Authority are both raising objections to the transaction. Both say it would give Microsoft too much control of the global gaming marketplace — a fear that Activision and Microsoft both say is off base for where the market is today and misses the competitive threat posed by overseas tech giants including China’s Tencent and ByteDance.

Activision has operated mostly on the fringes of traditional Hollywood. Kotick grew up in Roslyn, N.Y., and has the kind of Long Island street smarts that have helped many East Coast expats in Hollywood. He’s well liked among the showbiz elite with whom he has rubbed elbows for many years. Despite the severity of allegations around the company, Kotick has not been drummed out of the in-crowd. He has many defenders who feel the company, its influence in pop culture and Kotick’s role in building it have never been appreciated by mainstream Hollywood.

“Activision is a creative company through and through,” says Dawn Ostroff, a TV and digital veteran who has known Kotick for years and joined Activision’s board in 2020. “They’re so protective of the creative process. He really believes in allowing his creators to get the games right, and to make sure the players are first and foremost in their minds. They know their consumers so well.”

That fealty to cutting-edge technology and games that consistently wow hardcore gamers is what sets Activision apart from other gaming giants, including Electronic Arts, Take-Two Interactive and Ubisoft.

“Bobby as a leader is someone who is very creative. He’s not just a CEO who is brilliant in business; he respects the creative producer and developers in all of his different divisions, and he supports them to deliver the very best games,” Ostroff says.

The public and private personas of Ko­­tick are hard to square. Ask many of his C-suite counterparts in Hollywood and the first words blurted out are usually, “Bobby’s done a great job with Activision.” But there is no disputing that Kotick has long been a favorite punching bag of a key constituency in the video game universe: hardcore gamers. As The New York Times observed in a 2012 profile, “The disdain heaped on Mr. Kotick in video game blogs is second only to the admiration for him on Wall Street.”

The rap against Kotick has been that he’s bought his way to video game success. Most recently, he made a savvy deal in 2016 to acquire King, the U.K.-based maker of addictive mobile games such as Candy Crush, for $5.9 billion in cash. That made Activision well positioned to ride the mobile-gaming wave that accelerated during the pandemic.

As Activision has grown, Kotick has become a handy villain, depicted as the rich suit who lives off the money that gamers shell out on their favorite pastime. The slogging on video game-centric social media platform has taken its toll on Kotick, and his family.

“The hatred has turned into a lot of antisemitism,” Kotick says. “When you look at images of me are on the internet, there are these antisemitic undertones. My kids have gotten death threats.”

Longtime Kotick colleagues and competitors say he is exacting but Activision’s results and track record speak for themselves. The company has been able to keep growing by prioritizing quality over quantity and setting a high bar for improving the gaming experience.

Larry Kasanoff, a film producer who has worked with game content for years, including the enduring “Mortal Kombat” film franchise, says Activision’s growth on Kotick’s watch is no accident. “They have really held everyone to a higher technological standard,” Kasanoff says. “There are a lot of games like Candy Crush and Call of Duty, but none of them are as good. There’s something about the playability and technicality to them. They’re always at the top.”

Kasanoff observes that traditional Hollywood still struggles to grasp what makes the creative essence of a video game different from a movie or TV show. “The game community is different than the movie community. You have a hit movie, and you get people in and out in two hours,” Kasanoff says. “With games, people want to play them for a long time. You don’t spend 60 bucks to play for two hours. You’re looking to play for 60 to 80 hours. Your game has got to be good.”

In one-on-one conversation, Kotick can be disarmingly funny and warm, with a Mickey Rooney-like air of can-do energy. He’s soft-spoken, even when wound up about a particular subject. He lights up when talking about Activision’s strengths and future plans. During a tour of Activision’s motion-capture production space in Playa del Rey, for example, he is easily conversant on the specifics of the technology and how improving the company’s motion-capture tech elevated the experience of playing Call of Duty and other immersive titles. He proudly shows off a bit of expensive production tech that looks like a jungle gym made of cameras, sensors and wires. He oohs and aahs as a technician demonstrates how the device works when a person wearing a motion-capture skullcap steps inside. It’s all in service of allowing Activision artists and engineers to bring an ever-more-photorealistic look to games.

“Playing games is such a visceral experience,” Kotick explains. “We’re getting to the point that the game itself is able to create its own content in real time. That will be exquisite.”

Kotick has a lot on his mind about recent events. But if there’s one thing he wants to make crystal clear, it’s that this son of a teacher is not anti-union. In fact, he is a member of a prominent union: SAG-AFTRA. He joined when he was cast in a small role in Bennett Miller’s 2011 baseball drama “Moneyball,” starring Brad Pitt and Jonah Hill. Kotick played the tightfisted owner of the Oakland A’s.

“I am not like other CEOs that are anti-union,” Kotick insists. “I’m the only Fortune 500 CEO who’s a member of a union. If we have employees who want a union to represent them, and they believe that that union is going to be able to provide them with opportunities and enhancements to their work experience, I’m all for it. I have a mother who was a teacher. I have no aversion to a union. What I do have an aversion to is a union that doesn’t play by the rules,” he says.

The year 2021 was Activision’s annus horr­ibilis. By its end, Activision’s stock had plum meted 35%. The confluence of disturbing headlines, delayed games and a lukewarm fan response to the latest iteration of Call of Duty was taking its toll.

“These guys were on their asses,” says Clay Griffin, video game analyst for MoffettNathanson Research. “All these negative headlines about sexual harassment. The new Call of Duty came out, and it flopped. The stock was weak; some Blizzard titles were delayed.”

At the same time, Microsoft’s Xbox video game operation was sinking further behind its largest competitors, Sony PlayStation and Nintendo. “Microsoft needed to do something bold for Xbox. It was a really serendipitous moment for both sides to say, ‘Hey, what’s a fair price and can we get this done?’” Griffin says.

With Activision in a stronger place these days, though, there have been whispers in the industry about whether Kotick might be having second thoughts about hitching the company’s wagon to Microsoft. But Kotick, who stands to make a not-so-small fortune in the sale, says he is only focused on guiding the deal through the regulatory roadblocks. He’s exasperated by the public debate on whether Microsoft, in combination with Activision, will have too much sway over the nascent cloud-gaming sector. In his view, the real threat is that U.S. firms fall behind not only China’s Tencent, ByteDance and Alibaba but also Japan’s Sony and Nintendo as leaders and innovators in the AI, streaming and mobile technologies needed to power the next generation of immersive video games. The non-U.S. tech giants have tens of thousands of engineers focused on research and development in these emerging arenas.

Kotick emphasizes that he thinks Microsoft is a perfect fit for Activision. The company has the financial resources and infrastructure to support the kind of investment that will be needed to remain competitive in the space that Activision has helped define over the past 30 years. “I think Microsoft is by far the best place for us to be,” he says.

That said, if the deal doesn’t go through, Acti­vision will soldier on with a balance sheet that is bolstered by $12.6 billion in cash on the books. That amount will grow by nearly $3 billion if Microsoft has to pay Activision the deal breakup fee negotiated as part of the transaction. That’s a lot of cash to wield, should Kotick decide to go shopping for other companies.

As Kotick talks up the virtues of the Microsoft deal for Activision at the close of a nearly two-hour conversation, though, it’s clear he’s thinking about both his next moves and his legacy. Handing Activision to a new owner will be hard, but perhaps made easier by Kotick’s long-standing relationships with Phil Spencer, CEO of Microsoft Gaming, and Microsoft chief executive Satya Nadella. “I like the company,” Kotick says of Microsoft. “I like the culture. I’m really scared about the economy — compensation for talent has been ratcheting up in ways that are complex for us to deal with. So this deal made a lot of sense.”

Kotick sounds like he’s still a little unconvinced himself. But even amid the ongoing litigation over harassment claims, Activision is in the fortunate position of having options.

“We have a great company. We have an enormous amount of momentum, and we have an extraordinary balance sheet,” Kotick says. “And we can continue to be successful alone like we have been for the last 30 years. But it’ll be great if the deal goes through because I think it’s the right thing for our industry.”