This story contains a mention of sexual assault.
One of the video game industry's longest-serving and most powerful executives, Activision Blizzard CEO Bobby Kotick, is on thin ice, with calls for his resignation growing louder by the day. But Kotick, who has steered the publisher since the early '90s and made himself and stockholders fabulously wealthy in the process, is refusing to let go of the wheel, setting up a messy showdown unlike any power struggle the industry has seen before.
The crisis at Activision Blizzard took a drastic turn this past week thanks to an explosive investigation from The Wall Street Journal that revealed the extent to which Kotick was aware of the company's rampant sexual harassment and discrimination issues. That includes settling out of court with a former employee who had twice been raped by her manager at Activision-owned studio Sledgehammer Games and keeping the story quiet.
- The report detailed how Kotick himself has committed misconduct, ranging from threatening the life of an assistant in 2006 to stepping in to protect harassers within the company's top ranks, while also allegedly concealing many of these incidents from the board of directors.
- Condemnation has been swift. A group of more than 1,000 employees has called for Kotick's resignation. Investment group SOC also said if Kotick and his two longest-serving board members didn't step down, it would refuse to reelect the current directors next year and stage a boycott of the vote with other shareholders.
- Since the article's publication, Activision's handling of the situation has been nothing short of disastrous. The board said it would stand by Kotick without question, while the company said its new zero-tolerance policy for harassment didn't apply to the executive because accusations against him were over a decade old.
- Meanwhile, it was revealed that Blizzard co-lead Jen Oneal, who announced her resignation earlier this month, was being paid less than fellow co-lead Mike Ybarra for the same role. "It was clear that the company would never prioritize our people the right way," Oneal wrote in an email to staff in September. "I have been tokenized, marginalized and discriminated against."
The most important revocations have come from Kotick's peers. The heads of both PlayStation and Xbox sent emails to staff this week condemning Activision Blizzard and its handling of the crisis. While Kotick has deftly ignored employee demands with placating gestures like a pay cut, losing the support of platform owners like Sony and Microsoft creates a potentially dangerous situation.
- Jim Ryan, the head of PlayStation, sent an email to Sony staff on Wednesday where he said the company reached out to Activision immediately after the WSJ report "to express our deep concern and to ask how they plan to address the claims made in the article." Ryan went on to say: "We do not believe their statements of response properly address the situation."
- A day later, Xbox chief Phil Spencer said he was "disturbed and deeply troubled by the horrific events and actions'' at Activision Blizzard, adding that "this type of behavior has no place in our industry." Spencer said Microsoft would, going forward, have to think about how closely it wants to associate with the publisher.
- Ryan and Spencer are among the most prominent and well-respected figures in the game industry, and losing their support could mean any number of financial roadblocks for Activision Blizzard going forward. That could include losing marketing partnerships during big E3 keynotes, special deals for in-game promotions in Call of Duty titles or strategic placement in the PlayStation and Xbox digital stores.
The Kotick story has refocused the Activision Blizzard saga. It's been months since California filed its lawsuit against the company, and there were signs the controversy had died down after a federal settlement with the Equal Employment Opportunity Commission and the smooth release of the newest Call of Duty game.
- But the story has now become about Kotick, and in particular his handling not just of the lawsuit and the revelations it contained, but also his entire stewardship of the company throughout the past three decades.
- That the leadership and the company's board of directors have fallen in line so quickly behind Kotick has had the effect of galvanizing employee organizing efforts. "It's almost as if they're begging us to unionize," an Activision employee told Axios. "I don't know if I'd be ready to trust corporate again without a union behind me," another said.
How long can Kotick hold on? The company's major shareholders are enormous wealth management funds, including Vanguard, BlackRock and Fidelity, which tend not to get involved in any form of corporate controversy of this kind.
- It would also be expensive to fire Kotick; as of December 2020, Kotick's contract stipulates a payout of up to $265 million if he is ultimately terminated.
- Kotick has also run the company since 1991, a year after he purchased a 25% stake of the then-bankrupt Mediagenic and restructured it under its original name as Activision.
- He's one of the longest-running CEOs in America and has been instrumental in turning the company's games into household names through strategic acquisitions, mergers and buyouts with major companies like Vivendi and Blizzard Entertainment.
The depth and severity of the company's toxic workplace issues now has a face and a name, and it belongs to Bobby Kotick. Whether he thinks he can navigate through this crisis and repair his company's reputation is now up against the board's perception of how much damage he's doing to the company.
Activision's stock is down nearly 10% this week and more than 30% in the past year. And losing the faith of leadership at Microsoft and Sony is perhaps the most damning evidence yet that keeping Kotick onboard could cost more than he's worth.