Part IThe Story
The car came in fifteen minutes. Bobby Kotick lingers on that detail when he tells the story, and he has told it often enough that it arrives smooth, like a stone carried in a pocket for forty years. A limousine pulls up outside his father's office in Manhattan. Two men he would later call "gorillas" get out and give a single instruction, Get in. The car goes to the 61st Street heliport, where a Golden Nugget helicopter is waiting. Kotick had never been in a helicopter. A day or two earlier he had never been on a private plane either. He was a sophomore at the University of Michigan with a software company he had started in his dorm room, and he was beginning, he admits, to like this.
The helicopter set down in Atlantic City. Kotick and his college roommate and business partner were driven into the basement of a parking garage beneath the casino, and there they waited for three hours. Then the man they had come to see walked out in a fancy suit, with a pinky ring and perfect hair, and asked what they did. They made software that made computers easy to use. How much for a prototype? Three hundred thousand dollars. The man wrote a check for three hundred thousand dollars on the spot and set the terms: a third, a third, a third. You guys do the work, I'll raise the money. Who's hungry?
Kotick, nineteen or close to it and anxious in the way of a boy whose father had just watched him torch a respectable financing, said they had contracts prepared and could send them over.
"Contracts-shmontracts," said Steve Wynn. "You're my family now." And he walked out.
Kotick turned to his roommate in the basement of the garage and offered the only analysis he had: We're going to die.
He told the story on a stage at the CNBC Evolve conference in Los Angeles on November 19, 2019, to an audience of executives who laughed in the right places. By then Kotick had run Activision for twenty-eight years, which the interviewer, Becky Quick, converted into 196 years in the dog-years of the technology business. He answered that he had been "eating Alpo for like 50 of them." The garage anecdote was offered as gratitude, a parable about mentorship, about how a stranger's faith can launch a life. Wynn had told him on the plane that his own career began when Perry Thomas, the banker to Howard Hughes, lent a young man in his twenties the money to buy into the Golden Nugget, on one condition: someday he would do the same for another young entrepreneur. The money came with an obligation to pass it on.
That is the story Kotick meant to tell. It contains another one. A deal sealed with no paper. Capital arriving as an act of personal loyalty, with loyalty expected in return. Charisma working like a currency. A boy from Long Island who learned early that the important transactions happen in rooms the public never sees, a basement or a boardroom or a plane, and that the man who controls the money can tell the men who do the work that they are family.
Kotick spent the next four decades building one of the most valuable entertainment companies on earth, and he built it out of other people's names: Pitfall, Tony Hawk, Call of Duty, Guitar Hero, Warcraft, Candy Crush. He sold it to Microsoft for $68.7 billion in cash. By the end, a great deal had been written down: settlement agreements, regulatory orders, an eight-page board finding filed with the Securities and Exchange Commission, a front-page investigation in the Wall Street Journal, a petition signed by more than a thousand of his own employees asking him to leave. The man who once could not get Steve Wynn to sign anything had become the subject of an extraordinary amount of paper.
By the Numbers
The Kotick Years
~$440KWhat Kotick's group paid for the bankrupt Mediagenic, by his account (other tallies say ~$500K)
8 of 150Employees kept after the 1991 takeover
$5MPrice of Infinity Ward, the studio behind Call of Duty, in 2003
32 yearsTenure as CEO, February 1991 to December 29, 2023
$68.7BMicrosoft's announced all-cash price, about $95 per share
319xKotick's 2018 pay relative to the average employee's $97,000
$54MCalifornia civil-rights settlement, December 2023
Business cards in junior high
Roslyn sits on the North Shore of Long Island, a commuter town of good schools and ambition you could measure in square footage. Robert A. Kotick grew up there and took no apprenticeship in anything but commerce. In junior high he had his own business cards. In high school he rented Manhattan nightclubs on their off nights, delivered sandwiches, restrung tennis rackets, sold wallets. He would joke decades later that he shared his bar mitzvah with three other boys and so got only fourteen lines of Torah: "that's all you get when you're doing it with four guys." Even at the ceremony of becoming a man, the time was divided.
At Michigan in the early 1980s he studied art history, an inheritance that would later hang on the walls of a Beverly Hills house full of Abstract Expressionist canvases, and in 1982 he started a software company called Arktronics in his dorm room with a friend named Howard Marks. Their product was Jane, a graphical integrated software package for the Apple II, a gentler front door to a machine most people found forbidding. In 1983 Wynn and his wife, Elaine, put in $300,000. Then Steve Jobs met with the undergraduate and persuaded him to drop out, and Kotick did.
Jane did not survive. Improvements to Apple's own computers made it obsolete, and from 1985 to 1991 Arktronics was tangled in litigation over company shares that employees had accepted in place of pay, at the request of the company's leadership including Kotick, shares that turned out to be worth little. Hardly anyone mentions it now. It deserves a place at the start of the story anyway, because the arrangement would come back in other forms: people who make the product taking equity instead of wages, and then finding out what the equity was worth.
What Kotick took from Arktronics was not software. He had watched, from the inside, a technology platform shift beneath a small company's feet, and he had concluded that the durable money lay in whoever controlled the box and the brand rather than in the ingenuity of a particular program. In 1987 he tried to buy Commodore International. His plan was almost comically literal: take the Amiga 500, pull off its keyboard and disk drive, and sell what remained as a video game console. Irving Gould, Commodore's chairman, would not sell control. Kotick and his partners regrouped and bought into Leisure Concepts, the company that licensed Nintendo's characters, and in June 1990 he became its CEO.
Through Nintendo, he heard about a wreck.
Towel designers
To see what Kotick bought, you have to see what the name had once meant, and to see that you have to go back to May 1979 and a meeting at Atari.
Four programmers sat across from Ray Kassar, the chief executive Warner Communications had installed after buying the company. Kassar had come to Atari from the textile business. David Crane, Larry Kaplan, Alan Miller and Bob Whitehead were among thirty-five developers on Atari's staff, and their games accounted for 60 percent of its sales. Crane had worked out that the cartridges he was fully responsible for had brought in more than $20 million. His salary was $20,000. An Atari marketing memo listing the previous year's bestsellers had made the arithmetic impossible to ignore. The four asked to be treated the way record labels treated musicians, with royalties and with their names on the boxes.
As Kaplan remembered it, Kassar called them "towel designers." Anybody, he said, can do a cartridge.
That August they walked out. In 1979 there was no such thing as an independent console developer. Software for a console came from whoever made the console, and conventional wisdom held that to make games for a machine you first had to build the machine. Their attorney sent them to Jim Levy, a man raising venture capital to get into home-computer software, and Levy raised roughly $1 million from Sutter Hill Ventures, with litigation costs built into the budget because everyone knew Atari would sue. Atari did, and it lost the war that mattered: the 1982 settlement had Activision paying royalties but made the third-party model legitimate. The company was incorporated on October 1, 1979, first as Computer Arts, Inc. Levy came up with the permanent name by joining active and television.
In Crane's garage they built a company organized around credit. Activision's boxes were brightly colored and carried a screenshot on the back. Every instruction manual gave at least a page to the person who had made the game. Through 1983, nearly every manual also told players how to photograph their high score off the television screen and mail it in. In return Activision sent an embroidered patch. In 1982 Crane released Pitfall!, which sold more than four million copies. By the June 1983 IPO, Activision had about sixty employees and an estimated $157 million in sales. "I doubt that there is an active [Atari 2600] owner," wrote Danny Goodman that spring, "who doesn't have at least one Activision cartridge in his library."
Then came imitators, companies founded with venture money that, in Crane's telling, hired programmers off the street and shipped whatever they produced. When the 1983 crash hit, warehouses of unsold cartridges went to retailers who sold them for $5 against Activision's $40. Quarterly revenue fell from $50 million to about $6 or $7 million. Headcount went from roughly 400 to 95. Miller and Whitehead left to found Accolade. In 1986 Levy bought Infocom, the text-adventure house behind Zork, because he loved its games and believed it was a kindred spirit. Six months after what staff called the "Infocom Wedding," the board replaced him with Bruce Davis, who had opposed the deal and tried to sue Infocom's former shareholders to recover the purchase price. Crane left in 1986.
In 1988 Activision renamed itself Mediagenic and went into business software. The new name sounded like a drug-company spinoff and had all the warmth of an invoice. A football game Mediagenic owed Sega came back so unfinished that Sega took it to Electronic Arts, which turned it into Joe Montana Football. Cyan, whose CD-ROM game The Manhole Mediagenic had distributed, cut ties and took its next project to Broderbund. That project was Myst. In May 1990 Mediagenic lost patent suits to Magnavox and took a $6 million penalty. In 1991 it lost $26.8 million on $28.8 million in revenue and owed more than $60 million.
So the company the towel designers built was gone, though their name was still sitting in it.
Eight out of a hundred and fifty
In December 1990 Kotick sold his stake in Leisure Concepts and, with Brian Kelly, a business partner who would stay at his side for the next three decades and eventually become his chairman, bought a quarter of Mediagenic. Davis would not sell, so they took the company in a hostile takeover. The investors included Steve Wynn, the man from the garage, now a passenger in his protégé's deal. In February 1991 Kotick became chief executive.
He was not buying a business. He was buying a word. By every account Kotick wanted Mediagenic for the Activision name and the memory of Pitfall!, and he meant to restore the brand's old glory. The price is one of those numbers that sounds wrong however you say it: roughly $500,000 in the encyclopedic record, $440,000 in the figure Becky Quick read aloud in 2019. Either way it was less than many Manhattan apartments, paid for the rights to the first company ever to make games for a console it did not own.
He fired nearly everyone. Of 150 employees, eight stayed. He moved the company to Los Angeles, reincorporated it, and wrote a bankruptcy reorganization plan that treated Mediagenic not as a failed enterprise but as a pile of assets: the Infocom library, the internal tools for making games, a distribution network, licenses to develop for Nintendo and Sega. Then he made the move that would become his signature. He paid creditors with ownership. Distributors took stock in the company they supplied, which gave them a reason to want it to live. He persuaded Philips Electronics, the parent of Magnavox and therefore the holder of Mediagenic's patent judgment, to convert that legal debt into equity. The adversary became a shareholder, and the judgment became a bet on the turnaround.
He mined the back catalog. Old console and Infocom titles came back as PC compilations, product that cost almost nothing to make and found buyers among people who remembered. He saw that Zork still had value and ordered a sequel. Return to Zork came out in 1993, sold more than 600,000 copies and cleared more than $2.3 million in profit. By the end of 1992 Mediagenic had met the terms of its bankruptcy plan, and Kotick changed the name back. In October 1993 the new Activision went public, raised about $40 million, and listed on NASDAQ under the ticker ATVI.
Then he made promises, and the way he made them deserves attention. The first: four years of 50 percent revenue growth while staying at break-even. Growth without profit, explicitly, at a time when investors were not used to being told that. He delivered by 1995. Only then did he make the second promise, which was to develop high-demand games and turn the company profitable by 1997. It was a two-stage commitment, each stage something an investor could check, and the second offered only after the first was paid in full. The young man who had been unable to persuade Steve Wynn to sign a contract had become very good at writing the kind of contract a market can read.
Kotick has never been coy about the ruthlessness of the 1991 cuts, and he has never presented them as a moral question. In his account they were the price of survival. Twelve years earlier, the company's founders had walked out of Atari over the principle that the people who make the games are the asset. Their successor saved the company by keeping eight of them.
The defectors' bank
Kotick studied his competitors, Electronic Arts most closely, and concluded that publishers fighting their own studios over creative control were wasting energy. In the early Activision years he pushed a philosophy of autonomy: buy the studio, leave it alone, collect the results. With profit arriving in 1997, he started shopping, steered by market surveys about which genres to pursue. Over the next eleven years Activision made about twenty-five acquisitions. Several came during the dot-com bubble, when capital was chasing websites and game studios were cheap.
The pattern was a publishing deal first, then a purchase once the studio had proved itself. Raven Software, in Madison, Wisconsin, was founded by brothers Brian and Steve Raffel, who built the Heretic series on id Software's Doom engine and wanted a parent company. Activision signed a publishing deal in 1997 and bought Raven by year's end for $12 million, which also brought it close to id itself. Neversoft first got a contract to rescue Apocalypse, a game Activision had failed to finish internally. Then it was asked for a skateboarding prototype that became Tony Hawk's Pro Skater, and Activision bought the studio in 2000. Eight games later the series had brought in $1.6 billion. Treyarch, a Santa Monica shop founded in 1996, helped on Tony Hawk and Spider-Man and was bought in 2001 for about $20 million. Gray Matter, formerly Xatrix, made Return to Castle Wolfenstein under id's supervision and was absorbed in 2002 for about $3.2 million.
Then Kotick placed the most consequential bet of his career, and he placed it with his own money. In 2002 Electronic Arts released Medal of Honor: Allied Assault. Several of the developers behind it, unhappy with their contracts, left to start their own studio and planned to make a game much like the one they had just made for EA. Kotick personally gave them startup funding. The studio was called Infinity Ward. Activision bought it in 2003 for $5 million, and its first game was Call of Duty.
It is hard to exaggerate what that $5 million became. By 2016 Call of Duty had sold more than 250 million units and brought in more than $12 billion. By April 2021 unit sales had passed 400 million. In 2009 Modern Warfare 2 took in $310 million on its first day. In 2010 Black Ops took $360 million. In 2011 Modern Warfare 3 grossed $400 million in the United States and Britain within twenty-four hours, the biggest launch in the history of entertainment. Retail sell-in for Call of Duty: Ghosts passed $1 billion on its first day in November 2013. Treyarch, bought to help with skateboarding and Spider-Man, became one of the franchise's two main developers, alternating years with Infinity Ward. Gray Matter was merged into Treyarch for Call of Duty 3. Over time nearly every studio Kotick bought was folded into the series. By April 2021 every internal Activision studio was working on some part of it.
Infinity Ward's founding shows Kotick's method in compressed form. Atari's best programmers had walked out over credit and pay, and the company Kotick later rebuilt began with their defection. Two decades on, Kotick paid for a defection himself, aimed at Electronic Arts, the rival he had studied most carefully. A man who rarely, if ever, plays video games found the people who made them at the exact moment they were most aggrieved and offered them a way out.
Guitar Hero came next. Around 2005 a small company called RedOctane was building plastic guitar controllers for a game Harmonix was writing, based on the arcade game GuitarFreaks. By 2006 Tony Hawk was fading, so in June Activision paid nearly $100 million for RedOctane. The series went on to earn more than $2 billion. In February 2010, when sales slowed, RedOctane was among the first studios Activision shut down, on the same day as Luxoflux and Underground Development.
Kotick's understanding of what he owned did not change. In 2019 he described a franchise as something "durable in perpetuity," closer to baseball than to a movie: the rules might shift a little each year, but the construct stays. Unleash your inner rock star, or unleash your inner soldier, or unleash your inner wizard. The studios were roster spots. The franchise was the league.
Forbes, profiling him in January 2009 under the headline "Activision's Unlikely Hero," credited him with an "unmatched eye for spotting hits" and noted that he was "confident in his ability to understand his customers, whether or not he shared any of their passion for his products." That last clause matters. It describes a man who could see exactly what other people loved without needing to love it himself.
Admire your focus
By 2006 Kotick had studios, franchises and a stock market that loved him. He did not have a massively multiplayer online game, and he could see that the subscription economics of that genre, recurring revenue every month instead of one sale per box, beat anything he owned. No Activision studio had an MMO or could build one fast.
One company had the best of them. Blizzard Entertainment, in Irvine, California, made World of Warcraft, which by then was bringing in about $1.1 billion a year in subscription fees. Blizzard belonged to Vivendi Games, the struggling games division of a French conglomerate.
Blizzard's founders are worth a moment, because their story runs almost exactly opposite to Kotick's. In February 1991, the same month Kotick took over Mediagenic, three UCLA graduates named Michael Morhaime, Allen Adham and Frank Pearce started a company they called Silicon & Synapse. Each put in about $10,000. Morhaime borrowed his share, interest-free, from his grandmother. Their name was a little too clever (outsiders kept confusing silicon with silicone), so they became Chaos Studios, then, after a Florida company asked $100,000 for the rights to "Chaos," Ogre Studios, a name their new owner rejected. Adham finally opened a dictionary at the beginning and went through it, sending interesting words to the legal department until one came back clean. The word was blizzard. Kotick's money came from a casino magnate in a parking garage. Morhaime's came from his grandmother. Kotick bought a famous name. Blizzard's founders found theirs in alphabetical order.
Blizzard also made a habit of refusing deadlines. "It'll be ready when it's ready," its people said, starting when they delayed Diablo to protect its quality, and it became an informal motto. On the company's new Irvine campus, on a street the city named 1 Blizzard Way, there stood a twelve-foot bronze orc riding a wolf, ringed by plaques bearing the company's eight values. Gameplay First. Commit to Quality. Play Nice; Play Fair. Every Voice Matters.
Kotick called Jean-Bernard Lévy, Vivendi's new chief executive. Lévy understood immediately what Kotick wanted and named his price: a merger, on the condition that Vivendi hold the majority of the combined company. Kotick would lose control. Friends and investors say he agonized over it. He went to see Morhaime, who told him Blizzard was making real headway in China. That decided it. Activision's board agreed in December 2007, and the deal closed on July 9, 2008, at an estimated value of $18.9 billion, more than Electronic Arts' $14.1 billion. Vivendi held about 52 percent on a fully diluted basis. Kotick became chief executive of Activision Blizzard. The name of the studio he coveted now sat in the corporate name next to the one he had bought for half a million dollars.
The merger also shows what Kotick's focus meant in practice. Blizzard kept its autonomy. The rest of Vivendi Games did not. Sierra, an old and storied label, was shut down. Kotick told the press that Sierra products that did not meet Activision's requirements "won't likely be retained," and several finished or nearly finished games, Ghostbusters, Brütal Legend, The Chronicles of Riddick: Assault on Dark Athena, were dropped and later released by other publishers. Crash Bandicoot and Spyro, which had obvious sequel potential, stayed. Spyro went to Toys for Bob, which turned him into Skylanders in 2011 and, as the press put it, invented a toys-to-life category.
Kotick likes to tell what happened at his first Vivendi board meeting, and he told it in 2019 as a punchline:
The chairman, whom Kotick remembers as "Jean-René" (the merger's filings name René Penisson), asked him to explain to the French directors how he had kept Activision growing for so long when so many game companies had failed.
— Bobby Kotick, recounting his first Vivendi board meeting, CNBC Evolve, November 19, 2019We are ruthless prioritizers of opportunity; we don't get distracted; we know what our business is; we find the best talent, and we make sure that we keep our talent focused and not distracted; and we really do a great job of prioritization.
He left the room. Through the door he heard the chairman telling the directors, in a heavy French accent: This Bobby Kotick, he's going to fuck us, he's going to fuck us, he's going to fuck us. Shaken, Kotick pulled him aside afterward and said how disappointing it was to be thought of that way at the first meeting. The chairman laughed. No, Bobby. What I was telling them is: we admire your focus. Admire your focus.
The audience in Los Angeles roared. It is a good joke, and like most good jokes it holds a fact that its teller may or may not have meant to include. The same sentence lands two ways depending on who hears it. Investors heard admire your focus. Over the next fifteen years a growing number of the people who made and played Kotick's games heard the other phrase.
Taking the fun out
He had a talent for being quoted.
On an investor call in November 2008, a few months after the merger, Kotick said Activision wanted only games that "have the potential to be exploited every year across every platform with clear sequel potential, that can meet our objectives of over time becoming $100 million plus franchises." Ars Technica's headline summarized it: if we can't run a game into the ground, we don't want it. The following September, at the Deutsche Bank Securities Technology Conference, he said this:
— Bobby Kotick, Deutsche Bank Securities Technology Conference, September 2009The goal that I had in bringing a lot of the packaged goods folks into Activision about 10 years ago was to take all the fun out of making video games.
He later said the comment was aimed at investors and had been taken out of context. In 2019 he told the CNBC audience it had been a joke at a conference, in answer to a question about why he hired so many Procter & Gamble executives. "Of course I didn't mean it. I was laughing, and everyone laughed at the joke. Not that many people did hear, but, you know, the vocal minority of people took it out of context, and that's what caused the demonization." The retelling had softened it. Packaged goods folks had become a specific company, and a remark made to investors had become a joke few people heard. The sentence itself never changed. People kept quoting it.
In 2010 he said plainly that he cared about profit margins more than revenue growth. Sixty-five percent of Activision Blizzard's profit already came from games played online, and he named subscriptions, microtransactions, free-to-play and digital distribution as the future. In July 2009 he threatened to stop making games for the PlayStation 3 unless Sony cut the console's price. He lobbied the British government for tax incentives like those offered by Canada, Singapore and Eastern Europe. He used scale as leverage, plainly and without apology.
Studio founders learned what the leverage meant. In early 2010 Activision fired Vince Zampella and Jason West, the two founders of Infinity Ward, the studio Kotick had personally funded and that had made Call of Duty, citing "breaches of contract and insubordination." They sued over unpaid royalties on Modern Warfare 2. Activision countersued and called them "self-serving schemers." A group of current and former Infinity Ward employees filed their own royalty claim. Zampella and West founded Respawn Entertainment with help from Electronic Arts, the rival whose talent Kotick had once poached, and took much of their old team with them. Everything was settled for undisclosed amounts by May 2012. The founders who had defected to Kotick defected away from him back to EA, and Activision handed its biggest franchise to Sledgehammer Games, a studio set up in 2009 to make a spinoff, which now helped build Modern Warfare 3.
On a December 2012 front page, The New York Times put the paradox in one sentence that has followed him ever since:
— Amy Chozick, The New York Times, December 15, 2012The disdain heaped on Mr. Kotick in video game blogs is second only to the admiration for him on Wall Street.
Kotaku, writing about an interview with him in 2010, called him "the most hated man in video games." Edited photos of him with devil horns circulated online, and he joked that they had hurt his dating life. PC Gamer would later describe him as many players' "quintessential corporate villain—the go-to name if [gamers] want to talk about soulless profit seeking at the expense of artistry and human wellbeing." He became a byword before he became a scandal, and the gap between the two reputations tells you something about how people judged him for a long time. His critics were complaining about taste and values. His shareholders were looking at returns, which were excellent.
The year before the Times piece he had made a cameo in Moneyball, a film about a baseball executive who builds a winning team by valuing players as statistics instead of the way scouts admire them. Kotick played Stephen Schott, the Oakland Athletics co-owner who signs the checks. He did not play the scout or the general manager. He played the owner.
Other parts of his life showed up in the record as well. In 2007 a flight attendant sued Kotick, a partner named Andrew Gordon, and Cove Management, the company they had set up to run their privately owned Gulfstream III. She alleged that a pilot Cove had hired harassed her and that she was fired after reporting it. Cove denied it and settled. Kotick then sued the law firm that had represented him over its fees and lost, and the court awarded the firm damages. He married Nina Spiegel. They had three daughters, Grace, Emily and Audrey, and divorced in late 2012. Records later reported by several outlets show that in 2014 a former girlfriend obtained a temporary restraining order against him after alleging that he harassed her at her home. In April 2022 the Wall Street Journal reported that Sheryl Sandberg, whom Kotick dated from 2016 to 2019, had pressed the Daily Mail to drop its reporting on that order.
The numbers kept rising. In July 2013 Activision Blizzard bought 429 million of its own shares from Vivendi for $5.83 billion, and a group in which Kotick and Kelly were central kept a 24.4 percent stake, which ended French control. Kelly became chairman. The company that had taken control from Kotick in 2008 had sold it back five years later. Activision Blizzard joined the S&P 500 on August 28, 2015. That November it bought King, maker of Candy Crush Saga, for $5.9 billion. In January 2016 it paid $46 million for Major League Gaming, most of the money going to the seller's debts. Then came the Overwatch League, with team owners from traditional sports including Robert Kraft of the New England Patriots, and an inaugural Grand Final at the Barclays Center in July 2018 that drew 10.8 million viewers. In June 2017 Activision Blizzard entered the Fortune 500, only the third game company ever to do so. Fortune reported that Kotick had become the longest-serving head of any publicly traded technology company. From 2015 through 2018 the company appeared on the magazine's list of the 100 Best Companies to Work For.
In November 2016 he signed a contract that paid bonuses for hitting targets tied to mergers and acquisitions. When a 180 percent increase in the share price since March 2016 triggered one of those incentives, the expected award of about $200 million was cut to a package of $155 million after criticism. Shareholders approved it in June 2021. His 2018 compensation was $31 million, 85 percent in stock and options, 319 times what the average employee earned. The nonprofit As You Sow ranked him the forty-fifth most overpaid chief executive in America.
The Eye of Sauron
Blizzard staff had a name for the parent company. They called Activision the Eye of Sauron, after the lidless eye in Tolkien that sees everything and wears down everything it looks at. The nickname is more than a joke from people who know their fantasy novels. It describes how Blizzard thought of the place power came from: distant, always watching, interested in Irvine only for what Irvine could produce.
For five years after the merger the Eye mostly looked elsewhere. Blizzard released StarCraft II, Diablo III and Hearthstone, a collectible card game that grew out of a small internal team copying the indie development approach and reached more than 100 million players by 2018. Blizzard also spent seven years on Titan, an ambitious next-generation MMO with more than 100 people on it, and in May 2013 it cancelled the project internally. About forty people led by Jeff Kaplan were given a few weeks to come up with something new or be reassigned. They reused Titan's assets to build Overwatch, which became Blizzard's fourth major franchise.
After Titan, Kotick reduced Blizzard's independence. He pushed the studio to get more revenue out of its franchises, and that set him against Morhaime, Blizzard's co-founder and the man whose advice on China had sealed the merger. Their disagreement was the old one between Kotick and the people who made games: Morhaime wanted room to experiment, Kotick wanted profit. Jason Schreier's Play Nice: The Rise, Fall and Future of Blizzard Entertainment recounts the conflict in detail. Morhaime thought about resigning in 2017 and Kotick talked him out of it. On October 3, 2018, Morhaime announced he was stepping down. People close to him said he was tired of fighting Kotick. He left for good on April 7, 2019, and later founded a studio called Dreamhaven, part of a group of companies founded by former Blizzard employees that came to be called "Blizzard 2.0."
In February 2019, on the earnings call for a year of record revenue, Kotick announced about 775 layoffs, roughly 8 percent of the company, much of it at Blizzard, where headcount had grown for years. The company would be "de-prioritizing initiatives that are not meeting expectations." Two Blizzard projects, a mobile card game code-named Orion and a StarCraft shooter code-named Ares, were cancelled. That same quarter Activision ended its distribution deal for Destiny 2 with Bungie, the studio it had signed to a ten-year publishing agreement in 2010, and booked $164 million from the handover. Over the following year, Bloomberg's Schreier reported, Activision's indifference to remasters led to budget cuts for Warcraft III: Reforged. The game launched badly, and Blizzard's Classic Games team was disbanded around August 2020.
The Hearthstone tournament ban of a Hong Kong player in October 2019, the poorly received games, the departure of a co-founder: by 2021 PC Gamer was running a piece called "How Blizzard's reputation collapsed in just 3 years." It was published at the end of July 2021, a few days after the state of California filed its lawsuit.
Who wrote the letter
On July 20, 2021, after a two-year investigation, California's Department of Fair Employment and Housing sued Activision Blizzard in Los Angeles Superior Court. The complaint described a "frat boy" culture in which women were paid less and promoted less often than men and were routinely harassed. It described "cube crawls," in which male employees drank heavily and went from cubicle to cubicle making advances. It described a hotel suite at BlizzCon 2013 that colleagues called the "Cosby suite." It described a human resources function that failed to keep complaints confidential, so people who reported harassment faced retaliation. The company's workforce was 80 percent male. Kotick was not named. The suit focused mainly on Blizzard, where, as Schreier reported, top developers had been treated like rock stars and were nearly untouchable.
The company answered the next day. It called the allegations distorted and false and called the agency's staff "unaccountable state bureaucrats." On July 23 Frances Townsend, a senior Activision executive and the executive sponsor of the company's women's network, sent an internal email calling the lawsuit "truly meritless and irresponsible" and describing a "distorted and untrue picture of our company, including factually incorrect, old, and out of context stories – some from more than a decade ago." Employees were furious. More than 2,600 of the company's roughly 9,500 workers signed an open letter, and Townsend stepped down as sponsor of the women's network. On the eve of a walkout scheduled for July 28, Kotick wrote to the entire company that its first response had been "quite frankly tone deaf." He promised to bring in the law firm WilmerHale. Employees noted that the firm was known for anti-union work and walked out anyway. On August 3 Blizzard's president, J. Allen Brack, resigned and the head of HR was gone. On an investor call that day Kotick said, "We will be the company that sets the example for this in our industry."
On September 27 the federal EEOC sued and settled on the same day, with an $18 million fund that the Communications Workers of America called "mere pennies." The SEC had subpoenaed executives, including Kotick, the week before. In late October Kotick acknowledged that "the guardrails weren't in place everywhere," ended forced arbitration for harassment claims, and asked the board to cut his salary to the minimum California law allowed and to give him no bonuses until the problems were fixed.
Then, on November 16, 2021, the Wall Street Journal published an investigation by Kirsten Grind, Ben Fritz and Sarah E. Needleman. It reported that Kotick had known for years about sexual-misconduct allegations and had not always told the board. It reported that a female employee of Sledgehammer Games said a supervisor raped her after work events in 2016 and 2017, that the company settled with her, and that Kotick did not tell the board about either the incident or the settlement. It reported that Kotick overruled HR's recommendation to fire Dan Bunting, a co-founder of Treyarch, after a 2017 investigation, and that Bunting left only after the Journal began asking questions. It reported that in 2006 Kotick left a voicemail for an assistant threatening to have her killed. The company did not deny the voicemail. It said Kotick had "quickly apologized ... for the obviously hyperbolic and inappropriate voice mail," and that matter had been settled out of court.
And it reported one more detail, small enough to miss and more revealing than almost anything else. The July 23 email that went out under Fran Townsend's name and turned a lawsuit into an employee uprising had been written by Kotick. He had told her to send it. "Ms. Townsend should not be blamed for this mistake," his representative said.
So the most inflammatory document of the crisis had come from the chief executive and been delivered in a female executive's name. The young man who sold software to make computers friendlier, and who said in 2019 that he thought of himself as "a creative person who has entrepreneurial DNA," had put his own words under someone else's name.
Kotick told employees the article "paints an inaccurate and misleading view of our company, of me personally, and my leadership." The board said it "remains confident in Bobby Kotick's leadership, commitment and ability to achieve these goals." About 150 employees walked out that day. Within days more than 1,000 had signed a petition saying they "no longer have confidence in the leadership of Bobby Kotick." Shareholders led by SOC Investment Group demanded his resignation, as did treasurers from six states. Jim Ryan of PlayStation said Activision's response did not "properly address the situation." Doug Bowser of Nintendo called the accounts "distressing and disturbing." Phil Spencer, head of Xbox, wrote to his staff that he was "disturbed and deeply troubled" and that Microsoft was "evaluating all aspects of our relationship with Activision Blizzard."
Jen Oneal, who had run Vicarious Visions and then became the first woman to co-lead Blizzard, left that month. She later said she had been "tokenized, marginalized, and discriminated against," and that she had been paid less than her co-lead, Mike Ybarra, until she resigned. Morhaime posted an apology to the women of Blizzard: "I am extremely sorry that I failed you." Chris Metzen, a longtime creative executive, wrote: "We failed, and I'm sorry." Blizzard renamed Overwatch's gunslinger, Jesse McCree, who had been named after a developer who was no longer at the company. While a new name was chosen, Overwatch League commentators avoided the old one and called him "the cowboy." He became Cole Cassidy, and Blizzard said it would no longer name characters after employees.
Some of the people who had made the games now could not be named in them.
Kotick has told at least two versions of how the sale began.
In the version he gave VentureBeat's Dean Takahashi on the day it was announced, he, Phil Spencer and Satya Nadella had spent 2021 talking about the power of Tencent, NetEase, Apple and Google, and about Activision Blizzard's lack of machine-learning and data-analytics capability. Microsoft had both, so the logic was obvious. In the version he gave in 2025, the conversation started in 2020 with TikTok. Microsoft was trying to buy it from ByteDance. Kotick knew ByteDance's founder, Zhang Yiming, and found that Zhang would prefer Activision as a buyer to Microsoft. Activision could not outbid Microsoft, so Kotick suggested to Nadella that they own TikTok together. The idea of Microsoft buying Activision came up then for the first time. The TikTok deal never happened. The other idea survived.
Securities filings tell a version more tightly tied to dates. Microsoft came back to Activision Blizzard within days of the November 2021 Journal story, after the stock fell. The Journal and Bloomberg both reported that the board had been weighing other buyers, Meta among them, because recent releases had disappointed and others had slipped, and that after the story the board grew worried about Kotick's leadership and quickly accepted Microsoft's offer, while Kotick himself hesitated. Bloomberg described the deal as a graceful exit for him. Proxy filings put his payout at roughly $252.2 million to $292.9 million under most scenarios.
On January 18, 2022, Microsoft announced it would buy Activision Blizzard for $68.7 billion in cash, about $95 a share. The stock jumped nearly 40 percent in premarket trading. It was the largest acquisition in the history of video games. When Kotick explained the company's weakened position, he cited delays to Overwatch 2 and Diablo IV, the poor reception of Call of Duty: Vanguard, and the lawsuit. One engineer said he was "throwing game devs under the bus rather than taking responsibility for the culture he helped to foster." The New York City Employees' Retirement System sued, arguing the board had rushed the sale to bury the CEO's problems. A Swedish state pension fund made similar claims. The SEC looked at whether investors close to Kotick had traded ahead of the announcement, and the Journal reported that the inquiry covered trades by Barry Diller and David Geffen. In April 2022 shareholders approved the deal almost unanimously.
Then came twenty-one months of regulators. The FTC sued to block the deal on December 8, 2022. Britain's Competition and Markets Authority blocked it on April 26, 2023. The European Commission approved it on May 15, 2023, after Microsoft signed ten-year agreements to put Call of Duty on Nintendo and on Nvidia's cloud service. Microsoft told a court the process had become a "three-year administrative nightmare." On July 11, 2023, Judge Jacqueline Scott Corley refused the FTC's request for a preliminary injunction and wrote that "the record evidence points to more consumer access to Call of Duty and other Activision content." Sony signed on July 16. In August Microsoft agreed to sell the cloud-streaming rights to Activision Blizzard's games to Ubisoft for fifteen years, and on October 13, 2023, the British regulator approved the restructured deal. Microsoft closed the same day. The final cost was $75.4 billion.
Throughout, the regulators argued mostly about one thing: whether Microsoft might lock Call of Duty away from PlayStation. The franchise Kotick had started with $5 million of his own money, for a group of developers leaving Electronic Arts, had become the issue on which an antitrust case involving one of the largest companies in the world turned.
In June 2022 the board had filed with the SEC a summary of an outside review led by Gilbert F. Casellas, a former chair of the EEOC. It found "no widespread harassment, pattern or practice of harassment, or systemic harassment" at the company between September 2016 and the end of 2021, and expressed confidence that Kotick had "appropriately addressed workplace issues brought to his attention." In February 2023 the company paid the SEC $35 million to settle charges that it had lacked controls to collect and analyze employee complaints. When the deal closed in October 2023, Kotick said he would stay through the end of the year to help with the transition. He did.
The Pen Factory
On December 15, 2023, Activision Blizzard and California's Civil Rights Department, the renamed DFEH, settled for $54 million. Of that, $47 million was to address pay and promotion inequities for women. The language mattered more than the money, and Kotick's side made sure of it. In January 2024 the department filed an amendment withdrawing its harassment claims and stated: "No court or any independent investigation has substantiated any allegations that: there has been systemic or widespread sexual harassment at Activision Blizzard; ... or that Activision Blizzard's Board of Directors, including its Chief Executive Officer, Robert Kotick, acted improperly with regard to the handling of any instances of workplace misconduct."
Kotick retired on December 29, 2023, after thirty-two years.
With the settlement in hand, he went after the press. Several outlets issued corrections and redactions about the company, its board and its executives after receiving legal threats from him. In March 2025 he sued G/O Media, then the parent of Gizmodo and Kotaku, for defamation. The Wall Street Journal's November 2021 investigation, which started the endgame, has not been corrected or retracted. Two written records now exist side by side, each signed, each standing. You can read either and find support for your view. The record does not settle it, and I won't pretend it does.
In February 2026, documents released from the Jeffrey Epstein files showed that Kotick and Epstein had exchanged emails in 2012 and 2013 and had at one point planned to meet. There is no evidence they did. "Epstein and Mr. Kotick were not friends or colleagues ever," his representative said, adding that had Kotick known of Epstein's crimes, "he never would have engaged with him in any way."
The company kept changing after he left. On January 25, 2024, Microsoft laid off 1,900 people across its gaming division. Blizzard's president, Mike Ybarra, and Allen Adham, a co-founder who had come back as chief design officer, both left. A Blizzard survival game nearly six years in development was cancelled. Johanna Faries, who had run Call of Duty, became president of Blizzard, an unusual appointment for a studio whose leaders had always come up through game development or technology. On March 8, 2024, about 600 quality-assurance testers at Activision studios in Texas, Minnesota and California voted 390 to 8 to form the largest union in the American game industry, and Microsoft recognized it voluntarily. Months later, 500 people who worked on World of Warcraft unionized. Union drives followed among the Overwatch developers and then 450 people working on Diablo. Toys for Bob, which had turned Spyro into Skylanders, went independent. In October 2025, after Microsoft raised Game Pass prices by up to 50 percent, the former FTC chair Lina Khan said the acquisition had been followed by "significant price hikes and layoffs," and that dominant firms can become "too-big-to-care."
Kotick remains on the board of the Call of Duty Endowment, which he co-founded in 2009 and which by 2018 had helped place more than 50,000 veterans in jobs. He tried, in 2022 and again in 2024 according to reports, to put together investors to buy TikTok's American business, the deal that, by his own account, led to the Microsoft sale. He is still a dealmaker.
The Pitfall! manuals still turn up in collectors' boxes, with a full page crediting David Crane and instructions for photographing your high score off the television and mailing it to Activision for a patch.
In 2021, while everyone was working from home and the lawsuit was spreading, Activision Blizzard let its long-time Santa Monica headquarters go and ended its lease with Boston Properties. That September, the company that had filled a tower subleased much smaller offices from Kite Pharma, at a complex in Santa Monica called the Pen Factory. The building had once been a Paper Mate factory.
Part IIThe Playbook
The principles below come from the record in Part I. Some are what Kotick did well, in some cases better than anyone else in his industry for three decades. Others are lessons in what his methods cost. That is deliberate. Kotick's playbook produced extraordinary returns, and the same techniques, used without limits, also produced the crisis that ended his tenure. An operator should study both.
The principles
- 1.Buy the name, not the business.
- 2.Turn creditors and adversaries into owners.
- 3.Promise in sequence, never in bulk.
- 4.Fund the defection at its peak.
- 5.Buy proven work, not promises.
- 6.Treat franchises as leagues, not releases.
- 7.Give up control to buy recurring revenue, then buy control back.
- 8.Prioritize ruthlessly, and know what pruning costs.
- 9.Relationships are capital.
- 10.Autonomy is a strategy only while you protect it.
- 11.Everyone hears what you say to investors.
- 12.Sell to the buyer who has what you can't build.
Principle 1
Buy the name, not the business
In 1991 Mediagenic was a bad business. It lost $26.8 million on $28.8 million of revenue and owed more than $60 million. Kotick did not buy it for its operations. He bought it for a name that still meant something to anyone who had owned an Atari 2600, the name behind Pitfall!, the company Danny Goodman said every console owner had in their library. He paid roughly half a million dollars and immediately threw out nearly everything except the name and the assets underneath it.
Most acquirers price targets on cash flow. Kotick priced Mediagenic on what the brand would be worth once it was separated from management that had already wrecked it. The "Mediagenic" name itself was a symptom: a company that had stopped believing in its own identity. Changing it back to Activision by the end of 1992 was more than a branding exercise. It was the thesis of the deal.
The same logic showed up later. He wanted the Vivendi merger for World of Warcraft, and in the merged company's name, "Blizzard" took its place beside "Activision."
Tactic: When you look at a distressed company, value the brand and the intellectual property apart from the operations, and ask what they would be worth with no headcount attached.
Principle 2
Turn creditors and adversaries into owners
The cleverest move in the 1991 restructuring was not the layoffs. It was the cap table. Kotick paid distributors in stock, so the companies that put Activision's products on shelves now owned part of the company. He then persuaded Philips, whose subsidiary Magnavox had won the patent judgment against Mediagenic, to convert that judgment into equity. The company's chief legal adversary became an investor in its recovery.
This changes how a creditor behaves. A creditor holding a judgment wants to be paid and has little reason to care whether the company survives. A creditor holding equity needs it to survive. Kotick turned people who might have pushed Mediagenic into liquidation into people who wanted it to win.
The same thinking appears in the 2008 merger, where Vivendi, the counterparty, became the majority shareholder, and in the 2013 buyback, which ended that arrangement on Kotick's terms.
Tactic: In a restructuring, list every creditor and adversary and ask which of them could be offered equity in exchange for a stake in the upside, then lead the negotiation with that offer.
Principle 3
Promise in sequence, never in bulk
After the 1993 IPO, Kotick did not promise investors a growing, profitable company. He made the first promise, four years of 50 percent revenue growth while staying at break-even, and only after he had kept it did he make the second, profitability by 1997.
That sequence did several things. Investors had a clear test for each stage. It explicitly permitted a period of growth without profit, which most public-market investors of the time would not have tolerated if it had been left vague. And when he kept the first promise in 1995, he had credibility to spend on the second. A promise you have kept is worth more than a bigger one you have only made.
His later compensation contracts followed the same pattern. The 2016 deal tied bonuses to specific M&A and share-price targets. They could be measured, which also meant they could be criticized, and they were.
K
The Kotick Sequence
How the major commitments and deals followed one another, each funded by the one before.
1991
Hostile takeover of Mediagenic for roughly $440K–$500K; 142 of 150 employees let go.
1992
Bankruptcy plan completed; name changed back to Activision.
1993
IPO raises about $40M. Promise one: 50% annual revenue growth at break-even.
1995
Promise one kept. Promise two: profitability by 1997.
1997
Profitable. Raven bought for $12M; roughly 25 acquisitions follow over eleven years.
2003
Infinity Ward bought for $5M; Call of Duty launches.
2008
Vivendi merger; control given up for World of Warcraft.
2013
$5.83B buyback of Vivendi's shares; control regained.
2015
King bought for $5.9B; mobile becomes core.
2023
Sold to Microsoft; final cost $75.4B.
Tactic: Split big commitments into stages that can be checked, and make the next promise only after you have visibly kept the last one.
Principle 4
Fund the defection at its peak
Infinity Ward existed because a group of developers was unhappy with their contracts at Electronic Arts just after shipping Medal of Honor: Allied Assault. Kotick personally put up their startup money while they were free agents and before anyone else had priced them. Activision bought the studio for $5 million. Call of Duty went on to earn more than $12 billion by 2016.
Activision itself was founded on a defection. Four of Atari's top programmers left after being called "towel designers," and Kotick had bought what remained of their company. He understood better than most that the best time to acquire creative talent is right after it has been insulted by its current employer, and that grievance can be bought cheaply.
The principle cuts both ways, and the record shows it. When Activision fired Zampella and West in 2010, the same process ran in reverse: they went to EA, founded Respawn and took much of Infinity Ward with them. Disaffected talent is the cheapest asset you can buy and the easiest one to lose.
Tactic: Watch the best teams at your competitors for signs of a contract dispute or slight, and be ready with capital before that grievance becomes known.
Principle 5
Buy proven work, not promises
Kotick's studio acquisitions follow a consistent pattern: contract first, buy later. Raven had a publishing deal before it became a subsidiary. Neversoft rescued a troubled project and built a skateboarding prototype before Activision bought it. Gray Matter shipped Return to Castle Wolfenstein with Activision as its publisher and partial owner before Activision bought the rest. By the time he paid, he had seen the studio ship.
Timing helped. Several deals closed during the dot-com bubble, when capital was chasing web companies and game studios were cheap.
$
The Studio Ledger
Price paid versus what came of it. Not every bet held up.
| Studio | Year / Price | Outcome | Verdict |
|---|---|---|---|
| Raven Software | 1997 / $12M | Heretic; later Call of Duty support and Warzone | Compounded |
| Treyarch | 2001 / ~$20M | From Tony Hawk support to co-lead developer of Call of Duty | Compounded |
| Gray Matter | 2002 / ~$3.2M | Merged into Treyarch in 2005 for Call of Duty 3 | Absorbed |
| Infinity Ward | 2003 / $5M | Call of Duty: 250M+ units, $12B+ by 2016 | Generational |
| RedOctane | 2006 / ~$100M | Guitar Hero $2B+; studio closed February 2010 | Boom, then bust |
| King | 2015 / $5.9B | Candy Crush; mobile became central to the Microsoft rationale | Strategic |
Tactic: Treat a publishing or service contract as a paid trial, and buy only after the team has shipped something under your name.
Principle 6
Treat franchises as leagues, not releases
Kotick's 2008 line about games that could be "exploited every year across every platform" was a public-relations disaster, but it described his model accurately. By 2019 he had a better way to put it: a franchise is "durable in perpetuity," closer to baseball than to a film. The rules change slightly each year and the construct does not. Inner rock star. Inner soldier. Inner wizard.
The model shaped the company. Call of Duty rotated among Infinity Ward, Treyarch and later Sledgehammer on an annual schedule, with launch records falling three years running from 2009 to 2011. By April 2021 every internal Activision studio was working on the franchise. The Overwatch League borrowed traditional sports almost literally: city teams, owners from the NFL and MLB, finals at the Barclays Center.
The limits showed too. Guitar Hero peaked and collapsed within a few years. Kotick's critics argued that the annual cycle meant original work was turned down, and the 2008 investor call said much the same. A league needs new players, and new franchises come from the risks the model is built to avoid.
Tactic: Identify the fantasy your product fulfills, separate from any single release, and build a cadence of releases around that fantasy.
Principle 7
Give up control to buy recurring revenue, then buy control back
In 2006 Kotick wanted World of Warcraft and its $1.1 billion a year in subscriptions. Lévy's terms were that Vivendi would hold the majority, and Kotick, after a long period of indecision his friends described, accepted. He judged that recurring revenue and a way into China were worth more than control.
Five years later he got control back. The July 2013 buyback, 429 million shares for $5.83 billion, cut Vivendi's stake from 63 percent to 11.8 percent and left a group around Kotick and Kelly with 24.4 percent. The asset he had paid for in independence was now his to run.
This is unusual for a founder-type chief executive. Most treat control as non-negotiable. Kotick treated it as a currency he could spend and later earn back, provided the thing he bought was durable enough to fund the repurchase.
Tactic: Before rejecting a deal because it costs you control, work out whether the asset could generate enough cash to buy that control back, and how quickly.
Principle 8
Prioritize ruthlessly, and know what pruning costs
"We are ruthless prioritizers of opportunity; we don't get distracted." Kotick offered that as the secret of his success, and the record supports him. Eight of 150 employees kept in 1991. Sierra's releases cut after the 2008 merger. RedOctane, Luxoflux and Underground Development closed on a single day in February 2010. Budcat and Bizarre Creations closed within months. Destiny returned to Bungie. Around 775 jobs cut in February 2019 after record revenue. In 2010 he said profit margins mattered more to him than revenue growth.
The returns are clear in the numbers, and so are the costs, though they are harder to measure. Laying people off after record results taught employees that a good year did not protect their jobs. Squeezing Blizzard's budgets produced Warcraft III: Reforged. The ABK Workers Alliance, formed in August 2021, and the 600-person QA union in 2024 were in part responses to working lives in which pruning was frequent and seen as arbitrary. Pruning makes a portfolio more focused. It also tells the people who remain how secure they are.
⚖
Where the Playbook Diverged from Convention
Kotick's approach next to the conventional one, and how each move turned out.
| Conventional approach | Kotick's approach | Result |
|---|---|---|
| Rescue a distressed company with its staff intact | Keep 8 of 150 and keep the name | Worked |
| Never give up control | Give up 52% for WoW, buy it back in 2013 | Worked |
| Lay off only in a downturn | Lay off ~8% after record revenue | Lasting resentment |
| Give studios creative independence | Independence early; less of it at Blizzard after 2013 | Talent exodus |
| Say the same thing to every audience | Investor-facing candor ("take all the fun out") | Reputation cost |
| Build the capability you lack | Sell to the company that already has it | $75.4B exit |
Tactic: Before each cut, write down the second-order message it sends to the people who remain, and decide whether you are willing to pay for that message.
Principle 9
Relationships are capital
Kotick's career runs on relationships that pay off years later. He met Steve Wynn at a charity ball when he was nineteen, and Wynn funded Arktronics and later joined the Mediagenic takeover. Steve Jobs persuaded him to drop out. He described Warren Buffett as a longtime mentor. He sat on Yahoo's board from 2003 to 2008 and Coca-Cola's from 2012 to 2022. His acquaintance with Zhang Yiming, by his own account, led to a conversation with Satya Nadella about co-owning TikTok, and that conversation was where the idea of Microsoft buying Activision first came up.
Wynn's terms are useful here. The investment came with an obligation to do the same for a younger entrepreneur someday, which is what Perry Thomas had asked of Wynn. Kotick said he did: two people he mentored went on to run important parts of the company, one of whom started as his assistant. Relationship capital grows the way financial capital does, and it can also be lost the same way. In 2021 the network that included board members, platform holders and partners was also the network whose confidence he had to keep.
Tactic: Treat every senior relationship as a long-term position: put real attention into it early, expect nothing back quickly, and pass on the help you received.
Principle 10
Autonomy is a strategy only while you protect it
Early on, Kotick studied Electronic Arts and decided that conflict between publisher and developer wasted value, so his studios got independence. Blizzard kept its autonomy through the 2008 merger. After Titan was cancelled in 2013, he cut that autonomy back and pushed Blizzard to earn more from its franchises. Morhaime, the co-founder whose China insight had sealed the merger, left after years of conflict. Blizzard staff called the parent company the "Eye of Sauron."
The lesson goes beyond the obvious point that talent leaves when it is squeezed. Autonomy, once granted, becomes part of what the acquired company is worth. Blizzard's "it'll be ready when it's ready" was not a quirk. It was the reason for the quality that made World of Warcraft worth giving up control of Activision. Reducing that autonomy changed what had been bought, and the "Blizzard 2.0" diaspora of former employees founding their own studios shows where the value went.
Tactic: If you give an acquired company independence, write down exactly what that independence protects, and assume that taking it away will reduce the value you paid for.
Principle 11
Everyone hears what you say to investors
"Exploited every year across every platform." "Take all the fun out of making video games." Both were said to investors and were, in context, honest descriptions of strategy. Both reached players, and over the next fifteen years they became Kotick's reputation: the "most hated man in video games," the edited photos with devil horns.
The Vivendi board story fits this as well. The same phrase reached one audience as admire your focus and another as something much harsher. In a company whose products depend on how much players and developers care, the CEO's investor-facing candor carries a cost. By 2019 Kotick was retelling the 2009 remark as a joke to a Procter & Gamble question that few people heard, which suggests he understood that. The July 2021 email he wrote and Townsend sent was the extreme case: a message written in the language of legal defense, sent to employees who read it as dismissal.
Tactic: Before any investor call, read your prepared remarks as if your most skeptical employee and your most devoted customer were listening, because eventually they will be.
Principle 12
Sell to the buyer who has what you can't build
Kotick's stated reasons for the Microsoft sale were strategic: competition from Tencent, NetEase, Apple and Google, and Activision Blizzard's lack of machine-learning and data-analytics capability that it could not build quickly. Phil Spencer said publicly that mobile was Microsoft's main interest, with about 200 million console players worldwide against more than 3 billion mobile users. King's Candy Crush, bought for $5.9 billion in 2015, turned out to be one of the most important parts of the sale.
The reporting adds another reason. The board sold partly because of the crisis around its CEO. Microsoft came back within days of the Journal story, and the deal gave Kotick a graceful exit, with a payout estimated at up to $292.9 million. Even so, the price, about $95 a share, set a lasting value on what he had built from a half-million-dollar purchase. The timing reflected a weak position. The price reflected thirty years of work.
Tactic: When you need a capability you can't build fast enough, look at selling to the buyer who already has it, and get the deal done before your own weaknesses become the main topic of negotiation.
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Part IIIQuotes and Maxims
In their words
— Bobby Kotick, CNBC Evolve, November 19, 2019So that's probably the best answer to how we've been successful over those 28 years is the maniacal focus.
— Bobby Kotick, CNBC Evolve, November 19, 2019We think that you can't even consider a game a franchise unless it's durable in perpetuity.
— Bobby Kotick, CNBC Evolve, November 19, 2019I think of myself as a creative person who has entrepreneurial DNA. I think money making is easy.
— Bobby Kotick, on esports, CNBC Evolve, November 19, 2019Look at me. There are a billion of me. But I want that. I want the sense of belonging and purpose and meaning. I want to be part of a team.
— Bobby Kotick, October 2021The guardrails weren't in place everywhere to ensure that our values were being upheld.
Maxims
- Buy the name. A brand separated from the management that ruined it can be worth far more than the company that held it.
- Make adversaries shareholders. A creditor holding equity needs you to survive. A creditor holding a judgment does not.
- Promise in stages. Keep the first commitment before making the second, and let investors watch you do it.
- Fund the grievance. The best talent is cheapest right after a rival has slighted it, and just as easy to lose later.
- Buy what has already shipped. Use contracts as paid trials, and pay acquisition prices only for proven work.
- Build leagues, not hits. Franchises built around a lasting fantasy outlive any single release.
- Control can be bought back. Give it up for a durable asset only if that asset can later pay to regain it.
- Pruning sends a message. Every cut tells the people who stay something about their own security.
- Protect the autonomy you bought. Independence is often what you paid for. Remove it and you have changed the asset.
- Everyone is listening. Words aimed at investors reach employees and customers, and they usually hear them differently.
