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Activision Blizzard goes indie after CEO Kotick buys back the company (joystiq.com)
133 points by bdz on July 31, 2013 | hide | past | web | favorite | 86 comments

Not mentioned in this story: Chinese internet giant Tencent is part of the "investment group" Kotick has put together. Basically, the company is switching ownership from one conglomerate to a diffusion of others. I'd hardly call that "independent" in any sense of the word.

This story is less about independence, and more about allowing Vivendi to cash out on its 2007 merger of Activision and Blizzard. Basically, Vivendi transferred Blizzard to Activision in exchange for 52% of the combined entity (Activision Blizzard). While A-B has been doing well over the years, Vivendi has not fared as well. It wants some to capture some of the upside through the buyback.

The article says that Activision Blizzard is buying the majority (about two thirds) of the shares itself. And presumably Kotick and Kelly have some personal stake in the investment group getting the rest of the shares?

I don't know if this makes them "independent," but it doesn't seem to make them owned by a conglomeration of other parties either.

To clarify my previous comment...

The post-split cap table looks something like this (from what information has been made public at this point): Bobby Kotick & associates (including Brian Kelly and Tencent, among other unnamed parties) own 24.9%. Vivendi's share drops to 12%. A-B itself buys back the majority of shares. Technically speaking, yes, A-B becomes an independent company (in as much as the majority of outstanding shares are publicly owned).

My phrase "I'd hardly call that independent" was probably an overstatement worth correcting. My bad on that one. Because the word "independent" (and especially the derivative "indie") has a very industry-specific meaning in this case, I found the headline a bit misleading.

Also Bobby Kotick, who takes smug pride in the fact he doesn't even play games, is the last guy you want being your CEO.

See, I'd respectfully disagree with this. Based on [1], I'd say he's a man who knows his limitations in this area. He seems to know enough to stay away from trying to meddle with a game, and a CEO who knows enough not to meddle where he isn't good is a guy I'd trust (to some extent, anyways).

[1] http://kotaku.com/5559201/a-delightful-chat-with-the-most-ha...

His limitations are he's in the wrong business.

An effective CEO has at least a theoretical understanding of what the various employees in his company do, that while they may not know how to program they at least know what programming entails.

To not use the products your company produces is arrogance if not idiocy. How can you lead except by numbers in that situation?

Remember when the CEO of Motorola got their email printed out by their secretary? Ignorance like that reduced them from the dominant force in the industry to a pet of Google.

In fairness to Bobby Kotick, he took Activision from a small publisher filing for Chapter 11 to one of the biggest companies in the business -- and arguably, one of the companies largely responsible for the mainstreaming and explosive growth of the industry.

He may not be a gamer, and he may receive a lot of flak for his brazen "I just crank out IP; I'm not trying to make art" attitude. But as a CEO, it's hard to argue with his track record over the last 20+ years. As to whether he's qualified to lead Activision in the post-mobile world, well, that remains to be seen. Innovator's Dilemma.

I'm sure it was really hard to make money while milking Call of Duty, Guitar Hero, and the various Blizzard properties for all they're worth.

The biggest threat is that they'll run out of franchises to ruin.

He's been there since the early 1990s, and the first CoD, Guitar Hero, etc., properties came out under his watch. As to milking them as franchises -- hey, from a business standpoint, it's been printing insane amounts of cash. It's not creatively satisfying, and I'm not defending it as the height of entrepreneurial adventurism or innovation. But he found and perfected what became the definitive business model for the industry. Regardless of what you think of his practices, he's been successful.

What I mean by all this is it seems Bobby Kotick could hardly care if he's running a multi-national pizza franchise, a music label, or a construction conglomerate. He's just a numbers guy.

It's really hard to tell if someone like Kotick is running the business in a sustainable fashion, or if he's just beating all the value out of the company, getting in a good run, and then dumps the company in someone else's lap when it's exhausted.

It's a vital skill IMO- what CEO is going to be good at everything? They aren't gods.

You don't need to be good but, IMHO, you have to know WTF are you doing.

E.g. movie studios CEO might suck at writing, acting and never know which end of a camera shoots but, unlike their game industry colleagues, the do watch movies.

Steve Ballmer might be an awful coder and would not know how reinstall Windows from an OEM disk but, I have no doubt, he uses Windows and other MS products every day.

Elon Musk might not know how to change a tire or adjust wheel alignment, but he does drive cars.

The video game industry is really standing out with the most management, not just C*Os, having absolutely no idea what are the products their minions are producing.

Ah, the idea of the generic CEO or other executive that can manage anything, which I have said is a myth before.

How does anything said there contradict that?

That's several examples of CEOs that are obviously at least superficially familiar with the products their respective companies make.

It don't, I just wanted to mention that.

It's a vital skill in any supervisory or managerial job. Especially so as you get higher up the pyramid, it's important to remember you need a lot of secure blocks below you so things don't collapse.

Do you really want a university educated, never used a tool to make a living in his life, deciding he gets to dictate how to frame, roof and side your new house, maybe use less nails to cut down on costs? Is that a company you want to invest in?

I work in construction, my boss climbed to the top but he still only gives suggestions on how to do things because it's been over 20 years since he's actually done it. Our tools aren't dictated to us, our set ups aren't. We do our job, he does his.

For a company producing games your executives don't need to be the creative brains or anything of the sort, they've got tons of that below them. They've got entire departments of artists, developers, writers, etc. Why the hell would anybody think its financially prudent to get the CEO in on what would be a good story when you've got a career writer, or what cinematography style you should use when you've got artists on staff.

You want the management to be coordinating all the little guys so that everyone hits the goal posts and finish lines at the right times and make those judgement calls to either delay the project or drop something to make the deadline.

To sum it up I would say:

People who manage game developers don't necessarily need to be good at developing games- they need to be good at managing people who develop games, which is related but not the same.

A CEO, especially at a larger company, does more than manage people. They influence the strategic direction of the company, and act as both public face and rolemodel.

While it's /possible/ for a CEO influence effective strategy without using or thoroughly understanding their product, it does not exactly inspire confidence.

Tencent do not get a board seat and as such it's "ownership" wouldn't account to much.

After carefully investigating definition of "indie", it seems that Microsoft is an "indie" company as much as Blizzard.

Wait till Blizzard becomes one of this year's hottest startups!

Like other indie developers, Blizzard is cutting the middleman and selling the game directly to their fans. In this case Blizzard accomplished this by merging with games publisher Activision.

Why did Blizzard merge in the first place? They were making literal truckloads of cash. Did Activision have a warehouse to put all the money?

Blizzard was self-publishing before the merger.

> the split will see 439 shares (worth $5.83 billion) bought by Activision Blizzard itself, while an investment group led by Kotick and Kelly will purchase 172 million shares (worth $2.32 billion)

Those 439 shares must have one hell of a preference.

It's a typo. The real number is 429 million shares.

429 million sounds about right. 439 million skews the numbers way too much.

I thought for a second this was Vivendi buying Blizzard out of Activision, not the other way round. Blizzard games have definitely gone downhill since the activision merge

Have they? If anything, I think they have improved. It might not please everyone (I miss the old WoW), but it seems to me that Blizzard is making informed game design decisions based on what the users want. I wouldn't surprised me to hear they invested a lot in big data analytics.

Their big screw-up is perhaps the Diablo III auction house. The idea is good, but it has spiraled out of control. The auction house is now the only viable way to acquire gear. Playing only serves to rack money, but reselling is as good a way to make money. Gear serves to play, to rack more money, to buy better gear. The auction house is now the game. You can do very well at the game without ever playing the "real" game. Not to mention that shelling a few euros on the real money auction house will save tens of hours of farming, and real money continues to appreciate wrt in-game currency.

I have to agree with you, I've played every single Blizzard game ever made, and SC2 is just plain beautiful. The campaign cinematics were amazing...

They've grown to include wider appeal and be more profitable.

Since the merger, Blizzard has aggressively moved towards in-game real money transactions including one high profile fuckup where they irreparably ruined the economy of an entire game, ruining the game itself for many players (especially their older and more devoted fans).

They've scrapped their major next MMO, pushing it back and folding much of the staff into other projects while this one goes back to the drawing board.

They predictably released StarCraft 1.5, the graphics update, but StarCraft is a known commodity and they didn't have the leeway to make substantial changes without massively disrupting the playerbase.

I can't find a single product of theirs that screams character and love and devotion to video games like their classics do, but every single product does appear to be a financially calculated move to extract as much money as possible from gamers.

From this long time (and no longer) Blizzard fan, modern Blizzard looks more like Zynga than the company they once were. More interested in ARPU than making wonderful games.

Speaking of love of and devotion to games, if you want to see what the original Diablo team has done lately take a look at Torchlight II - it still has that something that D3 is missing and D1/2 had.

Blatant self promotion, but have you tried Path of Exile?

I enjoyed TL2 and Path of Exile! Both were great games that did the ARPG genre that Blizzard pioneered (and then abandoned) very proud.

I also enjoyed Guild Wars 2 -- the latest game by a team of ex-Blizzard staff.

Depends on your definition of "user". Diablo III was a huge let down to most of us who are fans of DII. It's not just the AH either; online always, crap gear, crap story, dumbed down skills, pay-to-win RMAH, and constant nerfs of a game that is not meant to be an esport. Bleh.

Hardcore D3 has (or at least had) much better economics, due to:

* no RMAH (and as such, all the good items are on sell for gold)

* and huge moneysink in the form of dying characters (as such, less gold inflation)

Also, when you play HC, leveling up your new character is so much less painful with AH. Besides, I'd just by something @ d2jsp.

I never played HC, is the regular auction house separate from non-HC though?

Yes, neither gold nor loot can cross the carebear/hardcore threshold.

Heart of the Swarm was also inferior.

In what sense? I don't play the single player, but I think Heart of the Swarm dramatically improved the multiplayer.

I'm the other way around: I bought it for the singleplayer campaign. It was terrible: short, half-assed, and boring. Huge contrast to the WoL campaign.

SC2 wasn't really designed for the single player campaign. Neither was brood war, Warcraft 1, 2, or 3. This genre of games has always been about the multiplayer aspect. The campaigns are nice add ons but not the core of the games.

I think you may be a tad misinformed. Even though the multiplayer aspect is very popular, Blizzard as a company has been known for really caring about the underlying story in both franchises. So no, the campaigns - which are the main tool used to advance the stories - are not supposed to be "nice add-ons."

Back before Warcraft 3, multiplayer usually meant LAN. Neglecting the single player campaign would have been just stupid.

Lots of fans disagree!

Why do you say so? Sales are good, games are good, korean cybersport is finally transitioning to SC2, diablo is fine, wow is probably holding record for the most living / profitable mmo.

While I think there is plenty of doom and gloom that isn't entirely true, I think the picture you've painted is still a bit rosy.

> korean cybersport is finally transitioning to SC2

Yes and no. Proleague finally switched from Brood War and KeSPA players are doing excellent in the WCS leagues, esports in Korea are way down from where they've been, with MBCGame dead. Even then, almost everyone is playing LoL.

In fact, in PC Bangs, Starcraft 1 is STILL more popular than Starcraft 2.

> diablo is fine

Again, yes and no. It sold well, and the initial sale of a Blizzard title is where almost all its revenue comes from. But many, many of the most hardcore fans were disappointed, and most won't buy the next Diablo property 'sight-unseen' like the last one.

> wow is probably holding record for the most living / profitable mmo

True, WoW has been the most profitable MMO ever. But their numbers have declined over the last few years, and every attempt they've had to "give it the paddles" and reignite growth hasn't been too successful.

Almost all my friends who played WoW call it a shadow of the game that it was, citing the HUGE differences in skillsets and builds, how easy it is to get rewards, etc.


All that said, SC2 was a HUGE part of eSports rising worldwide, and still sports a pretty healthy audience. And one has to expect their next MMO will be spectacular, if they can ever abandon WoW.

> Almost all my friends who played WoW call it a shadow of the game that it was, citing the HUGE differences in skillsets and builds, how easy it is to get rewards, etc.

Speaking here as someone who has played WoW since vanilla, that's sort of a self-selecting sample. Your friends who used to play WoW are people who selected into enjoying it when it was a (by modern standards) relatively hardcore game. It makes sense that they might be turned off by its new "everyone can see all the content!" approach.

It wouldn't surprise me if their current subscription "woes" (quotation marks because they're still the biggest MMO around) stem from the more-casual userbase running through, seeing everything, and not having any really reason to stick around, instead canceling their subscription until the next big content drop.

Honestly dude, except for young children, mmos have passed their prime, anyone whos been playing mmos for 15+ years has been there and done that, I don't mean that in an elitist sense, I mean that except for skin/model changes, mmos are really very cookie-cutter, it was really exciting to see it for the first couple of times, just as doom, half-life, and any other shooters were, but it is a real weakness when you're playing the same mechanics for years. Yes, I can use my imagination, but I am aware of the limits of technology and I'd like to do more than play the same time sinks over and over.

> except for young children

Am curious why you put that qualifier in. Is it just that you think people have to play MMOs to become bored of them?

I meant it as anyone who has been playing them for years has been there and done that, the thrill of them is in big part due to their novelty, there's a lot to explore if you've never played any mmo before, there's a lot less when you start to realize there all just reskinned versions of the same idea. MMOs are some of the more basic games in existence, the need to advance, that's my point.

But to your point about the most profitable mmo, Blizzard is leaking subscribers in the hundreds of thousands recently. The subscription model is becoming obsolete. WoW is an awesome game but times are changing.

> "Blizzard is leaking subscribers in the hundreds of thousands recently"

Another few years of that and they'll merely be ... well, still the largest subscription MMO ever...

And more to the point, WoW is still going to be the genre definer for the next five years. That's not exceptional on Blizzard's part, though: winning an overwhelming amount of market share lets you coast. It doesn't mean the merger didn't have significant negative effects. (Yay double negatives. ):

Well, yes. But the game came out in 2004 and for the majority of its history its growth was astronomical. It's only recently that subscription numbers have been declining at a steady rate. And even then, the game still has years left before it becomes obsolete. You can see that this is Blizzard's thinking as well, since they recently scrapped Project Titan (their new upcoming MMO) and started over.

Show me one F2P MMO that has more active players than WoW and I'd agree with you. Subscription isn't dying at all. WoW is just old. If anything, with all the failed F2P games dying I'd say it is the opposite.

Agreed; there's a natural lifetime to games. WoW is rolling through its middle age now and its health is starting to get a bit "off".

However, WoW simply is more playable than its competitors. I played a few of them, and WoW was still better. The next MMO to carefully build itself to be super playable will be quite a hit, I think. Note - when WoW was released, mobile wasn't here. If most casual gamers have moved to Facebook/mobile instead and won't get a desktop to play their MMO, the market will have shifted such that there won't be another WoW.

Probably? Oh it passed that years ago. WoW is 100% cash cow at this point.

I'm not sure if I would call a company the size of Activision Blizzard "indie".

There is of course a spectrum of "indieness". You seem to be subscribing to the small indie theory, where the team is comprised of just a handful of people; the perpetual underdog.

On the other side are those who define indie as your level of freedom to do what you please with your product. In that case, even though they may be large and successful, being privately owned and without a 3rd party (ie. publisher) gives them the freedom to take their games in whatever direction they choose.

Vivendi was never a publisher for Activision, Blizzard or Activision Blizzard. It was merely their owner. Both companies as well as the merged version of them were always self-publishers. They were always independent of other publishers (sans Blizzard back in the early 90s, but that's besides the point).

The only thing they would ever lose being under Vivendi is their rainy day fund. They always had complete control.

Indie my ass. OP means independent.

I'm confused, isn't "indie" an abbreviation for "independant"?

In the gaming world "indie" refers to small teams who are usually bootstrapped and not owned by some publisher. They try focusing on real game innovation and don't usually have big budgets - at least not when they start out, so they will use the cheapest tools available (e.g. Blender instead of 3d max); for instance I don't know if the studio developing Minecraft still qualifies as indie because they seem to have a truckload of money, so the definition may be fuzzy.

In any case, ActiBlizzard is very very far from being indie. They don't innovate, they have loads of money from some of their cash cows and probably every member of their team is easily replaceable like a standard cog in a machine. And when you're listed on NASDAQ and your employee count is in the thousands then you're practically a corporation.

>They try focusing on real game innovation...

I think you took the definition a tad too far.

I think he did too, but it is true that innovation is very important to the indie community.

Most indies don't have teams of engineers, artists, designers, marketers, or musicians to polish their turds into blockbuster gems. Because of this, an indie had better hope that their project begins as shiny as possible, which is why innovation (especially in gameplay) is crucial.

I'd say (by far) most indie games are turds (just look at the amount of crap games on mobile app stores). Games like Fez, Braid and Super Meat Boy are few and far between.

Indie is abbreviation of "independent"

And by the way, "gaming" industry refers to gambling industry.

Yes, but to the target audience of a submission with "Activision", "Blizzard", and "Kotick" in the title, indie means exactly what Tomis02 said. Context is important. I don't think anyone else would associate gambling industry with "gaming" in the context of this article.

It's an abbreviation that's taken on a different meaning altogether.

I don't want to debate semantics or linguistics, but I believe the comment you're responding to is insinuating that "indie" refers to complete independence (no external masters) whereas "independent" means private, but serving many masters.

It's a meaningless distinction, IMHO.

"indie" can also mean "individual", so it all depends who do you ask.

It's interesting that Dell is doing this and now Activision. I wonder if we will start to see a trend of other companies doing the same?

It's a distinct possibility. The C-suite is finally starting to understand the flaws in shareholder value theory, and going private/independent allows them to focus on long term value without having shareholders clamoring for their resignation due to poor short-term balance sheet results. Giant conglomerates such as GE or P&G will stay public, but I wouldn't be surprised if more focused technology firms - or even companies in other areas of consumer goods - start following this trend. It could be good for industry to have some variety in this way.

Maybe. See letter to shareholders by Jeff Bezos. If the business can handle it, and the leadership is capable, I don't see why they would avoid the benefits of being public either. When public, among other things, you have access to a huge amount of capital if you want it (if you can handle the effects of the increased dilution).


No one should expect Bezos to speak for all companies in -Amazon's- letter to the shareholder.

The problem with the stock market is that it is optimizing for a different thing than most companies, and even society at large. If the minimum holding period for an asset was, say, 20 years, the subprime mortgage crash would have been much less likely. (One could make a similar argument for democratic office. But I digress.)

Shareholder value theory induces a sort of hysterical myopia, where ideas and results are evaluated in these Q2Q or Y2Y window. Growth is only evaluated within the context of the company, which creates perverse incentives wrt externalizing costs. Furthermore, if growth initiatives require no additional external funding, then the public stock market -really- makes no sense, and that is likely the case for Blizzard and Dell.

Getting away from shareholder value theory's myopia is the surest way to begin a sustainable recovery of our capital markets.

If the minimum holding period for an asset was, say, 20 years, the subprime mortgage crash would have been much less likely.

One wonders what rules Microsoft stockholders are playing by. They seem to have the patience of a Zen master. Are their dividends enough to justify another 'lost decade' with Ballmer in charge?

When you're beholden to shareholders then you're a slave to the sales department, since they control the shareholder report. They'll drop their pants and make any deal to get those purchase orders in for the monthly/quarterly/annual reports, and clients that know this take advantage of it.

It also opens the possibility of deferring sales figures to fudge the numbers, for example sales in 2011 haven't "finalized" so they show up in 2012's reports, but those sales actually happened in 2011. It's effectively kicking the can down the road to buy time to fix whatever the reason sales figures are being deferred.


Don't worry this is probably the worst titled article of the year.

can we have lan in starcraft 2?

Depending on why you want LAN, you may be interested in "Spawn mode" which lets you get all your friends together and play custom games and things. Your friends install the "Starter Edition" as long as one of you owns the game you can all play.

Still requires internet and battle.net accounts.


i want lan so that i can use the product i paid for without having to check in with bliz every time i do it.

Hopefully somebody will create an unauthorized patch that enables LAN play and then Blizzard will have to release an official patch to compete with it.

You could as well ask for dedicated server and mod tools for the call of duty franchise.

Interesting (and smart) move on Kotick's part. I think WoW suffered under the mantra of 'make it broader, make it broader ...' perhaps they will pull back a bit from that.

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