From a child’s laptop to mobile phones and esports arenas, computer gaming has become ubiquitous, a multibillion-dollar global industry with some of its deepest roots in Southern California.
Two of the industry’s biggest players, Activision Blizzard in Santa Monica and its Irvine division Blizzard Entertainment, are being acquired by Microsoft Corp. for $69 billion as the Washington tech titan stakes a bigger claim on gaming in the so-called metaverse.
The deal comes after months of controversy for the local gaming companies, which publish some of the world’s biggest titles, including “Call of Duty,” “Candy Crush” and “World of Warcraft.” Last summer, California sued Activision over allegations its workplaces are rife with a toxic, “frat boy” culture that sexually harasses female employees and denies them promotions and raises.
Microsoft, which hosts “Call of Duty” on its Xbox console and has been considering buying Activision since late 2021, acknowledged change is ahead.
“We will have significant work to do in order to continue to build a culture where everyone can do their best work,” CEO Satya Nadella said on a call with investors. “The culture of our organization is my No. 1 priority.”
Microsoft said it will keep Bobby Kotick, Activision’s controversial chief executive, in his role. The deal faces regulatory hurdles with Democrats and Republicans alike pushing to limit the power of technology giants.
A history rooted in male storylines
The genesis of both gaming companies, while decades apart, were woven by common threads of creative angst — and a lack of diversity.
Activision was formed in the late 1970s by four disgruntled Atari software engineers who watched their pay stagnate as the Sunnyvale console maker’s profits soared. Their new company would be the first third-party game developer in the U.S. at that time. Activision’s 1982 game Pitfall!, made for Atari, would be one of the console’s best-selling games.
Some 20 years later, three UCLA grads in 1991 created Silicon & Synapses and taught themselves how to write joystick software code in one of the founder’s garages. The company would change its name to Blizzard in 1994. Ten years later, “World of Warcraft” would make its worldwide debut to much fanfare. The game publisher was acquired twice before it was sold in 2008 to Activision in a $19 billion blockbuster deal.
As was true of most tech companies of its time, both companies were founded by men with mostly male employees who created storylines aimed at male buyers who wanted to play war games. That trend would continue for years and be highlighted in stories such as one by NPR headlined, “Gaming While Male: A Privilege Few Men Recognize.”
“The issue is often framed as a women’s issue, but sexual harassment, sexism and misogyny in gaming is not a women’s issue — it’s a gaming community issue,” Jonathan McIntosh, a producer for the Tropes vs. Women in Video Games Web series, told NPR in 2014.
Today, 45% of video game players are women, according to Statista.com, while 24% of the industry’s workforce is female.
A summer of allegations
Summer 2021 would be a season of reckoning for Activision Blizzard.
The company in July was sued by California’s Department of Fair Employment and Housing over allegations of sexual harassment, unequal pay and retaliation. That same month its employees staged walkouts and signed petitions demanding Kotick resign. The company pledged to make the workplace more inclusive and welcoming to its 10,000 employees.
In late September, Activision agreed to pay $18 million in a settlement with a federal employment agency that filed a civil-rights complaint against the company, accusing it of sexual harassment and discrimination against female employees.
Another sledgehammer would fall in November when the Wall Street Journal reported Kotick had been aware for years of misconduct by male employees against female colleagues. The Journal’s story included allegations of rape at one of Activision’s studios and said Kotick had been informed of the alleged incidents, which occurred in 2016 and 2017, as well as an out-of-court settlement, and failed to report them to the company’s board of directors.
Despite declining shares on Wall Street and employee walkouts, Kotick refused to step down. In a video to employees, he said, “Anyone who doubts my conviction to be the most welcoming and inclusive workplace doesn’t really appreciate how important this is to me.”
Bloomberg reported Kotick took a 50% pay cut in 2021, but he’ll see a $375.3 million windfall if the deal with Microsoft goes through. He owns almost 4 million shares of Activision, the most of any officer or director, Bloomberg reported Tuesday.
Activision shares made up most of the damage of the past quarter on Tuesday, rising 26% and closing at $82.31.
In December, as the deal with Microsoft was taking shape, Activision released a diversity report that showed women make up just under a quarter of full-time employees, on par with the industry.
“While representation company-wide is similar to our peer gaming companies in the United States, this is wholly inadequate in my mind,” Activision Chief Operating Officer Daniel Alegre wrote to employees at the time. “We will do better.”
Almost half of the company’s corporate departures in the last year have been women, the report said.
Microsoft on Tuesday said this deal and its $7.5 billion acquisition of ZeniMax Media would help the tech giant beef up its Xbox lineup and speed its goals for the metaverse, or virtual worlds seen as the next-generation Internet.
That prospect already has raised questions about whether the company could restrict Activision games from competitors’ consoles. CEO Nadella promised the deal would help people play games “wherever, whenever and however they want.”
Pushback against the deal was immediate from consumer advocacy groups.
“No way should the Federal Trade Commission and the U.S. Department of Justice permit this merger to proceed,” said a statement from Alex Harman, competition policy advocate for Public Citizen. “If Microsoft wants to bet on the ‘metaverse,’ it should invest in new technology, not swallow up a competitor.”
White House press secretary Jen Psaki had no comment on Microsoft’s announcement at her briefing Tuesday but emphasized the Biden administration’s recent moves to strengthen enforcement against illegal and anticompetitive mergers.
Staff writer Samantha Gowen, The Associated Press and Bloomberg contributed to this report.
Can Microsoft deal heal Activision Blizzard’s year of turmoil? - OCRegister
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