Activision Blizzard’s Self-Inflicted Wounds May Not Heal Quickly

The combination of news has cost Activision about 13% of its market value, though the shares showed some recovery after hours on Tuesday following the company’s second-quarter results. The report—for the period that ended before California’s lawsuit was filed—showed both a strong business and one readjusting after a huge boom in gameplay last year during the early days of the pandemic. Net bookings of $1.9 billion beat Wall Street’s targets but still declined nearly 8% from the same period last year. The company’s total monthly active user count declined nearly 5% from the same period last year, when usage boomed a record 31%.

Less clear from the results is how the scandal of the recent lawsuit could impact the company’s actual business. The complaint filed July 20 accuses the company of running a hostile working environment for women, with allegations of unequal pay and promotion practices listed alongside disturbing instances of harassment. Activision’s initial strident denial of the charges—which included a politically tinged dig at its home state—only made matters worse. Employees staged a walkout last week even after Chief Executive

Bobby Kotick

publicly apologized for the company’s initial response and promised several reforms.

Given that summer is crunchtime for big fall releases, such as the next “Call of Duty,” the timing for such a work stoppage isn’t great. Analysts quizzed Activision executives about the potential for any delays during the company’s conference call on Tuesday, but no such details were given. Mr. Kotick and other executives reiterated the company’s commitment to changes, which included a change in leadership at Blizzard announced earlier in the day.

But the company also moved the release of Blizzard’s new mobile title “Diablo Immortal” from the second half of this year into the first half of 2022, citing testing that “revealed some exciting additional opportunities” its team wants to add. Activision also added a warning to its earnings release that its business could be impacted by “prolonged periods of adverse publicity, significantly reduced productivity or other negative consequences” related to the lawsuit. A Blizzard employee tweeted last week that “almost no work is being done” on the company’s “World of Warcraft” franchise “while this obscenity plays out.” Activision has its work cut out for it.

Write to Dan Gallagher at [email protected]