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With 30 years of experience, Bobby Kotick has the longest record of any CEO of a major video game company. His company, Activision Blizzard, has a market value of $70.9 billion, annual revenues of $8 billion, and more than 10,000 employees.
The company has franchises like Call of Duty, which has sold more than 400 million copies in nearly 18 years, as well as World of Warcraft, Diablo, Crash Bandicoot, Tony Hawk, Warcraft, Candy Crush Saga, and Overwatch. (Check out our Call of Duty interview with Activision president Rob Kostich).
Kotick hasn’t spoken much at industry events in a while, and so we were happy that he agreed to do a fireside chat with me at our GamesBeat Summit 2021 event. I talked with him for about 40 minutes on a wide range of topics, from his early days at Activision to the metaverse. It was interesting to learn that he had to once sell the furniture to keep the lights on at Activision. We also learned about his views on the merger-and-acquisition craze sweeping through gaming and the industry’s prospects for further growth.
The early days
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My first question was about what it was like when he was starting out.
“So I was really fortunate. When I was in college, my college roommate had a cousin who worked at the University of Michigan, and he had an Apple II. And I used to have access to the Apple II at night,” he said.
Of course, he played games on it. He also played a lot of text adventures and his parents got him an Atari 2600 console. He played Pitfall, River Raid, and Kaboom. Then he started a software company in college, selling things like word processors, spreadsheets, and databases. He grew the company and even tried to get Trip Hawkins, who was the CEO of Electronic Arts, to buy the suite of apps.
It didn’t happen.
“That was really how I got started,” he said. “I always felt like I would be more in control of my destiny if I was the publisher and the developer. But had I not had the experience of working with Electronic Arts in the 1980s, I don’t know that I would have been as motivated to go off and start my own publishing company.”
He looked around and wanted Activision to publish more of its older games. He was inspired to move back into games with platforms like the Amiga and the Commodore, and he did some licensing deals to make T-shirts, pajamas, and ice cream using the Nintendo brands.
Activision struggled after the 1983 video game crash, and it changed its name to Mediagenic in an attempt to move into business software for the Mac. That failed, and Kotick rounded up some investors to buy the Activision name and its assets out of bankruptcy. One of the things Kotick wanted was to get a license for making Nintendo games.
“I call up the CEO of Activision, and he wouldn’t return my phone calls,” Kotick said. “The company was pretty much insolvent. And it had just lost this patent infringement judgment to Philips, the Dutch company. And so I just bought 25% of Activision, which cost $400,000, and became the largest shareholder of Activision.”
Kotick convinced the board that he would be a better leader, and the board agreed. But the company had no money.
“We literally had to take the cans from the soda machine and redeem them, because we needed the money. And we had sell the furniture,” he said. “But there was a really passionate group of people who were at the company who wanted to bring back some of the original Atari Activision games. And then there were a group of people that wanted to make text adventures into graphic adventures. And then we were a small company, it was like 60 people, but that was really the beginning of my tenure as the CEO of the company.”
Lessons of growth
As for the lessons, Kotick said, “You have to start with a passion for what you do, and loving what you do, and loving the people that you work with. And 30 years is my Activision history, but it’s really 40 years of making software. And so if I didn’t love what I was doing, I would go do something else. But I think the thing that has always been exciting for me is creating an environment where creative inspired people can always do their best work. And, you know, if, if I’ve learned anything over 30 years, it’s you have to constantly be working at making sure that you have an environment that people feel excited to be there and do their best work.”
He said there’s a balance between making games based on franchises that people love and finding the balance to make original games as well. The company is now more than 10,000 people. Activision merged with Blizzard in 2008, forming Activision Blizzard. And it acquired King in 2015 for $5.9 billion. Activision Blizzard has acquired maybe 18 studios over time.
He reiterated, “My job is really creating an environment that people feel excited to come to work. And as the company’s gotten bigger with 10,000 people, it gets harder to do that in a hands-on way. So you have to just set some basic principles and find people who can actually are as enthusiastic about doing the same kind of thing, which is creating those environments for people.”
He noted that smartphones transformed the business and enabled the free-to-play models that bring in so many more players. Activision Blizzard now has more than 400 million players in over 190 countries.
“The thing that’s now proven to be the most durable part of our business, and the thing that I think gives purpose and meaning to the people who come to work to make games is that we have this ability to connect for us 400 million people around the world,” Kotick said. “And that social connection really adds a different dimension to games than what was the case 30 years ago.”
I asked Kotick about the metaverse, the universe of virtual worlds that are all interconnected, like in novels such as Snow Crash and Ready Player One. Kotick said he remembered back to Alan Kay, the former researcher at the Xerox Palo Alto Research Center and former chief scientist at Atari. Kay had a project called Vivarium in the early 1980s and it was the idea of a “living, breathing simulation, where you would have both the ability to have user generated content and professionally produced content, and that you would have this extremely rich simulation experience that you could live and play and potentially even work,” Kotick said.
He thinks we’re now much closer to the idea of an actual metaverse, and it requires this continuous social connection with people. He thinks that with advances in local and distributed processing power over the next decade, we will get to that original vision that Neal Stephenson had in Snow Crash or Ernest Cline had in Ready Player One.
“I think we’re rapidly progressing towards what is a legitimate mass market experience,” he said.
Call of Duty
Activision Blizzard’s slogan is “putting players first.” I asked about what that means in the evolution of Call of Duty, which has evolved from a single-player experience to multiplayer and Zombies co-op modes, and now made the transition to free-to-play Call of Duty: Mobile and Call of Duty: Warzone.
“I think there are no franchise principles that you could apply consistently, but probably at its core is making sure that when you look at the time and investment that players make in games like Call of Duty or World of Warcraft, you’re talking about many hours a week of commitment,” he said. “Our first responsibility is to those players who are investing those many hours a week in this experience, and making sure that we are responsive to the investment that they’re making in time and in dollars.”
He said that the developers have to capture the fan expressions and feedback and then transform it into more inspiration and creativity.
“You’re not gonna always get your players telling you what they want you to make,” he said. “But they definitely will tell you what they don’t want, once they experience something they don’t want. And I think one of the things that we’ve tried to do as, as best as we can — and it’s allowed us to have a very sustainable business for a long time — is really make sure to listen to our players. And the beauty of a medium like gaming is that because people invest so much in the game, they are very willing to express their enthusiasm, their frustration.”
Once you capture the enthusiasm and frustration, you have to make a commitment to iterate and change to positively respond to the audience, he said. Activision’s first attempts at battle royale modes met with limited success, but Warzone debuted in the pandemic, and it took off. It now has more than 100 million players, while Call of Duty: Mobile has topped 300 million. He said the core fantasy remains the same, that there’s a “soldier in us all.”
He said, “Warzone and Call of Duty: Mobile were recognition that if we had bigger audiences, and more people had the ability to connect with each other, that the game itself would be richer and more satisfying. I think back to the point I was making earlier, that not everybody can afford to spend what was $60 a year for a game or $15 a month for a game. And so being able to give people that opportunity to play and try and not know that they don’t have to actually invest capital, they just have to invest time has actually been a way for us to build and grow and innovate within the franchise. And it’s been a really transformative thing for the franchise, but also for the player.”
Avoiding franchise fatigue
I noted that Skylanders ran into franchise fatigue after a few years and Activision stopped most of those efforts. How does the company avoid franchise burnout among both players and developers?
He credited the Call of Duty studios for coming up with Warzone and other innovations that have kept the franchise growing.
“They’re the ones that make the decisions about what the product is going to be or what content they’re going to create,” he said. “And the business is way too large for me to be able to get involved in those kinds of decisions. I don’t have the skills that our heads of studios and heads of franchises have. But I think the collective view was that this was the right time for us to change the model and expand the audience of people that could play the game.”
He added, “We had seen the success that Fortnite had in expanding its audience, and we had our own experience with Hearthstone, which was free-to-play at launch,” he said. “There are tens of millions of people who were playing the game and I think that what we found is that it was a great way to get innovation, a great way to build your audience, a great way to create more connection with players and it turned out to be a good business decision.”
But he said that each franchise has its own subtleties and idiosyncrasies, and some platforms aren’t to work well with free-to-play models. But he said the franchise leaders are empowered to think about the best way to commercialize a franchise and guide its roadmap.
Layoffs and hiring
Kotick said the company has lots of hiring to do, with maybe 2,500 or so openings. His main focus is thinking about how to get continuous access to the best talent, how to retain that talent, motivate that talent, develop that talent, and reward the talent. He said the company’s biggest challenge is prioritizing opportunities.
“It’s a great business challenge to have, but it requires you to have access to a lot of talent,” Kotick said. “The competition is greater than it’s ever been. You have companies like Tencent that own a piece of so many different gaming companies. They have unique access to the greatest market in the world, China, that we as a Western company don’t have access to today. And so the big strategic considerations for me and for the leadership are how do we make sure that we’re prioritizing our opportunities.”
Kotick said the studios always need a pipeline of talent. He said that with 2,500 openings, there is always a natural attrition rate and performance management where some people are let go. It’s hard to hire that many as the company competes with big companies like Facebook, Google, Apple, Amazon, and Tencent.
“There’s enormous competition for talent than I’ve ever remembered,” he said.
But in the case of the recent layoffs, he said that the company kept its physical esports team onboard for the past year in the hopes that esports might return to physical events. That team handled tasks like the live broadcast of esports physical events. Kotick said he hoped over the last year that the team would be able to get back to work.
“After a year, we realized that it was going to take more time to be in the live events business, and a lot of the team owners probably want to actually produce and host the events themselves. And so, unfortunately, the consequence of that was there were a number of people in live production lost their jobs,” he said. “The first thing that we try and do is find jobs for people who work for the company or retrain people give them other opportunities. It’s a skill that isn’t one that we have an opportunity for. Those are the difficult decisions. Over the next three years, I think that you’ll see the company will be very challenged to hire the thousands of additional people that we will need to just meet our production schedules and production plans that we have in place today.”
Gaming’s accelerated growth
I asked him about the pandemic’s effect on the growth of the gaming business.
“That’s hard to know,” he said. “If you look at the success our franchises and our teams had in 2020, my view is a lot more of it had to do with the change in strategy and great execution and very difficult set of circumstances. I think it’s too early to know whether or not there’s a true structural change. But what I will say is, whether there is there isn’t, there are more people in more countries with more devices capable of playing games than ever before, and they are playing them.”
He added, “The games that have inherent social capabilities and social connection where you can connect with your friends, you can feel the joy and satisfaction through the lens of fun. That is a very enduring form of entertainment. And I think it will continue to grow. More people at home in the last year is a catalyst for more growth. Whether there was or there wasn’t a pandemic, gaming is going to become an even more significant form of both social connection and entertainment than any other form of media.”
I noted we’ve got a panel with top female executives at Activision Blizzard and wondered about his views on diversity, inclusion, and representation.
“If you are creating broad appeal entertainment, and today we have 400 million players in 190 countries, we can’t make broad appeal, entertainment that is successful in 190 countries, without diverse views and voices and talents and skills,” he said. “We don’t need external forces to be the reminder of how important it is for us. It’s the lifeblood of our business, to be able to have those diverse skills and talents and capabilities as a part of the creative process. And I think we’re when you look at our player base, it’s probably something that people will be surprised to learn, but 50% of our players are female. Now, that’s largely because of King. But I think gaming is increasingly becoming a form of entertainment that is more broadly appealing.”
He added, “I still think we could do a better job of having more female leadership in our studios, but we probably have more than any other game company that I’m aware of as senior leadership. We have a continuing commitment. We’ve always had a big commitment to making sure that we were tapping into all of the workforce. And I think one of the things you realize is that, with the talent demands we have, and the competition for talent, making sure that you are attractive for every type of talent from every walk of life and gender and ethnicity and background is critically important for us to be able to create compelling games.”
Activision Blizzard hasn’t made a huge acquisition since it bought King in 2015. I asked what Kotick thinks about the mergers-and-acquisition (M&A) craze of 2021, which generated investments, acquisitions, and public offerings worth $39 billion in the first quarter alone, according to analysis firm InvestGame. That was more than the $33 billion that went into games in all of 2020.
“We have a lot of organic growth. So we don’t need M&A to grow the business,” he said. “We’ve got to find the talent to keep up with the opportunities that we have internally. Having said that, when you look out over the last 30 years, we bought a lot of businesses like King and Blizzard. There were companies like Treyarch, Raven, and lots of studios that we have bought where the same leaders are in place today.”
Activision Blizzard has close to $10 billion in cash (I noted Kotick could buy one Discord with that) and $70.9 billion in market value, and so if the company finds the right fit, it will take action.
He added, “There’s, you know, a lot of attention and interest and enthusiasm in games. There is a lot of capital chasing [and there aren’t that many] opportunities. That usually evens out over time. For us, finding special companies that have great cultures and teams that are committed to innovation and excellence, and are excited and enthusiastic to come to work, and have shared values — that’s what we look for. But we’re also really careful. So that’s why we haven’t done very many transactions over the years.”
As for retro games, Kotick said he originally got into the business at a time when there were lots of remakes happening, and so it’s not new.
“It’s not a new idea. I think for us, it’s much more about is it the right idea?” he said. “Are we going to be able to execute against that nostalgic audience in a way where it’s going to actually resonate with both the original fan but also new fans. We’re fortunate we have a library that goes back to 1980. And so if you look at the hundreds of titles that we have in the library, for us being able to go back into the library and take something that hasn’t been worked on for years and years, but has a loyal following — going back and looking at those static titles as a source of inspiration is one way that we think about opportunity.”
But he said new intellectual property is also very important and that Activision Blizzard has had a lot of success on that front.
“We also have the flexibility of not releasing something until it’s great,” he said. “And so if you have the financial wherewithal and the discipline to say we’re not going to release a new intellectual property until we know that it’s really ready for its audience, and can find an audience, that’s a luxury and a privilege that we have.”
How people view Kotick
I asked if there was something he wanted people viewing the talk to know about him that they may or may not know, based on the usual misconceptions or views about CEOs of big companies. People haven’t always said nice things about Kotick on the internet, especially with his large bonuses that periodically come at times when the company is cutting back, most recently with the physical esports layoffs.
“You and I have known each other for a while I. You know I love what I do. And I think you’re right, there are a lot of misconceptions that people spend a lot of time talking to the media and trying to shape their personas. And I would rather spend my time in creating environments where talented, inspired, creative people want to work,” he said. “I don’t spend a lot of time doing this. I think that you can’t do what I’ve done for 30 years without that relentless focus on doing better. I come to work each day wanting to improve. And so I think that commitment to excellence, and wanting to improve can come across sometimes as dissatisfaction or unreasonableness.”
And he added, “But I think that if you want to build and grow and sustain a company that has the kind of opportunities that we have, there is an unwavering commitment to excellence that you have to have. And that also means a willingness to change, and improve and grow and provide opportunity. And so I’m not sure that there’s any one specific thing that I would say, I would want an audience to know about me, but that’s who I am. And that’s what drives me and gets me excited to come to work every day. I’m fortunate I get to work with an extraordinary group of people and have incredible resources. And we have 400 million people who spend something over an hour-per-person, per day, playing our games. And that comes with a great responsibility to make sure that we are satisfying the expectations of those audiences. And relentless in our commitment to our players in the way that they’re relentlessly committed to playing our games.”
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