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The sex discrimination lawsuit against Activision Blizzard is going to be a real nightmare for all parties involved, and my heart goes out to anyone who is suffering pain as a result of this disaster at one of the biggest game publishers in the industry.

This is the media sideshow of the moment. A war for attention is going on now, with different parties jockeying to control the narrative. And I don’t think Activision Blizzard is winning the PR battle. Each time a part of the crisis has unfolded, the company’s response has generated criticism from multiple directions, including victims on social media and employees concerned about the company’s combative stance. And those responses have reframed the perception of who is really the victim each time.

The lawsuit itself from the California Department of Fair Employment and Housing blasted the company for a “frat boy culture” and violating laws against unequal pay, sex discrimination, harassment, and unfair workplace practices. The allegations were devastating, ranging from frat-like behavior at a “Cosby suite” to a woman who committed suicide after being bullied and having nude photos of herself circulated by staff. The company’s initial response suggested they were blindsided, though the state said attempts to resolve the lawsuit had failed.

But the state, either out of its concern for worker privacy or its own PR savvy, did not disclose the names of most of the perpetrators or details about the incidents and when they happened. That helped it bolster its belief that the problems are still happening today. This put Activision Blizzard in a difficult position. It could not discuss specifics of individual cases for legal reasons. It could also not respond precisely to the circumstances of each allegation because it didn’t have all the details. But it could not say nothing, as its employees were hurting. Its initial response was combative and it said the state’s lawsuit was distorted and inaccurate.

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Then the company executives began to say what they needed to say to address employee concerns, and it turned out that Jason Schreier of Bloomberg was able to get his hands on these internal memos quickly. The memos from Rob Kostich, the president of Activision, and J. Allen Brack, the president of Blizzard Entertainment — the two of the three major divisions of Activision Blizzard — were appropriate. They were empathetic toward any possible victims within the company, and they pledged zero tolerance for inappropriate behavior. That is appropriate for a company under investigation, as it must clean house if it has any bad apples.

As an aside, a video of a 2010 panel reappeared that made Brack look bad. He was part of a panel along with former World of Warcraft creative director Alex Afrasiabi, who was named in the lawsuit, at a BlizzCon event. A woman asked at a panel why the female characters in Blizzard games looked “like they stepped out of a Victoria’s Secret catalog.” The all-male panel deflected the question with near-mocking humor. None of the male leaders of Blizzard took that serious question about sexist depictions of women seriously. Activision Blizzard told Kotaku that it terminated Afrasiabi for misconduct in 2020 after an internal investigation.

And then Activision Blizzard made a great blunder. Fran Townsend, its head of compliance, issued a memo with blistering criticism of the state, saying the suicide had nothing to do with sex discrimination and some of the allegations were 10 years old. She said the allegations included factually incorrect, old, and out-of-context stories when it came to the “Activision companies of today.”

That last phrase was a slip, because it suggested Activision Blizzard may have been bad in the past but now it’s good. But the biggest mistake Townsend made was to invalidate the complaints of her own employees, before completing any investigations, by saying the lawsuit was “egregious,” “truly meritless,” and “irresponsible.” She at least had the presence of mind not to call the lawsuit a “witch hunt,” which would have raised even more outrage.

As I said, Townsend’s stance was combative, which is good for a company trying to brush back an overzealous state agency. But it was bad form to say that employees who have complained to that agency are part of a “meritless” lawsuit — before the company’s chief compliance officer has the opportunity to fully investigate the complaints. It did not help at all that, days later, Kotaku dug out some photos and texts about an alleged “Cosby suite” at a BlizzCon 2013 event that appeared to verify the “frat boy culture” among Blizzard’s leadership.

Townsend’s statement and other stories about the case triggered a huge negative response on social media, according to an analysis by Spiketrap, which uses AI to analyze social media responses.

Some women stepped forward with their own names and made allegations against current and former male leaders at the company who mistreated them in some way. A forum on Reddit kept track of these developments. This suggests the lawsuit will serve to flush out more witnesses against the company.

Worse for the company, social media sympathizers turned against Activision Blizzard, with fans saying they would no longer buy or play the publisher’s games, and some small game publications saying they would no longer cover the company’s games, like Call of Duty. The company could downplay the importance of these fans and media. But Spiketrap’s data showed that 7.9% of all company conversations (the single largest discussion category) were about uninstalling Call of Duty and Overwatch. This is a real threat that shows the consequences that could get worse if the company further mishandles its response. This shows that, in contrast to years past, in this #MeToo era that people are willing to believe women who have filed complaints, rather than dismiss them as disgruntled workers.

Mike Morhaime is CEO of DreamHaven.

Above: Mike Morhaime is CEO of DreamHaven and a cofounder of Blizzard.

Image Credit: DreamHaven

Mike Morhaime, former president and cofounder of Blizzard, stepped forward three days after the lawsuit with a heartfelt apology to the women of Blizzard. He said he had failed them, and he acknowledged that “real people have been harmed, and some women had terrible experiences.” Morhaime’s comments were honest, powerful, and not defensive. He said he was ashamed.

“It feels like everything I thought I stood for has been washed away,” he wrote.

He said he had tried very hard to create an environment that was “safe and welcoming for people of all genders and backgrounds.” He said he knew it was not perfect, but “clearly, we were far from that goal.”

This was the right thing to say, and it is too bad that it took a former leader outside the company to say it. Yet it came with its own risks. Cher Scarlett, a former Battle.net worker at Blizzard, pointed out to Morhaime that some of this bad behavior happened on his watch. She pointed out the horror of complaining about abusive behavior and having no one do anything about it.

A day later, on Thursday, as the company’s stock price was falling, Kotick could no longer stay silent. Employees put together a response asking for the company to create more independent ways of dealing with the problem, including getting rid of forced arbitration. And they circulated talk of a walkout.

Kotick issued a rare apology, saying that the company’s initial response to the matter was “tone deaf.”

“Every voice matters — and we will do a better job of listening now, and in the future,” Kotick said. “Our initial responses to the issues we face together, and to your concerns, were, quite frankly, tone deaf.”

He said it is imperative that the company, which publishes games like Call of Duty and World of Warcraft, acknowledge all perspectives and experiences and respect the feelings of those who have been mistreated in any way.

Activision Blizzard CEO Bobby Kotick was hands-on with healthcare in the pandemic.

Above: Activision Blizzard CEO Bobby Kotick

Image Credit: Activision Blizzard

Kotick outlined actions the company would take against anyone found to have violated company policies, and he promised those who complained would experience no retaliation. He said the company would address complaints about sexism in games.

Kotick’s message appeared to be an attempt to walk back the hardline stance. Kotick said that ensuring that the company has a safe and welcoming work environment is his highest priority. He said the company would immediately evaluate all leaders across the company.

“The leadership team has heard you loud and clear,” Kotick wrote. “We are taking swift action to be the compassionate, caring company you came to work for and to ensure a safe environment. There is no place anywhere at our company for discrimination, harassment, or unequal treatment of any kind.”

But he also announced that the company had hired the law firm WilmerHale to conduct a review of policies and procedures to ensure that the company maintains best practices to promote a respectful and inclusive workplace. A woman, Stephanie Avakian, who is a member of the management team at WilmerHale and was most recently the director of the United States Securities and Exchange Commission’s Division of Enforcement, would lead the work.

It may have been a good choice, but on the internet, this part of the announcement generated controversy. Many dismissed WilmerHale as an “union-busting” law firm that had been recently used by Amazon to fight its workers’ unionization efforts. Once again, while trying to do good, the company left itself open for even more criticism.

The next day after Kotick’s message, hundreds of employees staged a walkout on Thursday. Thousands more signed a petition asking for more concessions from the company. And so the narrative that could have prevailed with Kotick’s late apology was blunted, and employee anger is still high.

At this point, fans, female victims, employees, and others are hammering the company. And that’s going to be difficult to defend against, as I have discovered myself that it is hard to argue with the internet. This is not my subjective assessment. Spiketrap shows that the sentiment on the Activision Blizzard matter is at 6-out-of-100, meaning it is well inside the negative range.

Why it matters

Above: Spiketrap notes that fans are considering uninstalling Activision Blizzard games.

Image Credit: Spiketrap.io

The reason why this matters is that the company’s reputation is at stake, as well as the legacy of Kotick, who is the longest-serving CEO of a major video game company. The company must be as careful, authentic, honest, and shrewd as it can be at this moment, as it has a lot of enemies at the moment who are looking forward to more missteps. Activision needs to unveil the next Call of Duty game soon, but I can’t imagine that is going to get a good reception anytime soon. And the company has had a couple of thousand open jobs for months now, and it will now get harder to fill those jobs.

Other parties have dogs in this fight. As an example, I counted at least 15 law firms who have announced “investigations” into Activision Blizzard for possible shareholder lawsuits against the company. Those law firms pounced after a few days, as they had to wait for the company’s stock price to fall, as it did starting July 26. It so happened that a stock market correction brought down the company’s stock price as well as much of Nasdaq, but the stock price dip gives those law firms the reason they need to file shareholder lawsuits. They can find angry shareholders who feel like they should have been warned earlier about the risk of sex-discrimination lawsuits at the company, and then they can file shareholder lawsuits against the company. They want to dig out dirt to make the company look bad.

I don’t think the law firms are going to win much money in the long run, but they will try. But it’s no joke for the company’s stock price to be going down during this crisis, as that will draw attention to Kotick, who has been unpopular among gamers for different reasons. Some see him as putting too much emphasis on business matters over creativity of game developers. Others criticize him for taking big bonuses (for a total of $155 million last year, with the bonus related to the company’s extraordinary stock price rise) at a time when he has cut jobs in certain departments. We’re in a volatile period for stock prices right now, but the buck always stops at the CEO. And Activision Blizzard reports its earnings on Tuesday, and Kotick will presumably have to answer questions from analysts about this matter.

One of the interesting things is that we haven’t heard much from the third major division of Activision Blizzard: the mobile game publisher King, maker of Candy Crush Saga. This part of the company makes mobile games for broad audiences, including women. It also likely has a more diverse staff, and it operates independently with its own culture that is likely very different from Activision and Blizzard. King’s own status in this litigation could be very telling.

Ultimately, how a company and its leaders react in a time of crisis is the ultimate test of leadership. I think this is a very serious matter that should not be dismissed as inconsequential. It should be handled with open and clear communication, with authenticity and honesty, and empathy. So far, I see a lot of mistakes.

Update

I’ve heard a lot of criticism about this story and how it is heartless. I’m sorry but it was not my intention to be unempathetic to women and other minorities who have suffered pain and are suffering pain right now. That is why I wrote the first line of the story in that way.

For those of you who have read the entire piece and still disagree with the tone, I apologize for the lack of clarity. I am horrified at the allegations in the lawsuit. I have listened to the emotional stories of women like Cher Scarlet. But I am also horrified that this piece would be viewed as trying to justify the company’s behavior. That is not the intent.

I would like to see justice done, and I am open to hearing more from the women of Activision Blizzard who have stories to tell. I’m not done reporting in this case. I think the top leaders of the company can and should be responsible for making change. I wrote this story as if I were speaking to Bobby Kotick, trying to convince him why he should care about it. I wrote it to say that all of Acitivision Blizzard leadership should care about this, not just because diversity is the right thing to do, but because it also makes business sense.

I wrote this to tell them they must take it seriously, as it represents so many different kinds of threats on matters such as recruiting, the stock price (which if you’re an employee you care about), and the ability to sell games. Many other people have written heartfelt stories about the victims. That is an appeal to emotion and to the heart. This is an appeal to reason and the mind. To make people see why they should care on a business level. Too often, companies wait to let the storm blow over. I do not want that to happen. I want them to change, and I want them to see why there are so many reasons why they need to change.

If you’re wondering what my purpose is, it is not to excuse or apologize for their behavior. It is to convince them that doing nothing is wrong. That is why I wrote these closing sentences: “Ultimately, how a company and its leaders react in a time of crisis is the ultimate test of leadership. I think this is a very serious matter that should not be dismissed as inconsequential. It should be handled with open and clear communication, with authenticity and honesty, and empathy. So far, I see a lot of mistakes.”

Perhaps those should have been the right words to use to start telling the story.

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