Today, I’m talking to Jason Schreier, a Bloomberg journalist and author of the new book Play Nice: The Rise, Fall, and Future of Blizzard Entertainment. If you don’t know Blizzard, you do know its games — the studio behind Warcraft, Diablo, and Overwatch has achieved legendary status over three decades. At the same time, the company has become emblematic of many of gaming’s biggest failings. Jason’s book is out on October 8th, and it’s an incredible, detailed accounting of how Blizzard started, grew into a hitmaker and, eventually, became a victim of its own mismanagement. Oh, and there are a series of chaotic acquisitions along the way, culminating in Microsoft’s purchase of Activision Blizzard last year. In this episode, Jason and I get into all of this and more. Links: Play Nice: The Rise, Fall and Future of Blizzard Entertainment | Hachette How Blizzard’s canceled MMO Titan fell apart | Polygon Blizzard was built on crunch, co-founder says, but it’s ‘not sustainable’ | Polygon Inside Activision and Blizzard’s corporate warcraft | Bloomberg Blizzard cofounder’s new company Dreamhaven aims to recreate old magic | Bloomberg Activision Blizzard’s rot goes all the way to the CEO, alleges report | The Verge Activision Blizzard’s workplace problems spurred $75 billion microsoft Deal | WSJ California settles Activision Blizzard gender discrimination lawsuit | The Verge Microsoft completes Activision Blizzard acquisition | The Verge Microsoft lays off 1,900 Activision Blizzard and Xbox employees | The Verge Credits: Decoder is a production of The Verge, and part of the Vox Media Podcast Network. Our producers are Kate Cox and Nick Statt. Our editor is Callie Wright. Our supervising producer is Liam James. The Decoder music is by Breakmaster Cylinder. Learn more about your ad choices. Visit podcastchoices.com/adchoices
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Hello and welcome to Decoder. I'm Nilay Patel, editor-in-chief of The Verge, and Decoder is my show about big ideas and other problems. Today I'm talking to Jason Schreier, a Bloomberg journalist and author of the new book, The Rise, Fall, and Future of Blizzard Entertainment. If you don't know Blizzard, you know it's games.
The studio behind Warcraft, Diablo, and Overwatch is more than 30 years old, and it's achieved a kind of legendary status. At the same time, Blizzard has become emblematic of many of the video game industry's worst tendencies. From shareholder pressures to prioritized monetization over creativity, to the deep sexism that still pervades so much of gaming today.
Jason's book is out on October 8th, and it is an incredible, detailed accounting of how Blizzard started, grew into one of the most beloved and most controversial companies in the world of video games, and then eventually became a victim of its own mismanagement.
Oh, and there are a series of chaotic, deeply culture-clashing acquisitions along the way, culminating with Microsoft closing its deal to buy a combined company known as Activision Blizzard last year in the biggest acquisition in Microsoft's history. As you'll hear Jason say, the story of Blizzard really revolves around two central themes.
One is the inherent tension that exists between art and commerce, particularly commerce at scale. Blizzard's journey from small startup in California to subsidiary of Microsoft with thousands of employees? Well, that's been about as close to M&A hell as you can imagine.
In particular, Jason goes into detail about how merging with Activision, the company behind Call of Duty, set Blizzard on a collision course that would rob it of so much of the creative agency that allowed it to flourish in the 90s.
The other big theme is how industries and intensely insular fandoms, like gaming, often have deeply problematic workplace cultures that take root from the very beginning and refuse to let go. That makes these companies almost impossible to change without industry shaking upheaval.
The state of California filed a massive sexism and discrimination lawsuit against Activision Blizzard in 2021, a moment that would change the course of the company and precipitate its sale to Microsoft the next year. Activision Blizzard in California settled that suit in 2023, shortly after the Microsoft deal closed. There's a lot going on here.
As you'll hear Jason say, the story of Blizzard is a quintessential tale about the perils of capitalism. about what growth and scale will do to a business, especially those in the business of making art, and the compromises that have to be made along the way to keep all that money flowing.
It's also a cautionary tale about a fundamentally creative industry that has, at many times in its history, utterly failed to make room for more diverse voices, creating a ticking time bomb at the heart of even the most beloved institutions. Jason Schreier, you are an investigative journalist who covers the video game industry for Bloomberg.
You have a book out next week called Plain Ice, The Rise, Fall, and Future of Blizzard Entertainment. Welcome to Decoder.
Hello, Neil. Thank you so much for having me on.
I am very excited to talk to you. I don't know if you've caught this, but in our coverage of whatever is going on with Activision, Blizzard, and Microsoft, it feels like Microsoft accidentally caught not the right prize. They worked very hard to make a mistake. That is my feeling. And it's exciting to talk to you because your book is just incredible detailed explanation of this problem.
giant merger company that just got an even bigger merger, and the culture class within it, it's perfect. It doesn't seem a year into it like anyone has had a good time.
No. Microsoft has gone through multiple rounds of layoffs, and a lot of that was focused on Activision Blizzard. Granted, to be fair, I think at least some of those cuts were planned before Microsoft took over, so Microsoft inherited this process. But still, I mean, when I was writing this book, I filed my first draft around January, so right before the first big layoff.
And the original draft ended on kind of an optimistic note, because a lot of people were really psyched about Microsoft, who worked at Blizzard. Because as the book documents, there's this saga of Activision and Blizzard going at it, and them just having totally incompatible values and philosophies about making games, and it caused a lot of problems.
So a lot of people, especially after the California lockdowns, lawsuit and all of the cultural issues. A lot of people were really excited to be out of the Activision rule, the Activision C-suite. And Phil Spencer came to Blizzard's campus. People were lining up to meet him. He was shaking hands. He was playing their games. People were really jazzed.
And then, at the end of January, Microsoft lays off 1,900 people, including hundreds of Blizzard, cancels one of the big games they're working on, the survival game Odyssey, and everyone's just like, oh, Phil Spencer, it's just another executive. They're all the same. Counting on a big corporation to save us was not a good idea. So yeah, quickly wrote a final chapter.
I emailed my editor, I was like, hey, I think we need to do a new ending here.
I want to come back to Microsoft and what happens now and the rationale for that big acquisition and whether that has played out.
But it just occurred to me as I was reading the book that it's hard to talk about all of that unless you actually take the time to understand what Blizzard was, its culture, what you just mentioned, its big fight with Activision's culture after those companies merged, and then how that whole – ball of chaos rolled itself into Microsoft.
So let's start with Blizzard, which is now a division of Microsoft, never shrinking division of Microsoft, but it used to be a behemoth. How did this company start?
Blizzard was the brainchild, really it was the brainchild of one guy named Alan Adham, and he brought along Mike Morhaime. And the two of them, they were both students at UCLA. They were engineering students, and they considered themselves two of the top programmers. They both were really into video games. And they decided, hey, why don't we go and try this? We're young.
We can do this with minimal seed money. They each took a loan of between $10,000 and $15,000 from their families. Alan, I think, took it from his college fund, and Morhaime borrowed it from his grandmother and eventually paid it back. I think he had the check framed in Blizzard's museum later on, many years later.
And the two of them, they said, we want to start a company that makes games that we like to play. A lot of these gaming companies in the 90s were run by business people and business people who didn't really care about games. They just saw this as a product to sell to children and make a bunch of money. And so these guys were like, we want to make games we really like.
And so for the first few years, they just tried to stay afloat. They took on contracts. They worked really closely with a company called Interplay, which was run by Brian Fargo, who was a high school friend of Alan Adham's and took on a lot of conversion contracts to bring these games to other platforms. So it would be like, we're going to bring Lord of the Rings to Amiga.
We're going to bring Battle Chests to DOS or whatever it was back then. And then in 1994, two things happened. One is they had a breakout hit, and that was called Warcraft, and that was the beginning of the Blizzard empire and the beginning of them starting to develop and publish their own games.
And two is that they were purchased by a company called Davidson and Associates, best known for making Math Blaster of all companies. So they became part of this edutainment company. That was the beginning of two kind of parallel paths for Blizzard. growing into this video game developer, making franchises and games that people just absolutely loved.
And two, shuffling from corporate parent to corporate parent along the way as they were trying to do the former. And they just kept growing and making hit after hit from there.
One of the tensions that is just very clear, even from that description, but fleshed out in the you have a bunch of nerds who are just excited to make games. You have a bunch of creatives and they are seemingly uninterested in what it means to run a good company. So then they just bring in some people or they sell themselves to someone else who will be interested in that.
And then there's a culture war, right? Like you should make great product on schedule. We should make fun products that we want to make. You should make sequels, all this stuff. And that is kind of just expressed in these early years through crunch, right? From 94 to 2000, it's Warcraft, Warcraft 2, Starcraft, Diablo, Diablo 2. And your book, you have all kinds of reporting.
This is just excessive crunch. They are just working all the time, and it's their company, so it's fine. But this stays – the culture. My reading of it is like, they're just a bunch of kids who want to have fun making video games. And so they work themselves to death. And then the suits are like, oh, this is how it should work.
I mean, 1990s crunch is kind of a different world from crunch that the video game industry or even the tech industry faces today. Back then, it was just a different dimension. It was your entire life is dedicated to this. And it was tied into the social elements of Blizzard in that everybody who worked there was friends with each other. They all wanted to be hanging out.
They were voluntarily staying after work just to play games with each other and hang out with their closest friends or like going out to dinner or like playing Magic the Gathering in the halls or whatever it was. So for them, it was work and life were so intertwined that it was hard to separate the two.
And then there were some periods, Starcraft in particular, which was like the science fiction real-time strategy game that they made. That was really brutal. That was like, we are going to work. Every single night, we are going to work. Weekends, this is really tough."
To your point earlier, I think that at that point in Blizzard's lifecycle, they weren't facing the same kinds of pressures from their corporate parent as they were a little bit later.
Also, their executive team, Mike Morhaime, Alan Adham, Paul Sams, who came in a little bit later, they were all really good at shielding the company from corporate pressures and saying, hey, if you just leave us alone and let us do what we want, we will make you hits.
So a lot of the crunch was really, it was either self-imposed or kind of imposed from Blizzard's executive layer rather than their corporate parents, at least at the time. For a long time, they were able to deliver on that promise and really mollify their corporate parents despite having to go through turmoil.
One of the craziest stories in the book is about Sendent, which was their parent company. So in 1996, Davidson and Associates sold their company to CUC, which was a mail order catalog company. And then a couple of years later, CUC merges with HFS, which is a healthcare company. Of course. And it's all just nuts. And everyone's like, what is going on here?
And they formed this company called Sendant. And then suddenly, one day, everybody wakes up to this press release from the SEC saying that Sendant was engaged in widespread fraud. And they're like, wait a minute, that's not good. And it turns out Sendant is cooking the books. Their CEO, Walter Forbes, goes to jail, prosecuted by Chris Christie, of all people.
That's the type of thing that would just happen to their corporate parents in the 90s. It's a miracle that they were able to make any games with the distractions and the craziness that was happening above them.
This is the thing that I'm focused on is it feels like you start a company. It's a bunch of people who want to work together. Your first hundred or your first thousand employees, that's their whole lives. And then you build a culture around working 24-7 with your friends. And that thing is inherently unscalable. Your next hundred or your next thousand employees might have their own lives.
And so then demanding that they work as hard as that initial wave of people who chose this life leads just sort of inexorably to weird labor issues and weird culture issues. Is that your read on Blizzard?
Well, so those people also grow up and find spouses and children. Yeah, I think Blizzard got better at crunch over time. I think the more deeper-setted issue was that from the beginning, Blizzard was almost entirely men, and working there felt like being at a frat house. And I think that had its pros and its cons for the people who worked there.
But if you were a woman who came in and worked there, it was super complicated, and you had to try to fit into the boys' club, or you might feel uncomfortable. And there might be all sorts of problems that you run into if you work there as a woman.
And those were the sorts of things that would then bubble up later, especially as people started getting rich and famous because of World of Warcraft, which really transformed the company. And then some of that, some of the kind of the combination of that geekdom combined with fame and fortune, turned some people into self-proclaimed rock stars, and made them do some awful things.
That, I think, was more of an issue that kind of lasted than the crunch thing. I think crunch was definitely an issue for a lot of people, and during the early days it was especially an issue because a lot of people during various stages of Blizzard's history felt like they weren't being paid appropriately, they weren't getting rewarded for all the crazy hours they were putting in.
But the kind of the culture of sexism and discrimination that would bubble up and be talked about much later, I think that was a bigger problem that was kind of rooted in that 90s culture.
You have a lot of hints about this in sort of the early chapters of the book. There's stories about looking at porn in the office and it being a boys club and basically men being men in an office unchecked by the cultural norms.
Yeah, men in their early 20s.
In the 90s. It was not a great time. Is that all just the – this is the 90s and this is what it was like? Is this something specific to Blizzard in that moment? Is it a combination of the two?
I think it's both. I think there are a couple of things that are specific to Blizzard.
I mean, first and foremost, Blizzard over the years became so beloved that when, in 2021, California sued Activision Blizzard for sexual misconduct and discrimination, and a lot of the allegations were about Blizzard, the reason it resonated so strongly, I think, is because Blizzard was so beloved that people were like, oh my god, like... Come on, Blizzard? We love Blizzard.
It'd be like workplace misconduct allegations coming out of Nintendo. It's like one of the most beloved gaming companies on the planet. So that was a big part of it. I think, yeah, a lot of companies were like this in the 90s. Some changed, some evolved, some didn't, some really struggled to. I think it's really difficult for a company to change its culture.
And it's especially difficult when you're a company like Blizzard, where tenure is really valued above a lot of other things. Tenure really matters at Blizzard. People used to say, oh, you've only been here for five years. You don't know Blizzard, right? Because there were people who stayed there for 20 plus years. That causes a couple of problems.
One is that if you're kind of a problematic or borderline problematic person... you're kind of entrenched in the company and it's kind of like, oh, he is the creepy uncle, whatever. That guy's just being that guy. That's one aspect of it.
The other aspect, and this I think is the most kind of insidious, is that a lot of those people who are entrenched in the company and at the highest levels of the company are men because That's who was there at Blizzard in the 90s. So if you're a woman coming into Blizzard in, say, 2004, and you're like, oh, I love video games. I grew up playing Warcraft. I want to come work at Blizzard.
This is really cool. It's hard to see a path to promotion and making your way up. And there are a lot of barriers that are in your way because the company is run by men. And that has never changed. Blizzard has been around for almost 34 years now. And to this day, the company has never had a female creative director on one of its games, which is a crazy fact.
But that's the reality of kind of this ingrained culture there. And it's really tough to overcome that.
We need to take a quick break. We'll be right back.
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We're back with Bloomberg journalist Jason Schreier talking about his book Play Nice and the evolution of the gaming giant Blizzard. Before the break, we covered Blizzard's beginnings in the 90s and how its work culture was deeply rooted in the sexist boys club atmosphere of the game industry at the time. That, in turn, promoted a pretty poor work-life balance dominated by excessive crunch.
It also ensured the only people who ever got promoted to positions of leadership were men in their 20s, who hung out, ate, and even slept in the office at virtually all hours of the day. These issues would prove very difficult to fix, and they would only continue to fester as Blizzard became larger and more diverse. We'll get to that in a little bit.
Jason and I also talked about Blizzard's ill-fated ownership saga, as the company had to survive under a series of increasingly bizarre M&A deals with businesses that had almost nothing to do with making art. As you're about to hear Jason explain, those early years of Blizzard, when it was owned by the makers of Math Blaster, were a blessing.
And perhaps the only and last time in the history of the company where it wasn't constantly under pressure to compromise on its creative ideals to make a set of new owners more money. So Activision shows up. Why sell to Activision?
After the send-in tobacco back in 1998, Blizzard wound up getting sold to this company called Vivendi, a French water company, which again, going from a mail order catalog company to like this merger with a health company to like a French utilities company. They're just like, what is going on here? So they're part of Vivendi for a little while.
Vivendi winds up with this games division, Vivendi Games. This was back when they were also like involved in Universal. So Vivendi had this whole entertainment strategy. Then their CEO got in all sorts of trouble for misappropriation of funds. That sort of thing, as the cycle continues. Basically, Vivendi wound up in a ton of debt, billions in debt, and was just facing all sorts of problems.
There were rumors in the news every year about how they were in trouble and they were going to sell the games division, and it was really just not pleasant to be there, to be part of Blizzard, because you're just like, man, this sucks. We're making all this cool stuff, and we have no idea what's going to happen to our company.
At one point, Mike Morhaime and his executive crew even talked about, like, can we buy out Blizzard? What would that look like? Which is a fun little alternate history speculation there. But anyway, so 2007 is when Vivendi Games announces they're going to merge with Activision.
So it's not a buyout, it's a merger, and it becomes Activision Blizzard, because Blizzard is like the crown jewel of Vivendi Games. At the time, it seemed like a really good fit. And I think from the Blizzard side, it was like, okay, we've gone through all this corporate turmoil. Here is Activision. They're one of the most successful video game companies on the planet.
And the book Play Nice kind of tracks the history, like the rise of Bobby Kotick and the history of Activision. We could work well together. And also Activision is really good on consoles. We're a PC gaming company. This is actually a really good potential relationship. And it is for a while. For a few years, things go really well.
Blizzard is firing on all cylinders, WoW is growing every single year, and things seem to be going quite well. Blizzard always delivered on that promise. For 20 years, they delivered on the promise of, you leave us alone, you give us time, you let us delay the games a few times, and we will get you hits no matter what. And that changed in 2013 when they canceled this project called Titan.
that was promised as the successor to World of Warcraft. And when Titan was canceled, that changed everything for the company, because then Activision Blizzard, run by Bobby Kotick, could look over and be like, hey, you promised us that you would deliver nonstop hits if we let you have all the independence and autonomy that you wanted, and you didn't, and you failed.
You threw $80 million into a furnace. So we can't give you that same level of autonomy anymore. And he didn't directly say this, but it became clear in the coming months and years that as the pressure started, that Activision began to feel like Blizzard was failing. Suddenly, Activision is looking over and they're like, hey, we need to get some adults in the room here.
And what they wind up doing is they have Blizzard hire... a new CTO and a new CFO. And for the CFO position, they wind up recommending this guy who, so Bobby Kotick has this second-in-command Thomas Tipple, and Thomas Tipple knows this guy from his days at Procter & Gamble named Armin Zerza.
And Armin Zerza comes in as the new Blizzard CFO, and he is not somebody that a lot of Blizzard folks get along with, because he comes in and he's like, why can't we treat these games like diapers and soap and detergent and just ship them and start a new factory to make more of them? He has never made games before. He comes in with a very different perspective.
He doesn't really understand video game fans. And he tries. He spends a little bit of time playing World of Warcraft. He tries to get it, but he just rubs people the wrong way within Blizzard. And at the same time as that's happening, Activision is applying more pressure from above on the Blizzard executive circle.
And it really starts hitting ahead around 2017, 2018, to the point where Mike Morhaime who is this beloved CEO of Blizzard and the co-founder of the company, he resigns. And he writes a letter, an email to Bobby Kotick towards the end of things, I got a hold of and quoted from in the book.
He's like, hey, we need to set boundaries between Activision Blizzard and Blizzard, between the parent company and us, because you guys are interfering with our operations. And he says this way more politely, but basically that you guys... We need to preserve our independence, which it seems like Activision is not interested in doing.
Activision very much wants to come in and make everybody work the Activision way. And so the Activision way, I think I should back up and explain here for a second, is the Bobby Kotick way, which is to treat video game franchises as, in his words, products to be exploited, quote unquote. And what that means is everything needs to come out once a year at minimum.
More than once a year, ideally, but at a minimum once a year. And you look at all the franchises that Activision has had, and that has been their strategy. Guitar Hero, Tony Hawk's Pro Skater, Skylanders, and most of all, Call of Duty. Call of Duty is the only one it's worked for. All the others just died unceremoniously.
But because it worked so well with Call of Duty, Activision has turned it into this mega corporation. And so that is the kind of Activision mentality. It's like, commercial takes priority over development. We see games as products. We want them to be great. We want people to love them, but we also want them to be on a predictable schedule, coming out every year. And Blizzard is like the opposite.
Remember, from the beginning, Blizzard had been like, you give us time. We want time to spend on this art. Critics of Blizzard would be like, hey, you guys are really abusing that notion because nowadays, by this point, mid-2010s, like around 2018, they've been working on projects. Obviously, Titan was a big one that was like six years in development.
They've been taking a lot of time, like more time than some of these games probably needed to take, especially now that they were entering the world of mobile, which generally takes a lot more faster than Blizzard. At Blizzard, a mobile game might take four or five, six years. In other companies, it could take six months.
Blizzard people would argue, well, that's how we make the best games in the world. That's why we've never released a bad game. Activision people would be like, yeah, but we got shareholders and quarters to hit and we have a plan.
And if you tell us this game is going to be out on this date and then you fail to deliver, that screws us over because our investors don't like that and our stock might take. So it's really this fundamental divide that comes to a head with Morhaime's resignation. And from there, Activision really starts taking over.
So there's this culture clash between Activision and Blizzard. It seems like Activision sort of wins. Along the way, they buy King, which makes Candy Crush. Once you have that diversification, shouldn't the pressure come down? Like literally Candy Crush whales exist. That is the biggest piece of Apple services revenue outside of the Google search deal is
Shouldn't that bring down the temperature and say, okay, you can make some art?
It's funny you say that because I think an argument at Blizzard all the time that people like Mike Morhaime and his C-suite would make is if we delay a game, one of the reasons we're part of this massive company is so something else can help fill this ladder. You guys can save the quarter this year and then maybe we can save the quarter next year and that sort of thing.
But that was a difficult argument to make to the Activision bosses because they... had all sorts of charts and numbers and reasons that Blizzard was failing. There was a lot of just talk about Blizzard failing to deliver on fans' expectations, failing to live up to what fans hoped for.
The biggest point of contention, I think, was over World of Warcraft and how World of Warcraft expansions each took two years to make. And that drove the Activision people crazy. Because Blizzard would say, we would love to speed up the cadence of this. People love expansions. We want to get one going every single year. And they tried all sorts of things to make that happen.
And Activision people would say, well, why don't you just move everybody to the WoW team? Why don't you put thousands of people on the WoW team? And Blizzard would be like, no, we want people experimenting with new things. We want to give our talent agency in deciding what they want to do. And Activision was like, what? Well, that doesn't make sense. We just have everybody on Call of Duty here.
And that was the point of contention for a very, very long time, because Blizzard was not able to speed up development of WoW expansions. Activision said, throw people at the problem, hire hundreds of people and make that work. Blizzard said, no, that doesn't work for us. And on and on the battle continued. And then the same sort of thing happened with Overwatch.
After that took off, Blizzard was trying to make a sequel. Activision was like, throw more people at the problem. Blizzard was like, no, we don't want to do that.
So you've got this company that's at war with itself that goes on for quite some time. And then the culture issues come to a real head, right? In 2021, state of California sues Activision Blizzard. They alleged a culture of, quote, constant sexual harassment. Everyone's lawyers will remind you that that case was eventually dismissed in large chunks and modified. It was settled.
It was settled for $55 million. It was settled for $55 million. The Wall Street Journal had an article saying that Bobby Kotick knew what was going on. He would tell you that he did not and that reporting was misplaced. There were petitions to have executives changed. And then Microsoft basically swoops into this mess. Right. All that stuff is happening in 2021, late 2021, early 2022.
Microsoft is like, we're just going to buy this and fix it. All the reporting at the time made it seem like they saw this huge, important game publisher in turmoil. And they're like, oh, this is our in. Is that basically what happened?
They certainly saw an opportunity to get Activision Blizzard at a discount, although it wasn't too much of a discount. I mean, $69 billion, it's pretty wild. It's one of the biggest acquisitions in Microsoft history, not the biggest. Yeah, and one of the biggest in business history, certainly the biggest in video game history. Yeah, I mean, it was pretty titanic.
I think Phil Spencer at Microsoft, he had spent a long years just gobbling up studios. They had bought Bethesda a few years earlier, another substantial big game publisher. For him, this was like a big coup to be like, we're going to get everything. We're going to be like Thanos with his Infinity Stones and gobble up the entire video game industry.
And I think he saw a moment of weakness at Activision and decided to jump in. And Bobby Kotick, after he got the call, he started calling other companies and was like, hey, would you guys outbid them? But nobody was interested. Only Xbox wanted to do it. This was also a time, end of 2021, beginning of 2022, when interest rates were incredibly low and borrowing money was cheap.
And the economic climate was much different than it was even a year later. So that also played a role in this whole thing.
Also, this is like middle pandemic, everyone's inside. And for whatever reason, the American business leaders decided no one would ever go back outside. Right. So we're spending a lot of money on inside stuff.
The entire video game industry was just so short-sighted. It's pretty wild. They made this massive purchase. I think they saw an opportunity. Activision Blizzard's market cap had fallen pretty hard. I think they went from a high of like over $100 per share to something like 70, maybe even 65, at the point that they were ultimately purchased by Microsoft.
It seemed like a good move, I suppose, to Microsoft at the time, and to fit into their strategy of just looking around and saying, hey, we haven't been able to compete with these other big game companies by making games ourselves, so we're just going to gobble up everything and try to make games with other people's talent.
Whether or not that was a successful acquisition, I think, still remains to be seen. Yeah.
We're going to come to that. At the time, Phil Spencer was on the show, and he basically made the case that they wanted to buy King. Because all the regulators were looking at Call of Duty, and are you going to make Call of Duty exclusive to the Xbox? Microsoft was like, no. And Phil, pretty loudly, was like, we need the Candy Crush money. That's what I want. We have no presence in mobile.
We've already lost this generation. We don't know what's going to happen in the next one. We need a presence in mobile. I'm buying King. Did that ever hold water with you?
Yeah, it makes sense. It's true that they didn't have a presence on mobile. They wanted to put together an Xbox mobile store. They wanted to compete on as many fronts as possible, because yes, I believe the PlayStation 5 has outsold it twofold at this point, PlayStation 5 being the biggest rival to the new Xbox. And so they're not in a position where they can compete on that front.
So yes, it definitely makes sense that they would want King. I certainly don't think it was just about King. Obviously, having Call of Duty and World of Warcraft, those are two pretty substantial... revenue drivers for a company like Xbox.
And looking at the numbers, I mean, on recent Microsoft earnings, they've reported that any growth in the Xbox business essentially has been attributed to Activision, Blizzard, that part of it. So it's not just King that is giving them growth. If you're forward-thinking, you might be like, well, mobile's the future, which, I mean, I think that's arguable.
And mobile has a tendency to be concentrated of the top, top games are making the most money. And for everybody else, it's much harder to penetrate. But yeah, I mean, definitely a big part of it. King was definitely the kind of the quiet moneymaker that came along for the ride.
The reason I ask that question is Microsoft felt for a minute like it was going to make a big bet on game streaming, a cloud service for games. It would show up on TVs, on phones, whatever. They ran into whatever Apple App Store problems they ran into. We'll see how those regulatory fights play out. But that bet seems to have diminished significantly.
And so now owning all the big studios for the big bet on how distribution will change seems like you're just holding the bag on a bunch of big studios and the second place console. Do you think that bet's going to pay off? Do you think they walked away from it? Are they just biding their time?
I don't know. I mean, Xbox's strategy is incomprehensible to most outside of Star Wars. That's where I was getting to. Do you see the strategy now that they have Activision Blizzard? It doesn't make any sense. They can't even be consistent in their messaging about which games will be exclusive to Xbox consoles and which games will be also released on PlayStation. They're
changing their minds every few months, it seems. I don't know what they're thinking, and I don't know how it all fits in. I mean, from one point of view, it's like, well, this is going to make us a lot of money. At some point, we will break even on this acquisition. So it was worth it on that front. We're making so much revenue from, wow, Call of Duty, King, maybe it's worth it.
And from a pure kind of math business perspective, that carries some weight with me. This idea, I think CEOs tend to think in these kind of grand strategy terms where it's like, we must have a branch on mobile. And that's the way you appeal to investors, right? It's not by saying we are making more money than we did last year.
It's by saying, here's our AI strategy and that's what boosts your stock 10%, right? So for them, it's like, we need to be talking about mobile and cloud and blah, blah, blah, blah, all these other kind of futuristic buzzwords that make investors happy. Whereas if you look at the numbers, it probably makes sense, but like the overall grand strategy, whatever.
So Microsoft gets into mobile and maybe they make some money there. What does that mean for Xbox owners? What does that mean for the Xbox ecosystem? Who knows? Like it's all kind of throwing a bunch of darts at a board and like hoping a couple of them stick.
One dart that is constantly getting thrown at the board is layoffs, right? The way that they're making the revenue pay for itself is by making sure the costs are increasingly low. Even as we're talking, there's Warnack notices being filed earlier this week. It's like 400 more people across three Activision Blizzard offices are going to be laid off.
Is that going to slow down as this industry reached the end of this layoff cycle or are we going to see more of them?
I think they announced like 650 people in early September. I think that was part of that. This has been a year of layoffs for every single video game company and a lot of tech companies too. This isn't just a Microsoft exclusive problem, but it's certainly a problem for a company that, I mean, within Microsoft, and this is something that we've been reporting on a few times at Bloomberg.
So Xbox for a long time was given a lot of autonomy and been allowed to do its own thing. And then suddenly Xbox is like, hey, we want to spend $69 billion on Activision Blizzard. And that deal closes and Satya Nadella and Amy Hood and Microsoft are like, how much did you just spend? Let's take a closer look at those P&Ls.
And so there's been a ton more pressure on the Xbox folks over the last year to get
super profitable get those profits up and a large part of that is cost cutting and that's why they've been making so many cuts some of them have been more quiet even like there have been a lot of cases of like them not backfilling roles or them asking people to take buyouts and that's been a little bit less like a little bit more under the radar too and also cutting down on travel expenses a lot of those things that companies do and it's like hey we're in belt tightening mode so yes within xbox it's definitely gone to lean times for those folks
We need to take another quick break.
We'll be right back.
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We're back with Bloomberg journalist and PlayNice author Jason Schreier discussing the circumstances under which Blizzard became a division of Microsoft after nearly three decades of shuffling corporate ownership. We just talked about how a major instigating factor for the game industry's biggest ever acquisition was Activision Blizzard's toxic culture.
That included years of alleged sexism, discrimination, and harassment inside of Blizzard itself. So that's something I wanted to talk to Jason about. Has Activision Blizzard fixed any of these issues since that big California lawsuit? Has Microsoft? And how far might the industry at large still have to go? Have they solved the culture problems, the sexism problems? Have they cleaned that up?
It's not something that people can ever really solve. It's something that's an ongoing conversation, especially in these male-dominated industries. And the video game industry is still mostly men. I think that the most recent stat I saw at Activision Blizzard was they had something like 26 or 27% people identify as women or non-binary. And so there's always going to be something.
I think for a lot of people, the bigger issue at Blizzard was not so much that there was harassment or discrimination because those things... are going to happen at any company of thousands of people, the bigger issue for a lot of people was that HR didn't really do much about it. Or like that people didn't seem to be fired or punished when they were accused of that sort of thing.
Or that people would complain about not being paid equitably and just be told that their problems weren't a big deal or like that it wasn't true, gaslit or told they were making it up or whatever it was. There were a lot of kind of these systemic issues that I think Blizzard had a really poor infrastructure for dealing with. And that, I don't know if it's something that they fixed.
It's certainly something that has been talked about a lot more. It's certainly something that they've said that they have people coming in to fix, but it's the type of thing where it's difficult to know until there's another critical mass of people all talking about something.
Even with the Blizzard, like the lawsuit, and I get into this a lot in the book, the lawsuit, it had some problems for sure. It was pretty sloppy. It was misleading in a lot of places. You can write anything in a lawsuit complaint.
So it definitely, it wasn't a hundred percent accurate, but it did capture this fundamental truth for a lot of people, especially women who work there, which is that like, Hey, there are some big problems here and here's my story. And so a lot of people came out in public to tell their stories. And that's what kind of led to this big cultural reckoning for Blizzard at the time.
You kind of need to have that again at some point and have an ongoing conversation at some point to really know if things have changed or if things have stayed the same. And I think internally, these companies try to have those conversations, try to have big summits where they get into that sort of thing and hopefully leads to more changes than it did in the past.
But yeah, I mean, for any company like this, you have to just be working at it every day in order to actually make improvements. So it's never a fixed or a done thing. It's always just this ongoing battle.
One of the things that I think about a lot when it comes to games and game companies is the tension between we are a bunch of artists who make culture. The culture impacts people. It makes people feel feelings. It's art. We're going to act like artists and rock stars. Oh, by the way, this is also a software company. And these things, these projects take six years, seven years.
Like.
Taylor Swift is a billion-dollar corporation, but she gets to make all the decisions. But that's not the case for a company like Blizzard or Activision. It feels like the video game industry has just been reckoning with that tension for a long time. Blizzard is sort of a paradigmatic example of that tension. Has that changed? Have we built systems to deal with it yet?
Because it doesn't seem like anyone's figured it out. But I'm curious from your perspective.
I think the biggest issue and the core tension, the reason for that tension, like the explanation behind this is that budgets have gotten so big in the video game industry because they're taking so long. These games to make, a few years ago, 10 years ago, 15 years ago, the average time for a game was like two to three years. And now it's like five to six years, which means...
twice as much of a budget. You're essentially paying your staff for double the time. Now we're seeing budgets in the hundreds of millions. It's pretty wild. And by necessity, these companies have to be publicly traded because they're the only ones who can afford to make those kinds of games.
And if you're publicly traded, you are in service to your shareholders and your board of director and watching that stock tick up. In Blizzard's case, it's really interesting. I big turning point for this company was releasing World of Warcraft, because throughout the 90s and early 2000s, they were really successful, hit after hit, just constantly growing.
But it wasn't until World of Warcraft that they became an empire. And suddenly they went, over the course of just a few years, they went from a company of hundreds to a company of thousands. Soon enough, they merged with Activision. And for a while, that was good, until the Titan debacle that I mentioned.
And then Bobby Kotick and Activision started applying more pressure because they felt like Blizzard was not delivering, was failing to meet the expectations that they had. And obviously, there are a lot of twists and turns along the way, a lot of ups and downs in that relationship as time went on.
But fundamentally, you have this company that is faced with this challenge of supporting World of Warcraft, and that means hiring thousands of staff because this game is the biggest thing on the planet. And to do that, you need to operate at a much bigger scale. It's really just growth and scale and size.
And this, to me, the book, Play Nice, is a story about what that does to people and companies. scaling up really does, which I think is a very familiar story in the tech world and in a lot of the gaming world. And the more you scale up, the more you need to look around and be like, oh, okay, are we going to have to be publicly traded and deal with those compromises?
Are we going to have to bring in VCs and make different kinds of compromises or private equity and watch our company get gutted or something like that? So growth is really fundamentally what it all comes down to. Too much scale.
This criticism of the games industry is a long one. It has been around for a while. It has been loud for a while. The industry has reacted in different ways. Gamers, for whatever it's worth, have reacted in different ways at different times. Have things changed? Are we making new companies that have learned lessons? Or are we still making companies in the mold of Blizzard?
Yeah, it's funny you ask that because Blizzard's co-founder Mike Morhaime is just like starting to talk about his new company. He started this company called Dreamhaven four years ago. And they just started making the press rounds. They're about to announce their new game. And just a few days ago, I interviewed him and a couple other top people there.
And one thing that I found really noteworthy was that one of the people I was talking to was this woman named Erin, who was the director of the game they're about to announce. And it was like, oh, hey, okay, there's a female creative director here. This is a change from the Blizzard days.
And that's not to say that I've interviewed people there and checked on the culture and made sure that everything's on the up and up or anything, because I haven't done that yet, question mark.
But even that is just a sign that someone like Mike Morhaime recognized some of the problems and is like, okay, we want an atmosphere where we can give a woman an opportunity here, because it seems like that was an issue at Blizzard. So Yes, absolutely things have changed. I mean, there's been progress overall, like across the industry.
Blizzard also recently got its first female executive producer, a woman named Holly Longdale, who's the head of World of Warcraft now. So there is change very slowly, but very surely. One thing that's happened in recent years is that employees are a lot more willing to call out the BS. A lot of people are willing to take to Twitter and call out their bosses. They're willing to whistleblow.
They're willing to make a scene within the company on Slack and do all that stuff. And that can have some negatives and repercussions, especially when someone's voice gets amplified, but they're not necessarily telling the truth. They're like a disgruntled employee. But internally, it has led to some real progress, I think, at a lot of gaming companies.
There's Microsoft's corporate culture. There's Activision's corporate culture. There's Blizzard's corporate culture. There's the mashup of all of them. There's a desire to improve. There's the employees wanting it to improve. What to make of this at the end of this all?
Yeah.
Is there still a Blizzard?
I mean, there's definitely still a Blizzard. They just released this new WoW expansion that people really love. They have this new Diablo 4 expansion coming out in just a few days that is pretty highly anticipated. There's definitely still a Blizzard, even if it's a little bit different than it was in the past.
I think it's more of a big oil tanker than it is the nimble, creative boat that it was back in the day. But that's been the case for a long time. I think there was more optimism under Microsoft a year ago than there is today. Because of all the cuts. And I think being at a company where layoffs are hitting twice a year is just miserable no matter what.
And I think people need to get through that to really just feel like morale is going to go up. But Blizzard also, they have a new president now, Johanna Fares. For the first time, a woman is leading the company. And so that has been... a big deal. A lot of people seem to like her, and it remains to be seen the big picture changes she's going to enact. But a lot of people are hopeful.
There have been some more recent issues that I think are still not quite addressed, such as return to office. That's a big ongoing conversation because Blizzard made people return to office. And I have stories in the book about people who had to return to office, and then three months later they were laid off, which is incredibly fucked.
It remains to be seen, and it's only been a year since Microsoft took over, so there's a lot of time left to make these big changes in cultural change, but it remains to be seen what kind of long-term effects this will have.
And something I always think about is when the Activision-Blizzard merger happened, it took six years before problems really started, and they didn't really manifest to the broader company until a few more years after that. So it's hard to really know. It takes a long time before you really know what the repercussions of a massive M&A deal really are.
So let's end where we started. Microsoft bought this thing, this chaos ball. Why? What was it for?
It's a fantastic question. It was shiny. Money was cheap at the time. I think being able to make the headlines of, oh my God, Xbox is this powerhouse. I'm sure that was a part of it. It remains to be seen. Like, who knows? Microsoft strategy. It's been such a mess, like Xbox strategy as a whole this year. that it's really hard to tell.
A lot of people fantasized about, oh my god, Microsoft, they're going to bring back StarCraft and let the Age of Empires people make StarCraft. Or maybe a new WoW expansion will be made by, I don't know, maybe 343, the Halo makers. Maybe they'll get into Overwatch. Maybe Blizzard will make a Halo game. But none of this None of that is real life.
All of that is just the fun fantasizing that happens when a merger like this occurs. In real life, I think business continues as usual, and we'll see what happens five years from now, or if they just sever Blizzard and shuffle Blizzard off to some other corporate owner, which I wouldn't be super shocked if that happened. Not to say that's a prediction.
I mean, that is the through line of the book, I have to say, is Blizzard gets sold.
Yeah. Yeah, yeah, yeah, yeah.
Speaking of which, the book is Play Nice, The Rise, Fall, and Future of Blizzard Entertainment. Jason, it's a great book. Thank you so much for joining the show.
Yeah, thanks so much, Eli. Thanks for having me.
I'd like to thank Jason Schreier for taking time to join me on Decoder today, and thank you for listening. I hope you enjoyed it. His new book, Play Nice, The Rise, Fall, and Future of Blizzard Entertainment is out on October 8th. If you are at all interested in games or giant companies buying each other, you should pick it up.
It is the definitive account of the wild history of Blizzard, and it really just tells a fascinating story about the modern video game industry. You'll learn a lot. If you'd like to let us know what you thought about this episode or really anything else about Decoder, drop us a line. You can email us at decoderattheverge.com. We really do read all the emails.
Or you can hit me up directly on threads. I'm at reckless1280. We also have a TikTok account for as long as there is TikTok. Check it out. It's at decoderpod. It's a lot of fun. If you like Decoder, please share it with your friends. Subscribe wherever you get your podcasts. If you can help me out, leave us some five-star reviews in those podcast apps. It's been a minute.
Decoder is a production of Urge and part of the Vox Media Podcast Network. Our producers are Kate Cox and Nick Statt. Our editor is Callie Wright. Our supervising producer is Liam James. The Decoder music is by Breakmaster Sound. We'll see you next time.
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