Specialist
Former executive at Activision Blizzard
Agenda
- Activision Blizzard’s (NASDAQ: ATVI) operating environment – update on culture issues and potential improvements
- Attrition expectations for next 12-36 months vs typical industry rates
- Content pipeline management expectations, especially around CoD (Call of Duty), and potential further title slippage
- Outlook for 2022 and beyond – organisational structure evolution and downside risks
Questions
1.
Could you discuss the broader state of the video game industry’s culture? There’s a lot of press around the state of Activision Blizzard’s culture. Where do you think we should stack up Activision vs what you would consider industry norms presently?
2.
How much would you say the state of culture differs across the three studio houses? Obviously a lot of the press is around the Blizzard studio with Activision Publishing being separate, but to your point, the two had been married long before King came into the mix.
3.
You mentioned Activision Blizzard began the concerted effort to improve the cultural standard 2-3 years ago. How far along in progress is the company in improving this from the time of occurrence? Obviously, there’s a lot of vintage to the years ago that some of the press in and around the allegations are to present day. Do you think the company is still very early innings in reaching a best-in-class culture?
4.
It seems figures such as former Blizzard co-leader Jen Oneal also aren’t satisfied with how everything has been handled. How are you assessing the drivers that led to her voluntary departure announced in November 2021? Might this cause an even further stalemate given she seemed well-received to lead the studio groups and try to drive cultural improvement?
5.
Do you consider Jen Oneal’s departure a function of how daunting of a task it will be to right the culture, and this should be a bad sign for how quickly and efficiently Activision Blizzard can do this? Do you think there’s any canary in the coal mine from Jen’s departure and her reasons behind it?
6.
Could you discuss the more external backlash, such as Phil Spencer, former Corporate VP and Head of Xbox, and Jim Ryan, CEO at PlayStation, making public comments towards their disappointment in the issues at Activision and how they’ve been handled? How likely are some of those things to be a large wave of criticism rather than a slap on the wrist? Do you expect chance of stagnancy in the company’s culture to have broader implications outside of the internal dynamics?
7.
You mentioned the handling of factors such as showing support to those coming forward was not satisfactory. What milestones would you expect to be in place? Over what expedient timeline do you think these changes need to be made?
8.
How much trust do you think can be regained with the existing board and CEO Bobby Kotick remaining in place, as well as the possibility of further management swaps and putting a fresh new face on the senior leadership team? Is that a table stakes dynamic prior to anything else actually mattering to the broader employee base or could changes be made with the current status?
9.
What’s Activision Blizzard’s bench strength outside of Bobby Kotick? If an eventual departure on his behalf is the most likely way to expediently right the cultural dynamic, how reliable are the internal replacement prospects, so much as would a lot of the fresh faces have to be external?
10.
Do you think a very strong candidate will be hard to come by? How keen might anyone in the industry be to take on the role, given the state of affairs at Activision Blizzard and that Bobby Kotick took a large pay cut?
11.
Even below the senior leaders, obviously there’s been some voluntary churn and some lay-offs across various levels across other Blizzard franchises. How has headcount churn in the video game industry evolved over the last 3-5 years? Was retention an increasing issue regardless of culture dynamics, given the rise and popularity of the video gaming industry?
12.
Would you say Activision was better or worse than industry peers in retaining talent, prior to any cultural issues coming to light? Or does everyone struggle equally with this?
13.
It seems there are a lot of moving pieces around why any employees would go to any studio. What’s the balance between EQ and IQ around getting developers and other employees to stay or actually be hired at Activision, given where the company stands with these cultural issues? How challenging could that be when you have to balance the company’s brands, the game quality, the freedom given in the role and that it’s a lot more than just a pay cheque?
14.
How could difficulties in hiring data scientists and digital marketeers impact the P&L? It seems, aside from the immediate push-out of Overwatch 2 and Diablo IV, that the developer side might be less impacted than the marketing side, meaning title slippage won’t be a big issue. Do you expect the holes in the more marketing esque departments to lead to these games engaging with their target communities on a far lower level?
15.
Is there much risk for more title slippage? You brought up former EVP and General Manager for CoD [Call of Duty] Byron Beede going to EA and it seems the Diablo and Overwatch product leads have exited the business. At the very least, the people at the helm of those franchises’ strategies have been changed. Do you expect content pipeline management to be an issue? Could it not be an issue, given you mentioned how fluid the developer dynamic ends up being?
16.
Would you expect a lot of the dynamics playing out for Activision to be isolated to it in the broader video game industry? The Me Too movement wiped across all of the Hollywood studios. Do you expect things to be that disparately worse for Activision vs other studios and publishers?
17.
Do you think a more centralised model vs the existing federated one would help drive a more unified culture? You’ve commented on King’s culture being orders of magnitude better than Activision Blizzard’s. Would you expect more centralising of the organisational structure to contribute to that coming to parity business-wide?
18.
How large of a risk do you think an eventual CoD fatigue could be, given the CoD franchise’s importance to Activision Blizzard’s business trajectory?
19.
You’ve mentioned some of the avoidance of fatigue comes from engaging with the community in various new ways. Blizzard has, as you’ve mentioned, YouTube channels, CoD League, Warzone and CoD Mobile. Does this capability exist for the other important franchises, such as Diablo, Overwatch and World of Warcraft? Is the ability to engage in new game formats a function of high engagement, or do new game formats improve engagement overall? Do you expect as much success extrapolation of the IP into new game formats as with CoD and the other franchises?
20.
Activision acquired Digital Legends, another mobile studio, in October 2021. The way that I think about it is King, with a push for a match 3, that’s not the same as these role-playing games that would exist for CoD, Overwatch or World of Warcraft. Is that why King could never succeed in developing these games? Do you think Digital Legends provides anything more, or could be continuous collaboration with Tencent and NetEase to work on mobile formats of AAA content?
21.
King has grown its MAU [monthly active user] base, which had historically been stagnant and reliant on “whales” that had been early adopters of Candy Crush on a decades-long basis. Is this broadening player base due to coronavirus, with people sitting at home and downloading more mobile games, but with a likely high churn risk? Do you think anything is allowing for a broadening of the player base beside Candy Crush, whether within the monetisation system or new games?
22.
Is there anything we didn’t do justice to that you think is important to consider over the next 12-24 months when monitoring the Activision Blizzard stories?
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