Inside the Bobby Kotick Saga

Activision Blizzard CEO Bobby Kotick
Photo by J. Emilio Flores via Getty Images)
Dylan Byers
November 17, 2021

The Bobby Kotick story isn’t well known outside of business and gaming circles, but in terms of sheer narrative drama it’s probably deserving of the Hollywood treatment. Thirty years ago, after launching a tech company in his dorm room, securing an investment from Steve Wynn (in a casino basement), and then dropping out of college on the advice of Steve Jobs, Kotick raised $400,000 to buy an insolvent gaming company. Today, that company, Activision Blizzard, is worth $52 billion, has nearly 10,000 employees, and produces some of the most popular video games on the planet. Herb Allen III, the president of Allen & Company, has called it “one of the great success stories of all time.”

How does the story end? We’re about to find out. On Tuesday, The Wall Street Journal published a damning report alleging that Kotick was long aware of sexual misconduct allegations at his company—despite his claims to the contrary—and failed to inform his board. The report also says that Kotick intervened to save an employee from being fired for alleged sexual harassment despite the recommendations of his human resources department and other supervisors. And while Kotick himself is not accused of sexual misconduct, there are two allegations of him making threatening remarks toward women: one to an assistant, another to a flight attendant on his private jet.

These revelations, which come amid an S.E.C. investigation into the company’s handling of sexual misconduct, as well as a lawsuit from the state of California concerning Activision’s “frat boy” culture, have left the Sun Valley set speculating over their friend’s future. At Activision headquarters in Santa Monica, around 100 current and former employees staged a walkout demanding Kotick’s resignation. Vox Media’s gaming news site Polygon also called on Kotick to resign, while The Information concurred that it was time for “fresh blood at the top.”

I will leave questions about what should happen to others, and focus instead on what will happen—or at least what is likely to happen, based on the conversations I’ve had this week with several sources close to Kotick, as well as those familiar with the deliberations taking place at the company. In the near term, barring any new revelations, Kotick isn’t going anywhere. He has no intention of stepping down—he takes far too much pride in his empire and his legacy, and you don’t create a nothingburger into a $52 billion colossus without developing a will of steel in the process. 

Perhaps more critically, however, Kotick has the support of his board, which isn’t going to depose him because of murky questions of what he knew and when, my sources said. On Tuesday, the board released a statement expressing confidence in his leadership and his commitment to achieving new workplace goals, which include “a zero tolerance harassment policy.” While Kotick’s behavior may be disruptive to the business—Activision stock fell 6 percent yesterday, and is down another 3 percent today—it would be far more economically harmful to force out a visionary C.E.O. with no clear plan in place for succession. And at the end of the day, the board has the cloud cover of saying that they are looking out for the company’s shareholders.

The X factor here is how Kotick’s leadership and management of the misconduct issues will impact Activision’s production schedule. Earlier this month, the company announced that it would be delaying the release of two popular titles, Overwatch 2 and Diablo IV, past 2022. The stated reason was that the games needed more time to reach their “full potential,” but a source familiar with the matter described the delays as a “fuck you” from Activision developers to Kotick over his management. And that middle finger took a far greater toll on Activision stock than the Journal report: Shares of $ATVI dropped 15 percent on the news.

As is so often the case in business, Kotick’s fate will be determined by Wall Street sentiment, which in turn depends on whether or not he can inspire his producers and developers and engineers to deliver games on schedule. If Kotick announces the delay of more titles, and the stock falls another 15 percent, the board can start questioning whether his management is harming shareholders. Remember, in the fine print of S.E.C. filings, the board’s ability to fire an executive for cause has less to do with wrongdoing, and more to do with demonstrating that such wrongdoing had an “adverse material effect” on shareholders.

For now, the board has Kotick’s back. But there are signs of looming vulnerability. The Journal, citing “people familiar with the board,” claimed that the board “was blindsided by the California lawsuit’s allegations.” In other words, at least one board member (or source close to a board member) is quietly substantiating the claim that Kotick didn’t come clean with the board about what he knew. More damning still is the implication that Kotick overrode his H.R. team in order to retain an employee who had been deemed worthy of termination for alleged sexual harassment. It suggests he was willing to condone bad behavior—or, at least, it gives the board an opening to make that argument. 

But again, all this depends on where the stock goes. So the smartest thing Kotick can do now, from a cold, hard business perspective, is make sure that all the people who work for him are satisfied that he is working to change Activision’s culture, have faith in his leadership and, most importantly, work really hard to meet their deliverables and release world-class videogames on time. He started that effort in an internal video presentation following the Journal report on Tuesday. “We are incredibly fortunate to have the most talented people in our industry all so committed to constant improvement,” he said, adding: “Anyone who doubts my conviction to be the most welcoming, inclusive workplace doesn’t really appreciate how important this is to me.”