Activision Blizzard, the Lawsuit, and the Q2 2021 Financials

You don’t want to do that either. You think you do, but you don’t.

-J. Allen Brack, BlizzCon 2013

I am pretty sure that J. Allen Brack would be pretty happy just being known as the guy who arrogantly pissed all over, and probably helped delay, the huge money maker that WoW Classic turned out to be.

I am also pretty sure both he and the company wish that statement was worst thing to come out of BlizzCon 2013.

But yesterday saw him step down as President Blizzard… a polite way to say he was the first big sacrifice in the wake of the California Department of Fair Employment and Housing hostile workplace lawsuit.  He was joined by the SVP of HR, Jesse Meschuk

Not that he didn’t deserve it.  Sure, a lot of the most egregious behavior happened on Morhaime’s watch, but Brack was still in the thick of things, still a leader in the company during that time as well.

Brack was replaced by new Blizzard “co-leaders” Jen Oneal and Mike Ybarra, both of whom have roots outside of Blizzard.

For those of you who like the “Bobby Kotick is cementing his dominion over Blizzard” narrative, it has been noted that Morhaime was CEO of Blizzard, Brack was President of Blizzard when he replaced Morhaime, and Oneal and YBarra are co-leaders now, whatever that means.

And the Brack announcement went out in advance of the Activision Blizzard Q2 2021 financial results announcement, no doubt following the theory that you get bad news out of the way before and hope that you have good news during and after.  So was it a good thing that Kotaku pointed out that the company is losing T-Mobile as a sponsor of their Call of Duty and Overwatch esports league before the call as well?  And then there was the expected shareholder lawsuit.

Which brings us to the report.  You can find the detailed financials, the presentation, and the recording of the call over at the investor relations page.

The presentation opened right up with five actions the company is taking in light of the lawsuit and the protests both from outside and within the company.  They are:

  1. We have asked Jennifer Oneal and Mike Ybarra to assume responsibility for development and operational accountability for Blizzard.
  2. We will continue to investigate each and every claim and complaint that we receive. When we learn of shortcomings, we will take decisive action. To strengthen our capabilities in this area we will be adding additional staff and resources.
  3. We will terminate any manager or leader found to have impeded the integrity of our processes for evaluating claims and imposing appropriate consequences.
  4. We will be adding resources to ensure and enhance our consideration of diverse candidate slates for all open positions.
  5. We have heard the input from employee and player communities that some of our in-game content is inappropriate. We will be actively reviewing that content and removing it, as appropriate.

Again, this is a change from the stubborn defiance that was the hallmark of the initial response from the company, but is unlikely to be enough in itself to soothe anybody.  The employee organizers are still not buying the company’s new tack.

When it came to the numbers, all three pieces of the company saw a decline in revenue from Q1 2021, though that is not unexpected given the roll back in pandemic restrictions we saw midway through the quarter.  People went outside and did things, a trend that will no doubt continue into Q3 if the price of airline tickets and rental cars are any indication.

Activision Blizzard Q2 2021 Financial Results Presentation – Slide 11

Blizzard alone was down $50 million in revenue when compared to Q1, which was a direct hit to margins.

When it came to singing Blizzard’s praises, the song remained the same, a tale of Azeroth making the money while other franchises languish.

Activision Blizzard Q2 2021 Financial Results Presentation – Slide 7

WoW bookings doubled year over year, with much of the credit going to the launch of Burning Crusade Classic.  A lot of people bought that pack with the lizard mount.

Hearthstone kept on rolling as well, cranking out yet more expansions.

And while Diablo II Resurrected holds promise for the company, Diablo IV is still on the distant horizon and Diablo Immortal has been pushed back again, this time to the first half of 2022.  We could see a four year gap between when it was announced at BlizzCon 2018 with a playable demo and when it finally ships.

Meanwhile over at Massively OP, where they have been keeping score, the running tally of monthly active users for Blizzard continued its downward trend, with the company shedding another million users.  We don’t know where they came from or where they went, but they aren’t hanging out in Blizzard games anymore.

After being down in revenue and players in Q2, we have yet to reckon with Q3 and the iceberg that is the California lawsuit.  The only thing Blizz has in the near future is Diablo II Resurrected and some likely misguided hope about “stronger engagement” with the Shadowlands expansion.  But people were already leaving retail WoW for FFXIV before the shit hit the fan.

I appreciate that Activision Blizzard seems to have finally decided that they need to clean house, though the cut off for responsibility is clearly enforced before you get to the C-level suite, but the company clearly needs to step things up a couple notches or the Q3 results will be a bloodbath.

9 thoughts on “Activision Blizzard, the Lawsuit, and the Q2 2021 Financials

  1. PCRedbeard

    I suspect that more heads will roll, but the man in charge, ol’ Bobby, will just continue onward. Unless someone finds his direct involvement with some of the allegations, I suppose.

    Liked by 3 people

  2. Nosy Gamer

    I can’t help but think Brack was on his way out the door even before the lawsuit hit. Am I wrong in thinking content patches took longer than usual? The big content drought waiting for patch 5.1 is the example I’m thinking of.

    Liked by 1 person

  3. Wilhelm Arcturus Post author

    @Nosy – There have been worse dips and droughts on his watch and bigger dives when Morhaime was at the helm. Plus the Burning Crusade Classic launch offset the 9.1 delay. I don’t think he was necessarily in danger on that front. They don’t can execs even when they’re laying off the rank and file.

    On the flip side, there has been a consistent leak of opinions from within Blizz that it has been becoming more and more Activision’s show to run, so giving Brack the chop helps that along. I am sure if they really do shake things up and clean house down in Irvine, things will end up more closely run by Bobby Kotick.

    Liked by 1 person

  4. Archey

    I’m of two minds on this.

    For me, the famous quotation at the top of this post is enough to sour me on JAB and prove that he has, at least, a very different view of WoW than I do. The one remaining interest I have in the game is something he actively dismissed and discouraged. And, perhaps more importantly, if he did have knowledge of the shenanigans and failed to address it, then his exit was well deserved.

    That said, it’s also possible he did everything reasonable and/or didn’t know the full extent of the issues, and he’s just being made a scapegoat. That may be unlikely, but who knows. And on the other topic, one could hope for a creative return to the kinds of things that endeared me to vanilla through Wrath with him gone. But putting corporate bean counters (as represented in this case by Activision) in charge doesn’t seem like the kind of thing to cause creative magic.

    I probably in any case have a maximum of two years or so before the nostalgia train pulls into the final station at the end of Wrath anyway. I wonder what will happen between now and then.

    Liked by 1 person

  5. Bmyers

    If the warcraft team is about 300 people from what I just looked up, they represent around 3% of the total company. I would not be surprised with declining subs over the past several years, that Activision would possibly just cut the department. Keep those critical people to maintain the Classic franchises, which probably don’t require that many people. So figure keep about 59 or so, with maybe another 150 relocated to other departments, and the rest just get cut. Would it be a blemish on Blizzard? Sure, but this will get worse the longer it drags out

    Liked by 2 people

  6. Wilhelm Arcturus Post author

    @Bmyers – The problem is that without WoW Blizzard is just a mid-tier game studio, and subs have not been declining over the last few years, but going up. Yes, the rise has been in large part due to WoW Classic, but the same sub is for both classic and retail, and retail, for all its faults, sells a few million boxes every other year, so cannot be discarded on a whim. Blizz doesn’t give us the numbers, but when the good news in the financial report every quarter for the last two years has been only WoW, that is a pretty strong signal.

    People have been saying for year that Blizz should just let WoW go, but WoW is pretty much the only ongoing, consistent money maker Blizz has. It probably brought in a billion dollars in 2020. Even the D2 remaster will just be a short spike in box sales. There is no way that Activision does anything to that team outside of pruning some bad apples.

    Liked by 3 people

  7. Belghast

    I am also in the camp that “stronger engagement” seems like a really big ask considering that the numbers they showed don’t really include any of the “exodus” of players going over to FFXIV. That more or less happened entirely during the month of July. The timing of the videos from Asmongold, Bellular, and a few other notables really landed early July, so any losses that have come from that won’t actually be realized until the next earnings report. I feel like the next quarter and the rest of the year is going to be pretty bleak for World of Warcraft. The 9.1 patch seems to be generally poorly received and I am doubting we see a 9.2 before the end of the year.

    Liked by 3 people

  8. zaphod6502

    The poison and corporate culture starts at the top. Bobby Kotick needs to be removed from the company. If you are getting paid $150 million a year and don’t know what is occurring under your leadership then you are either incompetent or are a part of the problem.

    Liked by 2 people

  9. zaphod6502

    “Asmongold, Bellular”

    I don’t think you can totally rely on a couple of streamers opinions to sway the userbase of WoW. I recently logged in to WoW and it is more popular than ever and all of the hubs were teaming with people. Even the “WoW Logout Protest Event” was only attended to by a small minority on my server and people were still going about their business in the hubs and out doing their dailies. The loud minority make a lot of noise about cancelling WoW but for the rest of the userbase it is business as usual.

    Liked by 2 people

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