Activision Blizzard is raking in the cash even as the fallout over a harassment and discrimination lawsuit threatens its enormous business.
The gaming company behind hugely popular titles such as “Call of Duty,” “World of Warcraft” and “Candy Crush” reported revenues of around $2.3 billion for the quarter that ended June 30, a 19% jump from the same period last year and slightly higher than the company’s previous forecast.
“With respect to our financial performance, we are pleased that the company continued to deliver strong results in the second quarter, and we are raising our outlook for the year,” Bobby Kotick, CEO of Activision Blizzard
(ATVI), said in a statement. “We remain intensely focused on the well-being of our employees and we are committed to doing everything possible to ensure that our company has a welcoming, supportive and safe environment where all of our team members can thrive.”
Over the past several days, accusations of discrimination and harassment at the gaming giant have snowballed into an avalanche of dissent. The first high-profile departure from the company was announced Tuesday morning, when Activision Blizzard COO Daniel Alegre told employees that J. Allen Brack, president of the company’s Blizzard Entertainment studio, would be leaving his post.
The unfolding crisis, and the response to it from employees, echoes similar controversies at major tech firms. And the fallout from what happens at Activision Blizzard is likely to have major ripple effects not only across the gaming world but also the tech industry and corporate America at large.
The actual impact on the company’s business from the controversy could take time to play out, but its stock price, which surged as much as 73% during the pandemic, has fallen nearly 15% since news of the lawsuit first broke two weeks ago. Buoyed by the strong earnings report on Tuesday, the stock rose around 4% in after-hours trading.
Activision Blizzard acknowledged that the scandal could hurt its business going forward.
“If we experience prolonged periods of adverse publicity, significantly reduced productivity or other negative consequences relating to this matter, our business likely would be adversely impacted,” it said. “We are carefully monitoring all aspects of our business for any such impacts.”
The backlash against (and within) Activision Blizzard began with a lawsuit filed by California’s Department of Fair Employment and Housing.
The lawsuit alleged a “frat boy” work culture where multiple female employees were subjected to gender discrimination, sexual harassment, and unequal pay, and that “the company’s executives and human resources personnel knew of the harassment and failed to take reasonable steps to prevent the unlawful conduct, and instead retaliated against women who complained.”
Several former Activision Blizzard employees had already begun sharing their experiences on social media in the wake of the lawsuit, but the company’s effort to paint the suit’s claims as “inaccurate” and “distorted” prompted more than 2,000 current and former workers to sign a petition slamming that response as “abhorrent and insulting.”
Kotick, the CEO, tried to dial the temperature down, admitting in a note to employees last week that the company’s initial response had been “tone deaf” and that it was hiring an outside law firm to investigate the claims.
But that didn’t stop dozens of employees from staging a walkout at the company’s campus in Irvine, California (with hundreds more joining virtually), last Wednesday. Some of the demands included greater pay transparency and an end to mandatory arbitration.
David McNew/AFP/Getty Images
Dozens of Activision Blizzard employees staged a walkout last week to protest the company’s policies and response to the lawsuit.
Spurred on by the California lawsuit and its aftermath, several employees across the gaming industry are now speaking out about sexual harassment, pay disparities and other aspects of the culture. All eyes will now be on how Activision Blizzard’s leadership handles the situation and whether it faces more consequences or changes beyond Brack’s departure.
For now, the biggest change is at the Blizzard division, with Brack out. Brack will be replaced by Blizzard executives Jen Oneal and Mike Ybarrra, who will co-lead the division. While the company did not detail a reason for his exit, Brack said in a statement: “I am confident that Jen Oneal and Mike Ybarra will provide the leadership Blizzard needs to realize its full potential and will accelerate the pace of change.”