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Activision's modern warfare

A dustup in the video game industry has cast a shadow over the company as it prepares for the E3 conference. But CEO Bobby Kotick is familiar with such brawls.

June 12, 2010|By Ben Fritz and Alex Pham, Los Angeles Times

On a warm Monday afternoon three months ago, the producers of the hit video game Call of Duty found their offices under invasion.

Security guards with Secret Service-style radio earpieces showed up on the second floor of Infinity Ward headquarters in Encino on March 1 and refused to tell employees why they were monitoring the entrances. Staffers congregating in the hallways suspected it had to do with the mysterious absence that day of their longtime bosses Jason West and Vincent Zampella.

"I was confused and afraid," recalled Jon Shiring, a former Infinity Ward programmer.

The next afternoon, Bobby Kotick, chief executive of Infinity Ward-owner Activision Blizzard Inc., made a rare trip from his corporate office in Santa Monica to announce that West and Zampella had been fired. The security guards were making sure the two former executives didn't enter the offices.

In the studio's kitchen, he told Infinity Ward employees that he regretted axing the key creators of the multibillion-dollar Call of Duty military action games but that he had no choice. He offered no explanation.

Since West and Zampella's departure, 35 out of Infinity Ward's nearly 100 employees have quit, including the lead designers of Call of Duty: Modern Warfare 2, the best-selling video game of 2009. Most are now suing their former employer.

Infinity Ward's near implosion has brought to the fore the rocky relationship between the freewheeling game culture and the buttoned-down ethos of Activision's Kotick, who recruits many of his executives from consumer-product giants including Procter & Gamble Co. and who readily admits he doesn't play video games.

Activision is behind the game industry's biggest titles, including Guitar Hero, the Tony Hawk skateboarding games and World of Warcraft, which has 11.5 million online subscribers. The company is known for Hollywood-style marketing, rapid-fire sequels and frequent acquisitions. Its market value is $13.5 billion, more than twice that of its biggest competitor, Electronic Arts Inc.

Kotick, however, has drawn the ire of gamers thanks to his comments, including when he said he wanted "to take all the fun out of making video games." (He later said it was a humorous aside.) The Facebook group Gamers against Bobby Kotick and Activision, which seeks to "stop him before other companies copy him," has about 1,680 members.

"In the development community, Activision is not very popular right now. I've heard some pretty vitriolic assessments since the Infinity Ward situation started," said Randy Pitchford, president of game studio Gearbox Software. "But they are still one of the largest publishers in the world, and that power has value."

This week, 45,000 professionals from the $45-billion global video game business, which generates more money than movie ticket sales and is a key industry for California, will gather in Los Angeles for the annual E3 industry conference. But the events at Infinity Ward have cast a shadow over Activision as it prepares to show off its new games in a splashy demonstration at Staples Center on Monday night.

Kotick, who according to filings with the Securities and Exchange Commission has netted more than $240 million from stock sales over the last two years, mixes regularly with Hollywood moguls, whose names he drops in conversation. Though he tends to favor sweaters over suits, the 47-year-old University of Michigan dropout owns a private jet and attends the yearly conference for media bigwigs in Sun Valley, Idaho.

At Activision's Santa Monica headquarters, he works in a suite walled off from the rest of the office and accessible only by keycard. Employees have nicknamed it "the capsule."

The Long Island, N.Y., native is a major Republican donor and is supporting Meg Whitman's bid for governor. He sits on the board of the Los Angeles County Museum of Art and has a collection of mid-20th century works by artists such as Willem de Kooning worth more than $100 million.

The growth of Activision — once a tiny firm that Kotick and partners took over in 1990 for $440,000 — into a $13-billion behemoth has been accompanied by high-profile clashes with game creators. The publisher has sued and been sued by development studios including Double Fine Productions Inc., Harmonix Music Systems Inc. and Spark Unlimited.

Lawsuits are common among entertainment companies, but Activision's legal brawls underscore its willingness to bulldoze Hollywood's first commandment: Thou shalt not alienate the creative talent that makes thee rich.

Three days after West and Zampella were forced out, they sued Activision, contending that the company fired them to avoid paying $36 million in royalties. In a countersuit, the publisher said that the two breached their contract by attempting to decamp to rival Electronic Arts, labeling them "self-serving schemers."

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