Activision's Iceberg Has Come, Abandon Ship!

Activision, for quite some time, was one of the top dogs in the gaming industry. They were the first to get into the music game market with Guitar Hero, and they owned Infinity Ward, makers of the highly successful Call of Duty (and therefore Modern Warfare) games. Activision makes a wide variety of games, is a very large company, and even owns Blizzard (although Blizzard is powerful enough to be very, very independent). Unfortunately (or more accurately: fortunately, but more on that later on) Activision has been shooting itself in the foot for quite some time now. First, they let the lead designer of Guitar Hero go to create Rock Band while they oversaturated and killed the Guitar Hero marker. Now, Modern Warfare 2 and Infinity Ward may have proved to be the iceberg that will do the unthinkable: Sink Activision, maybe for good.

Alright, so why would this be a good thing? One name: Bobby Kotick, CEO of Activision. if you haven't heard the name, this is the man who has declared that he wants to take the fun out of the gaming industry and that he fires anyone who does not produce massive profits. The more profit you make, the more likely you are to stay on. In effect, his business plan riles gamers the wrong way because it stands against everything gamers love, and we have seen gaming businesses take this route before. Once money becomes the focus, the franchises get milked, quality drops like a rock, and the company dies, but usually not before the guy who caused all of the problems runs like well...a rat abandoning a sinking ship.

Kotick is an admitted businessman who plays no games, and there is a reason that gamers don't like that. Gaming is about fun on a certain level, you can't remove that process without adversely affecting the industry. That, and gamers see how 'businessmen" run other businesses. Financial crisis and greedy CEO's anyone? Gaming doesn't want that.

So anyway, the latest ax against Activision which may be the last straw is the battle with Infinity Ward. Lets be honest, Modern Warfare 2 sold like mad and made huge amounts of cash, so much so that Kotick announced no less then three new Modern Warfare titles to come out this year alone, one of which (or more) is not even a shooter but an action-adventure title. Modern Warfare 3 on the other hand, will cost $80 ($20 more then most games, something Kotick already tried by selling MW2 for that price outside the US and then telling gamers that he though they'd be getting a deal if he charged $100) and will have a monthly subscription fee of $5-$15 a month just to play the game. So Infinity Ward founders West and Zampella jumped ship, quitting to start their own studio anew (these are also the two who created Call of Duty and therefore Modern Warfare).

Here's where Kotick messed up: he filed a lawsuit against these two, claiming that they had been working with members of other companies to some end and that they owed money or some stupid drivel. West and Zampella filed a counter-suit that alleged that Activision had never paid any of the Infinity Ward employees their promised bonuses from the sales of Modern Warfare 2. Activision retorted that bonuses were forthcoming, but only for employees left at Infinity Ward, which by that point was experiencing an outward surge of employees following in West and Zampella's footsteps and getting out. One Activision employee posted the following online:

I'm confused, because by leaving, they are giving up their bonus -- and the more people that leave, the bigger the bonus gets for the people who stay. I'd think if you are young and hungry and have a vision for a new game, IW would be a really good place to be right now.

Unfortunately, his comments may have been a little premature as this morning what could be a killing blow was struck. The remaining employees at Infinity Ward have filed a lawsuit of their own on the basis that according to their contracts, they were owed bonuses months ago totaling anywhere from 75 million to half a billion dollars! Bonuses that have not been paid and are being held over the heads of Infinity Ward to keep them onboard. Now, this could have been a less brutal blow except that immediately following, the Publishing CEO and President of Activision resigned, which is pretty self-incriminating. (Ars Technica)

Thing is, this has much greater implications past employees not being paid bonuses. If I were a shareholder right now, I'd be wanting to see some third party audits and fast. Any company that's playing this fast and loose with cash could be pulling a financial fast one. I'd be selling my stock right now. And according to USAToday's stock ticker, the stock has dropped.

So what can we really gleam from this? Well, until one of these court cases is decided or investors start fleeing en mass, not much. I do not even know for certain if some of the claims made (and reported in this article) will pan out to be true, although I will say this. A president jumping ship is not the best of moves to increase confidence.