It's probably a safe assumption to say that many executives spat out their morning coffee today when news of the biggest merger in game-industry history broke. This morning, Activision and Vivendi Games announced they were joining forces to create Activision Blizzard, a new, publicly traded company.
If the merger is approved, the new entity is expected to leapfrog over Electronic Arts to become the biggest independent third-party publisher on the planet, with estimated joint revenues in excess of $3.8 billion. That princely sum is dwarfed by the estimated combined value of Activision Blizzard's assets--a massive $18.9 billion.
While unexpected, the union makes perfect sense. Though its Call of Duty and Guitar Hero franchises are established success stories in the first-person shooter and rhythm game markets, Activision has no massively multiplayer online role-playing games in its portfolio. Since the Creative Assembly was bought by Sega, its profile in the real-time strategy space has been nearly nonexistent. Enter Vivendi, whose Blizzard Entertainment subdivision owns the most popular MMORPG on the planet, World of Warcraft, and whose RTS roster includes the hugely anticipated Starcraft II.
As the game industry picked up its collective jaw up off the floor, GameSpot got a hold of Mike Morhaime, Blizzard's cofounder, president, and CEO, to get some insider perspective on this landscape-altering union.
GS: Obliviously this is HUGE. Can you speak about the origins of the deal at all?
Mike Morhaime: Well, I guess it originated out of a phone call earlier this year. [Activision CEO] Bobby Kotick went out and had lunch with [Vivendi CEO] Bruce Hack, and they chatted about possible things the two companies could do together. I think both companies left feeling like there was a lot of merit exploring the combination of the two companies. But before I get too far, I just want to clarify something--Vivendi is not buying Activision; they're acquiring a majority stake in Activision Blizzard, which is pretty different.
GS: So it's more of a merger in which Vivendi has a controlling interest.
MM: Yeah, that's perfect. Something Bobby [Kotick] has always wanted to do is grow his company to be the number one game publisher in the industry. This provided him a way to do that. Activision's got a great track record, very strong in console gaming. In fact, the last several months they've been the number one third-party publisher in console gaming.
GS: Yeah. The kids, they like the Guitar Hero.
MM: Call of Duty has also been doing very well...
GS: Really? I hadn't noticed.
MM: [Laughs] Right. Anyway, we've been very strong in PC games and online games. We're the publisher of the number one massively multiplayer online subscription game in the world--9.3 million subscribers and counting. We're the only successful western publisher in Asia.
GS: I hear you're popular in Korea.
MM: [Laughs] Yeah, a bit.
GS: Well obviously this is very exciting. I mean, the total deal is worth nearly $19 billion. That's just staggering. However, it's not the only big deal of late and comes not long after EA bought BioWare/Pandemic, in large part for their upcoming massively multiplayer online role-playing game. Now, Activision Blizzard will be taking that project on head-on. Was this deal accelerated at all by the BioWare/Pandemic buyout?
MM: I don't really think there was any correlation. We've been talking about this a long time before we heard about the other deal. There was a lot of due diligence. There was a lot of understanding of Vivendi's business and Activision's business. It really took some time.
GS: Now, one of the first questions people ask when a deal like this goes down is, "Who's getting laid off?" Are there any plans for staff reduction of redundant positions in the Activision Blizzard organization? What's going to happen in terms of the management structure?
MM: Bobby Kotick will be CEO of Activision Blizzard, the public entity traded on NASDAQ of which Vivendi will have a majority interest. I will remain as president and CEO of Blizzard Entertainment, reporting to Bobby. Michael Griffiths will be president and CEO of Activision publishing, also reporting to Bobby. Activision publishing will include all non-Blizzard Vivendi games assets.
GS: So what happens to Sierra Entertainment, then? Is that brand going to remain or are they going to be subsumed by Activision?
MM: [Pauses] I think it's too early to talk about the branding strategy going forward. I think those decisions will revolve around conversations that haven't happened yet. I do know that Mike Griffiths in his role as president and CEO of Activision Publishing will be responsible for all of the Vivendi games.
GS: So will all Activision Games be branded with a new Activision Blizzard logo?
MM: I'm not sure about a logo--that's something we'll have to discuss. But I think this issue is very important from a consumer-facing standpoint, so I want to emphasize it: The Activision and Blizzard brands will remain. We're not going to put Blizzard Entertainment logos on Guitar Hero boxes, and we're not going to put Activision logos on World of Warcraft boxes.
GS: Right. However, there is a big fear among certain games now that, with the creation of this megacorporation, game quality will suffer. What kind of assurances can you give the myriad Blizzard and Activision fans that this deal will in no way change the quality of your games?
MM: I spent a long time speaking with Bobby Kotick about our culture, philosophy, and commitment to quality at Blizzard. And no one at Activision or Vivendi has any desire to change that. Why would they? Activision runs an autonomous studio system. Their studios operate with a lot of creative freedom, and it's been very successful for them. That's something that may be different from the [way] other large publishers operate. But both Activision and Blizzard respect the talent that creates games, and this is going to be able to provide us with a stable, secure infrastructure with which we can take care of our people making games.
