Former Chief Executive Officer, ACTIVISION BLIZZARD INC
Activision Blizzard CEO Bobby Kotick Talks Microsoft Deal | Bloomberg Talks
Microsoft finally completed its $69 billion purchase of Activision Blizzard, capping off a nearly two-year fight with regulators. Activision Blizzard CEO Bob Kotick spoke with host Ed Ludlow not long after the deal about next steps, his future and more.
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About Robert Kotick
In a July 2023 interview, Kotick discussed the pending acquisition of Activision Blizzard by Microsoft, noting that 98% of shareholders approved the transaction and describing it as a "great deal." He stated that the company extracted "significant additional value" through a short extension, a dividend, and a termination fee he characterized as one of the largest in history. Kotick expressed personal concerns about the economy, citing interest rate increases and a deficit substantially greater than GDP, and said he did not believe any business is recession-proof. He also identified Chinese companies like Tencent, ByteDance, and Alibaba, along with Nintendo, Sony, and Netflix, as major competitors in the video game industry. Earlier, in 2016, Kotick described the acquisition of King Digital, the maker of "Candy Crush Saga," as an opportunity to enter the fastest-growing mobile game market and to attract a female audience, noting that 60% of King's audience was female. In 2010, he stated that over 60% of Activision Blizzard's profits came from online-related games and described Facebook as a "great platform for gaming" that could grow to be significant over five years, though he noted it was then too small to influence the company's operating profit. He also said the company was "platform agnostic," aiming to make its games playable on any device with a display and microprocessor.
Transcript (21 segments)
✨ AI-enhanced transcript with speaker attribution
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Ed0:00
It's official. Microsoft's completed its $69 billion purchase of Activision Blizzard after nearly two years fighting with global regulators who threatened to halt and indeed stop the deal. This is the biggest ever acquisition in the video games industry. I'm delighted to bring in Activision Blizzard CEO Bobby Kotick. Bobby, good afternoon and thank you for your time joining us from New York City.
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Robert Kotick0:25
Thanks for having me, Ed. Look, I think there are a lot of great reasons for this merger. Mobile is an important part. I think one of the things that we've all benefited from is as smartphones became the dominant form of delivery devices for video games, we started to see the democratization of video games. For most of the 30 some odd years I've been running the company, we made games for consoles and for PCs, and those were really limited to people who are middle class consumers in developed countries. Over the last 10 years, what we've seen is the dramatic expansion of games to today we have over 350 million players in 190 countries. This dramatic transformation that's taking place and building this much larger audience of players is something that I think Microsoft will continue to develop and enhance, and we're really excited about the future of gaming as a result.
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Ed1:56
Bobby, I know that you also engage with the gamers, the community. We asked the questions to the community, what would you ask Bobby Kotick? I think the resounding question is, what is it that Microsoft could offer Activision gamers playing your different titles that you guys couldn't offer on your own if you'd remained a standalone company?
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Robert Kotick2:16
Well, I can't say that there's any specific thing that Microsoft can will offer that we couldn't. What I would say is what's the most important is access to talent. As the market continues to grow, as you see the intensified competition that's coming from so many companies with aspirations to make and sell video games, one of the things that we were realizing is that access to talent was going to be increasingly more competitive and difficult. And it's the same type of talent, you know, AI and machine learning talent, data analytics, user interface and user experience type talent that is now in such high demand. I think our hope is that over time we'll be able to attract people from the enterprise side of Microsoft to be excited about working in gaming. I think on a combined basis it gives us a greater chance to compete against the many, many competitors that are out there today.
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Ed3:19
That's the technology side, and to all great technologies there's a cost. I remember you saying that at times like Activision wasn't looking to sell, it didn't need to. When this deal came together in the outset, was it because the financial position had changed and Activision did need to sell?
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Robert Kotick3:44
No, we had, you know, we merged with a stellar balance sheet and strong financial performance. It really was, you know, our principal responsibility is providing a return to our stakeholders. And when Microsoft approached us, they made an offer that was in the best interest of the shareholders. 98% of the shareholders voted for the transaction, and so that's, you know, that's our principal responsibility as a board and for me as a CEO. The exciting thing is that we actually sold to a company that has a history almost as long as ours of making video games. And if you think back to the early years of flight simulator, this is a company that has been in the games industry for a long time. People are passionate about gaming at the company, and so when you think about a perfect home for the next generation of gaming, Microsoft is going to be a fantastic place for our incredibly talented people to have opportunities.
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Ed4:51
Bobby, how did this deal come together? What's the origin story?
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Robert Kotick5:04
Well, it came together pretty quickly. Satya and Phil gave me a call and said that they were really excited and enthusiastic about this as an opportunity, and is it something that our board would consider? I of course said absolutely, and you know, it didn't take very long after that to see the logic of it. It's a perfect combination, and like I said, given the intense competition that you're seeing from every big technology company, not just in the US and Europe but in China and Japan, I think that this gives us on a combined basis the opportunities to develop new franchises, to take advantage of some of the titles in the library that haven't actually been developed in a long time. Right now is a really great moment in gaming. There is enormous innovation taking place. We're about to launch a new Call of Duty game in the next few weeks and a new season of Diablo, and you can actually see the changes and the benefits of new technology in games like Call of Duty. We're seeing an expanded reach of games like Candy Crush, which now has probably something like 130 million monthly active users. This is just an exciting time to be in the gaming business, and an even more exciting time now that we have this transaction completed with Microsoft.
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Ed6:26
Well, welcome to our Global Bloomberg Television and Radio audiences. We're speaking with Bobby Kotick, Activision CEO. But it was announced, Bobby, that you will work with Microsoft under Phil Spencer just through to the end of 2023. This is the biggest deal in video games history. Activision has more than 10,000 staff. Is that enough time, or I guess my question: why not stay on longer? You have run this company for almost three decades.
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Robert Kotick7:03
Well, it's probably appropriate for me being sitting here at Bloomberg right now, but Mike Bloomberg is one of the most inspiring philanthropists that I have ever had the pleasure to know. I just turned 60 last year, and I'm personally really excited about the opportunity to help reform K-12 education, think about reducing hatred and intolerance in the world, focus on bridging relationships with countries like China. So there are these philanthropic interests that I've always had that I really want to focus on and make my priority today.
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Ed7:44
And a reminder to our global television radio audience that Mike Bloomberg is the founder and majority owner of Bloomberg LP, which of course owns Bloomberg Television. Bobby, 24 hours ago an industry colleague of yours, Laura Miele of Electronic Arts, who I believe you know well, was on the show on the close of this deal. EA will become sort of the largest independent studio left, and yet she gave a glowing review of the deal. I'm paraphrasing, but basically said this puts video games on the map in the context of the entertainment industry. But she also conceded that EA is a target, and I wondered if you'd reflect on the years of negotiating with regulators to get this deal done. If you think that EA can remain independent or if this opens the door to consolidation?
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Robert Kotick8:41
Well, EA is a fantastic company. I started my career as a developer of software for Electronic Arts, and so I will always have a great reverence and respect and appreciation for the company. It's an extraordinary company, and I think they can remain independent and continue to be as successful as they've been since they were founded in 1983. We're lucky to have companies like Electronic Arts, who have what we have, which is a workforce that is enthusiastic and passionate and so committed to advancing the art form of gaming.
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Ed9:22
Give me a real answer here, Bobby. Microsoft buys Activision – is this kind of the signal of where we're at with the video games industry that the studios, the creators, have to live within a much bigger technology entity because of AI, the need for cloud compute?
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Robert Kotick9:45
Well, I don't think that's the case at all. You look at an example of a company like Roblox; it was a startup not less than 10 years ago, and they've built an extraordinary business. There's enormous access to capital for video game startups still today. I think in fact, probably more venture capital has gone into video game companies in the last few years than ever before. The competitive environment still favors great entrepreneurs with big ideas and visions and the ability to execute. So I think that whether you're large or small, there's going to be continued opportunities for innovation and new types of companies. For a company like ours, what we just did was in the best interest of the shareholders and our almost 15,000 incredibly talented employees around the world.
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Ed10:48
So if somebody buys EA, I get it's a hypothetical, it leaves very few options. What do you think that entity looks like? I'm not sure I really understand the question yet. Well, it took Microsoft to spend $69 billion to buy Activision. If there's going to be consolidation in your industry, and you've led in this industry for three decades, right, who do you think could buy EA based on your experience of the last two years?
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Robert Kotick11:17
Oh, I wouldn't want to speculate. I mean, there are just so many business combinations that are possible, but I don't have an informed view of that.
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Ed11:30
So here today, Phil Spencer – what task does he have to take all of the people working at Activision and bring them into Microsoft? Do you think that there's anything he can learn from your company?
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Robert Kotick11:46
Look, we have a fantastic company with an extraordinarily talented workforce. People are passionate, motivated, enthusiastic, excited about this merger. And Phil is an extraordinary leader. I couldn't think of a better person to give the reins to for the business. He is a passionate gamer; he's been involved in this industry since 1989. He's incredibly technically capable, visionary leader, people love working with him. And I think it was actually one of the really appealing parts of this transaction was to know that the people that I've worked with for three decades are going to have a leader who is extraordinarily capable and passionate and compassionate and will do a wonderful job leading the combined companies.
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Ed12:40
We're speaking with Bobby Kotick, the Activision Blizzard CEO here on Bloomberg Television and Bloomberg Radio. And Bobby, as we discussed, you will stay until the end of the year and then focus, it sounds like, on philanthropy. But to those that don't know you as well, the video games industry and market is huge, but there will be people that don't know your backstory. It started in software, right? There's a tie to the early days of Apple. You've been able to work with Microsoft now, and the story of the year is generative AI. I wondered if you could just give us some illustrative examples of how you think their work in AI is going to read through to video game development. No matter how niche, NPCs, customization, look.
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Robert Kotick13:26
Look, AI is going to – in fact, when you think about the talent that will be required to move the art form forward and to be able to create new innovation, AI and machine learning are going to be the important new technologies that are going to be transformative for the future types of games that we create. There are so many important applications, whether it's generating art and animation, or onboarding players, or creating greater experiences for players through better tools like player matching. There is an enormous amount of benefit that will come from the evolution of AI. It's the early innings though of really figuring out how to translate what is the available technology today into practical solutions for gaming, but I think this is one of the big areas of opportunity for us on a combined basis, because Microsoft is, you know, clearly right now I think the leader in AI and machine learning. So Ed, I wanted to say thank you very much for the opportunity to have me today. I really, really appreciate it, and I look forward to continuing the conversation. And it was very, very generous of you to include me.
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Ed14:43
All right, Bobby Kotick, Activision CEO for now. Thank you.