Activision Blizzard’s Q3 Earnings Underscore Importance of Resolving Internal Issues

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Cheyne Gateley/Variety Intelligence Platform; Adobe Stock

Given annual “Call of Duty” releases every Q4, Activision Blizzard’s third-quarter earnings are generally the lowest of each year, with 2020 an exception due to the unusual circumstances of the pandemic, which led to upticks in home activities like video gaming.

But while the company’s latest Q3 earnings as reported Tuesday appear to be business as usual within the scope of 2021, the year itself has been anything but for the largest Western publishing group in gaming — for reasons good and bad.

It would be easy enough to highlight that Q3 marks four consecutive quarters of year-over-year earnings improvements, with Q1 and Q2 setting quarterly bests for Activision Blizzard. But the company is still enduring the fallout of state and federal investigations into its conduct, its stock dropping more than 10% at market close Tuesday.

While the company in September reached a settlement with the U.S. Equal Employment Opportunity Commission (EEOC), the California Department of Fair Employment and Housing (DFEH) announced in October it would prep an objection to the settlement due to ethical concerns amid its ongoing investigation that began in July.

Despite the legal mess, the earnings press release was accompanied by a long list of commitments following CEO Bobby Kotick’s letter to staff last week.

The letter pledged the company would launch a new zero-tolerance companywide harassment policy, invest $250 million in workplace programs geared toward expanding opportunities for more underrepresented talent, waive required arbitration of sexual harassment and discrimination claims and increase visibility on pay equity, with Kotick’s annual salary reduced to $62,500.

Given the company’s goal to become the “most welcoming, inclusive company in [the gaming] industry,” as cited in the Q3 press release, it’s crucial that these steps be taken now, as all three of Activision Blizzard’s publishing units are facing increased competition.

Its games seeing the lowest engagement since the release of Activision’s “Call of Duty: Warzone” in March 2020 thrust the segment forward in monthly players, Blizzard Entertainment’s flagship “World of Warcraft” MMO-RPG now has a well-funded competitor by way of Amazon Games’ “New World,” released in September 2021.

“New World” reached a total of 913,027 consecutive players on Steam in early October but has since lost as much as 500K of those players, so it’s not an end-of-the-world scenario for the Blizzard unit, which still maintains consistent revenue that isn’t far below what mobile publisher King pulls in.

But Amazon still has a lot of time and money to flesh out “New World” as a flagship live-service title, while Blizzard announced delays for two highly anticipated titles amid the earnings call, a likely contributor the drop Activision Blizzard’s stock Tuesday.

Likewise, the company’s other publishers are also facing an increasingly competitive market.

Inspired by the rampant success of Epic Games’ “Fortnite,” “Call of Duty: Warzone” has itself inspired further similar titles, with Ubisoft especially focusing on turning its own IP into more competitive multiplayer games with nods to the popularity of the battle royale genre, such as upcoming “Tom Clancy’s Defiant” and “Assassin’s Creed Infinity.

While the former game will be a free-to-play release like “Fortnite” and “Warzone,” the latter will come with a price tag and more narrative-driven elements, bearing similarity to “Grand Theft Auto Online” from Take-Two Interactive's Rockstar Games publisher.

“Candy Crush” remains the big earner for King but still exists in a mobile ecosystem where Zynga continues to acquire robust developers as it partners with entities like Snapchat to make competitors to smash games such as “Among Us.”

All the reason for Activision Blizzard to further resolve its longstanding workplace issues and strive to meet its declaration of setting a new tone for empowered workers in gaming. With its own financials remaining in great shape, there’s no excuse not to do so while defending its industry territory.