{"id":12287,"date":"2022-02-11T16:43:20","date_gmt":"2022-02-11T16:43:20","guid":{"rendered":"https:\/\/mailinvest.blog\/index.php\/2022\/02\/11\/how-bobby-kotick-activision-blizzards-embattled-ceo-outlasts-opponents\/"},"modified":"2022-02-11T16:43:20","modified_gmt":"2022-02-11T16:43:20","slug":"how-bobby-kotick-activision-blizzards-embattled-ceo-outlasts-opponents","status":"publish","type":"post","link":"https:\/\/mailinvest.blog\/index.php\/2022\/02\/11\/how-bobby-kotick-activision-blizzards-embattled-ceo-outlasts-opponents\/","title":{"rendered":"How Bobby Kotick, Activision Blizzard\u2019s embattled CEO, outlasts opponents"},"content":{"rendered":"

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Kotick persuaded casino magnate Steve Wynn to invest, and the employees of their company, called Arktronics, included members of the university\u2019s computer science faculty. Kotick and his partners asked their employees to forgo part or all of their pay in return for shares in the company, court records show, with Kotick thanking one hire for \u201cthe confidence and dedication you have demonstrated by your deferral of salary for stock, it is appreciated and should prove rewarding.\u201d<\/p>\n<\/div>\n

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But Apple\u2019s next model made Jane obsolete, and the employees claimed their thousands of shares \u2014 said to be worth $1 each \u2014 were in fact worthless. \u201cWe felt that we had been lied to and perhaps cheated,\u201d said former employee John Wiersba.<\/p>\n<\/div>\n

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Five employees sued Arktronics and its principals in 1985, records show. Arktronics and the employees reached a settlement \u2014 but then the company claimed the agreement should not be enforced due to a \u201cmistaken assumption\u201d about expected revenue. In 1989, a Michigan judge ordered Arktronics to honor the settlement: $17,000.<\/p>\n<\/div>\n

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But by then, Kotick and his partners had moved to Los Angeles, where he was in the midst of taking over a salvaged gaming company known as Activision.<\/p>\n<\/div>\n

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The dispute would drag on for six more years, with interest accruing. Kotick\u2019s spokesman, Mark Herr, said the judgment was \u201cpaid and satisfied,\u201d though he did not specify when. Wiersba said he was never paid, and a second employee said he couldn\u2019t comment because he signed a nondisclosure agreement. Available court records don\u2019t indicate whether the debt was ultimately paid.<\/p>\n<\/div>\n

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\u201cOur intention was not to hurt people. Our intention was to start another company and become successful,\u201d said Kotick\u2019s partner Marks, who added that he didn\u2019t recall specifics of the dispute. \u201cAnd it turns out it was unfortunate for the original people.\u201d<\/p>\n<\/div>\n

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The early enterprise \u2014 with Kotick blazing toward profits while leaving behind a trail of aggrieved employees \u2014 was a case study in his approach to business, which would become well known over the decades that followed.<\/p>\n<\/div>\n

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That approach was on full display last month when Microsoft, in an industry-shifting megadeal<\/a>, agreed to purchase Activision Blizzard for $68.7 billion, with Kotick reportedly expected to leave his role as CEO after the sale closes, probably sometime next year. The purchase price, nearly as much as the $71.3 billion Disney recently paid for 21st Century Fox, showed the remarkable extent of Activision\u2019s overhaul since Kotick revived it from bankruptcy three decades ago. And it demonstrated why Kotick is revered <\/b>by some as having one of the most prescient minds in business, recognizing and situating himself to capitalize on incoming industry booms in computing, video games and, most recently, esports.<\/p>\n<\/div>\n

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That reputation has helped make Kotick one of America\u2019s highest-paid executives, earning $154 million in 2020. And it won him the loyalty of a corporate board that has stood by him through periods of tumult \u2014 including when he fired two of the company\u2019s most prominent developers, and when he pushed the company to pursue a stock deal that a judge ruled meant a disproportionate profit for himself.<\/p>\n<\/div>\n

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The board has continued to voice full confidence in Kotick even as the company faced accusations of being a toxic workplace for many of his 10,000 employees. The state of California has sued the company, and the SEC is investigating, over its handling of sexual harassment allegations. A recent Wall Street Journal investigation<\/a> alleged that Kotick failed to share sexual assault and other allegations with the board. More than 1,800 employees have signed a petition calling on Kotick to resign.<\/p>\n<\/div>\n

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A corporate spokesperson has said Activision Blizzard \u201cfell short of ensuring that all of our employees\u2019 behavior was consistent with our values,\u201d and that the company is cooperating with the SEC investigation. But the company has broadly disputed the various allegations, including calling the California lawsuit\u2019s claims \u201cdistorted, and in many cases false,\u201d and Kotick has not conceded that he did anything wrong.<\/p>\n<\/div>\n

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Court records reviewed by The Washington Post show that Kotick has engaged in years-long battles against enemies big and small, sparring with contractors for his Beverly Hills, Calif., home and an attendant on his private jet, who claimed Kotick fired her after she reported sexual harassment by another employee. He has brawled over sums of money far eclipsed by the cost of his lawyers.<\/p>\n<\/div>\n

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Herr, Kotick\u2019s spokesman, described Kotick as a \u201creluctant litigant\u201d who rarely files suit himself and whose lawyers defend him \u201cprofessionally and with determination.\u201d An outside law firm representing Kotick also sent a five-page letter to The Post\u2019s attorneys, calling this article \u201can attempt to discredit Mr. Kotick\u2019s stellar reputation as a businessman who has built an $80 billion enterprise from bankruptcy.\u201d<\/p>\n<\/div>\n

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Activision Blizzard\u2019s sale has been described as a hastily arranged concession<\/a> to the damage done to Kotick and the company\u2019s reputation in under a year. But its terms also showcased Kotick\u2019s ability to survive \u2014 and to weather, for now, a scandal that might have meant a quick and inglorious exit for other executives of publicly traded corporations.<\/p>\n<\/div>\n

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If he leaves Activision Blizzard as expected next year following the close of the sale, it will be with stock holdings currently worth around $400 million, reinforcing what was long recognized by those who know him: Even when he loses, it\u2019s on his terms.<\/p>\n<\/div>\n

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In 1990, with Arktronics now defunct, Kotick and his partners spent less than $500,000 to acquire a controlling stake in a Bay Area company called Mediagenic.<\/p>\n<\/div>\n

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Previously called Activision, the company had enjoyed huge sales during the first video game boom in the early 1980s, with a catalogue of titles for Atari, Sega and Nintendo that included \u201cPitfall!\u201d and \u201cDragster.\u201d<\/p>\n<\/div>\n

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But <\/b>revenue had plummeted, and Kotick\u2019s predecessors at the company, sensing that video games were a fad, had changed its name and shifted to what they saw as a more lasting product: word processors. The company was beset by debt and litigation.<\/p>\n<\/div>\n

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Kotick revived the Activision name, <\/b>laid off much of the staff, and moved the company to Santa Monica, partly to better <\/b>poach talent from the film industry. A full-page ad in the Hollywood Reporter in 1992 featured the Hollywood sign replaced by letters spelling \u201cActivision\u201d and the tag line, \u201cWe have big plans for this town.\u201d The ad didn\u2019t mention the term \u201cvideo games,\u201d instead referring to \u201cinteractive media\u201d as \u201cThe Next Big Thing.\u201d It called for \u201cwriters, screenwriters, special effects people, animators, producers, and illustrators\u201d to call Kotick, listing his direct extension.<\/p>\n<\/div>\n

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At the time, Hollywood dwarfed the gaming industry, which was cordoned behind the pornography section<\/a> at the annual CES technology show. But with Kotick at the helm, the company produced franchises, including \u201cTony Hawk\u2019s Pro Skater\u201d and \u201cCall of Duty,\u201d that far out-earned even the most successful films in history.<\/p>\n<\/div>\n

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By 2014, Kotick could out-bully the film industry in its own town. That year, Sony Pictures executive Tom Rothman, who would later become chairman of the company, prepped his colleagues to tread lightly with Kotick in advance of a meeting about adapting some of his games.<\/p>\n<\/div>\n

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Kotick\u2019s plan was to \u201cdo it all IN HOUSE to CONTROL everything,\u201d Rothman warned, according to an email leaked in the Sony hack<\/a>. But they might have a chance, Rothman wrote, if they were able to \u201cCOAX him toward us, by letting him retain control.\u201d<\/p>\n<\/div>\n

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Kotick has personified that shift, carrying himself more like a film boss than a product of gaming\u2019s scruffy programmer roots. His personal art collection has been valued at $100 million, and he\u2019s vice-chair of the Los Angeles County Museum of Art. He has close relationships with business titans like \u201cUncle Steve,\u201d as he\u2019s called Wynn, and Robert Kraft, owner of the New England Patriots, whose ownership of the Boston Uprising gave instant cachet to the Overwatch League, one of Activision Blizzard\u2019s professional esports circuits.<\/p>\n<\/div>\n

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Compared with other magnates who have transformed multibillion-dollar industries, Kotick has, until recently, managed to keep a relatively low profile. Those who know him are reluctant to discuss him on the record, giving reasons ranging from confidentiality agreements to fear of a man who has shown a willingness to devote enormous resources to even the most minor feud.<\/p>\n<\/div>\n

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When Kotick grew dissatisfied during a home remodeling in 2001, court records show, he wrote in an email to his general contractor that during their next meeting he\u2019d be joined by the \u201csenior litigation partner\u201d of a major law firm. \u201cI will assure you the financial and reputational consequences of a litigated outcome will be to [the contractor\u2019s] great disadvantage,\u201d Kotick wrote.<\/p>\n<\/div>\n

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When the contractor\u2019s company then sued Kotick for allegedly not paying his bill, his lawyers said in a counterclaim that the company\u2019s \u201csecret practice of hiring undocumented and unknown workers \u2026 placed the Koticks and their children at risk,\u201d including causing an explosion in his house and the venting of \u201clethal carbon monoxide.\u201d They tried to depose the contractor\u2019s famous clients, including Jim Carrey, Jennifer Lopez and Quentin Tarantino, in what they said was an effort to reveal other allegations of poor workmanship. The contractor\u2019s lawyer said Kotick was trying to hurt the company\u2019s reputation.<\/p>\n<\/div>\n

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A judge ruled against the celebrity depositions. Kotick\u2019s spokesman said last month that he terminated the contractor because of \u201coverbilling, safety and quality of work,\u201d but settled to \u201cavoid protracted litigation.\u201d<\/p>\n<\/div>\n

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In 2010, when the rock group No Doubt sued Activision over the use of their likeness in the game \u201cBand Hero,\u201d Kotick appeared to take it personally that one of the band\u2019s lawyers, <\/b>who had previously represented Kotick, was now opposing him. In an email filed in court, Kotick chastised the lawyer for not having \u201cgiven me the courtesy of a phone call\u201d about what he called the \u201cfrivolous lawsuit,\u201d writing: \u201cDo you understand that this will prevent you from ever doing any business with Activision, Universal Music or ANY Vivendi company anywhere in the world?\u201d Kotick\u2019s spokesman said he couldn\u2019t comment on the No Doubt case because of the terms of a settlement.<\/p>\n<\/div>\n

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During a second protracted spat with a contractor who had worked on his Beverly Hills home, court records show, Kotick sued his HVAC contractor over an $18,000 dispute for what he said were faulty thermostats. Though Kotick ultimately voluntarily dismissed the lawsuit, he apparently still couldn\u2019t get the temperature right in his house, designed by famed architect John Lautner. He filed suit against an electronics company whose malfunctioning control system, Kotick claimed, was randomly filling his bathtub and turning on the heat, which his lawyers claimed would \u201clikely damage the Koticks\u2019 irreplaceable art collection,\u201d including pieces by Mark Rothko and Robert Rauschenberg.<\/p>\n<\/div>\n

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Marks, his former business partner and an Activision executive until the late 1990s, said he counted Kotick among his best friends until they had a falling out over money. Marks described Kotick, whose net worth has been estimated to be near a billion dollars, as always ready to scrap for virtually meaningless amounts of money. \u201cHe always liked the saying, \u2018The one who has the most things when they die, wins,’ \u201d Marks said. \u201cWell, he might win, but I never wanted to be in the race in the first place.\u201d<\/p>\n<\/div>\n

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Herr, the spokesman, said that the saying was from a sweatshirt worn by a mutual friend to Kotick and Marks, and that they would both make reference to it. \u201cBobby denies he believed it then or now,\u201d Herr said.<\/p>\n<\/div>\n

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Kotick\u2019s stamina for legal combat was on display again during a dispute that could be seen as a precursor to the sort of allegations he\u2019s recently faced atop Activision Blizzard.<\/p>\n<\/div>\n

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In 2007, a flight attendant for Kotick\u2019s private jet sued, accusing him of firing her after she reported being harassed by a pilot. Kotick undertook what an arbitrator later described as a \u201cscorched earth defense.\u201d<\/p>\n<\/div>\n

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After the flight attendant mentioned during a deposition that she had an abortion, Kotick\u2019s attorneys argued in court filings that her ex-boyfriend should have to answer questions about it during a deposition, and also that they should be able to introduce evidence of the abortion at trial. The procedure may have \u201cdistracted [her] from properly performing her job duties\u201d or caused the \u201cemotional distress\u201d she was now blaming on her firing, Kotick\u2019s lawyer argued in a legal filing.<\/p>\n<\/div>\n

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The flight attendant\u2019s lawyer described the line of inquiry as \u201cpure harassment.\u201d Kotick\u2019s spokesman defended their legal argument, noting that she brought up the abortion herself, \u201cunprompted.\u201d<\/p>\n<\/div>\n

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Kotick and the flight attendant ultimately settled, with Kotick agreeing to pay her $200,000 plus $475,000 in legal fees. <\/b>After Kotick then refused to pay his own lawyers <\/i>all of what they said he owed, claiming they overbilled him, they took him to court, too. The arbitrator described Kotick\u2019s strategy as being more concerned with vengeance than business sense, citing statements Kotick allegedly made during meetings with lawyers <\/a>that he would \u201cruin\u201d the flight attendant to ensure she would \u201cnever work again.\u201d At the time, Kotick\u2019s lawyer disputed the arbitrator\u2019s account of those statements as \u201cinaccurate\u201d and \u201ctaken out of context.\u201d<\/p>\n<\/div>\n

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Kotick\u2019s spokesman said Kotick only defended himself against the attendant\u2019s lawsuit, which \u201cthe facts clearly showed was without merit.\u201d The arbitrator awarded his former lawyers nearly $1.5 million in fees and costs. All told, Kotick spent more than $2 million on a legal saga his attorneys allegedly advised<\/a> could have been settled early on for a tenth of that.<\/p>\n<\/div>\n

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According to the arbitrator, however, Kotick said during the proceedings that he was unconcerned with the cost. \u201cHe was worth one-half billion dollars,\u201d the arbitrator wrote<\/a>, paraphrasing what he said was Kotick\u2019s position, \u201cand he didn\u2019t mind spending some of it on attorneys\u2019 fees.\u201d<\/p>\n<\/div>\n

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Reached by The Post, the flight attendant declined to comment, writing, \u201cI have [a] gag order with him.\u201d<\/p>\n<\/div>\n

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Each time that Kotick, as Activision Blizzard chief, has weathered major storms of his own making, he has emerged richer.<\/p>\n<\/div>\n

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When Kotick fired Jason West and Vincent Zampella, the two developers behind the massively lucrative \u201cCall of Duty,\u201d in 2010, the move stunned the industry. The developers sued, claiming their firings were an attempt to avoid paying them $36 million they were owed in royalties and bonuses.<\/p>\n<\/div>\n

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The resulting litigation included claims of a secret campaign to spy on the developers to find a reason to fire them, with a former IT director for the company testifying in a deposition that he was told his assignment for subterfuge \u201ccomes from Bobby directly<\/a>.\u201d Activision Blizzard\u2019s version was that the developers were investigated and terminated for insubordination<\/a>, after the company discovered they were allegedly planning to leave for rival Electronic Arts.<\/p>\n<\/div>\n

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Activision Blizzard responded by suing EA, but after more than two years of escalating court claims, it settled with both the developers and the rival company. Kotick\u2019s spokesman declined to comment on the litigation, saying that the settlement had rendered it \u201cstrictly confidential.\u201d<\/p>\n<\/div>\n

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The episode cost Activision Blizzard tens of millions of dollars, but the company and Kotick\u2019s bottom line proved unaffected. The company\u2019s stock price has increased roughly ninefold since the scandal, and it maintains full control of the multibillion-dollar Call of Duty franchise.<\/p>\n<\/div>\n

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Within a year of that settlement, the company\u2019s board faced a direct test of its loyalty to Kotick, over a deal that appeared to particularly benefit him.<\/p>\n<\/div>\n

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As described in a later court opinion by a Delaware judge, Kotick and Brian Kelly, the Activision Blizzard board chairman, proposed a massive buyback of the ailing French corporation Vivendi\u2019s stake in the company. Kotick and Kelly\u2019s plan included forming a private entity in the Cayman Islands, separate from Activision Blizzard, that they would use to purchase billions of dollars\u2019 worth of shares for themselves and outside investors.<\/p>\n<\/div>\n

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An adviser hired by the board warned that Kotick and Kelly would wind up with a \u201cdisproportionate influence\u201d on the company. But when a board committee proposed alternate plans, according to the Delaware judge\u2019s opinion, Kotick repeatedly shot them down. The committee, \u201cconcerned that Kotick might resign if they did not support a deal on his terms,\u201d disbanded. A version of the deal went through in 2013, and Kotick and Kelly\u2019s group immediately profited by $712.8 million \u2014 a quarter of which was shared by the two men \u2014 according to the court opinion.<\/p>\n<\/div>\n

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Shareholders sued, claiming the deal favored the executives. The lawsuit was settled in 2015, for $275 million, just over half of which came from Kotick\u2019s group. Kotick\u2019s spokesman told The Post that the deal \u201ccreated tens of billions of dollars of long-term value for shareholders.\u201d<\/p>\n<\/div>\n

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In approving the settlement, the judge didn\u2019t disagree, writing that the transaction\u2019s problem \u201cwas not the lack of benefit to Activision,\u201d which also profited, \u201cbut rather the extraordinary benefits that Kotick and Kelly extracted for themselves.\u201d<\/p>\n<\/div>\n

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Marks, Kotick\u2019s old partner, described such maneuvers as Kotick\u2019s real specialty, and said his \u201cgolden parachute\u201d from the trouble at Activision Blizzard was his finest work. \u201cThat\u2019s like a chess move,\u201d Marks said. \u201cNo one saw that coming.\u201d<\/p>\n<\/div>\n

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Kotick\u2019s caustic and unilateral style has long been accepted as part of the package, according to Trip Hawkins, the EA founder who has known Kotick for more than three decades, dating back to when he said the young businessman\u2019s nickname was the \u201cEnfant Terrible.\u201d<\/p>\n<\/div>\n

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But Hawkins suggested that style was bound to clash with new expectations for executives. \u201cBobby is a brilliant businessman,\u201d Hawkins said, \u201cbut he\u2019s the opposite of \u2018woke.’ \u201d<\/p>\n<\/div>\n

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Unlike the business landscape, Kotick appears to have changed little since his Arktronics days. In 1984, he told an interviewer for PBS <\/a>about an aborted attempt by another computer company to buy the Michigan start-up.<\/p>\n<\/div>\n

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\u201cAnd they said, \u2018This is going to be great fun<\/i>,\u2019 \u201d Kotick, 21 at the time, said of that meeting, accentuating the word. \u201c \u2019We\u2019ve been in business for two years, we have a lot of fun <\/i>doing it, and we\u2019re in it for the fun<\/i>.’ \u201d<\/p>\n<\/div>\n

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\u201cWe\u2019re in it for the fun, too,\u201d Kotick said. \u201cBut we\u2019re in it, really, for the money.\u201d<\/p>\n<\/div>\n<\/div>\n