Last April, Activision Blizzard hired former Restaurant Brands International CMO Fernando Machado to spice up marketing efforts as the gaming giant competed in an increasingly competitive market with COVID lockdowns spiking an interest in gaming.

But roughly four months into the job as chief marketing officer, Machado is confronted with a challenge of a much different kind: helping to restore consumer trust in a company whose reputation has been hurt by an internal scandal. The largest independent U.S. game maker, known for popular games like “Call of Duty,” “World of Warcraft” and “Candy Crush,” has been shaken by a sexual harassment lawsuit, which has led to an employee strike, calls for a boycott online, shareholders suing the brand for withholding information and the exit of two executives: J. Allen Brack, the head of Blizzard, who was singled out in the California suit for enabling sexual misconduct, and Jesse Meschuk, head of human resources at Blizzard.

Machado could not be reached for an interview. But as CMO, he will be called on to help reposition the brand in the minds of consumers, which will not be an easy feat. 

"The entire leadership team is committed to long-lasting change. They will work with teams across the company, including the entire marketing organization, to improve and build the kind of inclusive workplace that is essential to foster creativity and inspiration," says an Activision Blizzard spokesperson.

“This is about earning trust which is incredibly fleeting after a scandal like this,” says Mike Proulx, VP, research director at market research company Forrester. “Activision Blizzard has lost the trust of three interconnected stakeholders: Shareholders, employees, and consumers. Their stock price is down, employees went on a strike, and now the question is will consumers respond with their wallets?”

Proulx points to Forrester research that shows it’s highly likely consumers will respond negatively and use their wallets to do so: 60% of Gen Z adults in the U.S. play video games in their spare time and 50% regularly purchase from brands that align with their personal values. A particular stat of interest comes from an upcoming Forrester report called “The Effect of Cancel Culture On Brands,” which surveyed 1,056 consumers and found that 37% of U.S. Gen Z adults will boycott a brand if they treat their employees unfairly.

“As primary owners of the brand and the messages the world sees to communicate it, a CMO's role is key," says Jason Cieslak, president for the Pacific Rim region at branding agency Siegel+Gale. "Obviously, this isn't the kind of assignment any CMO wants. They'd rather the crisis communications team take the lead. But any great CMO knows it is their job to figure out how to overcome it internally with leadership and employees, as well as externally with partners, customers, prospective employees and Wall Street."

Historically, the way brands have handled internal operations hasn’t been an indicator of how successfully their product sells. But with the rise of cancel culture and employees having more say in the way companies are run, brands can now track how their internal moves directly affect their bottom line. Consumer calls for corporations to do more to handle internal issues have peaked over the past year with consumers calling for more diversity and an end to systemic racism within corporate leadership following the death of George Floyd. Also playing a role is the Me Too movement, which has led to the ouster of misogynistic leaders and put a spotlight on sexual violence in the workplace. At the same time, companies are being either praised or criticized for how they are handling the COVID pandemic internally.

“Brands have to remember that how they behave on the inside not only impacts their people, but can considerably impact their outside reputation and equity,” Cieslak says. 

Activision was in good shape financially before news of the harassment suit broke last month. On Tuesday, the company reported second-quarter results that beat Wall Street projections, with adjusted revenue coming to $1.92 billion, beating analysts’ forecasts of $1.89 billion. Still, during the earnings call with analysts on Tuesday night, Daniel Alegre, Activision Blizzard’s president and chief operating officer, warned that fallout from the sexual harassment lawsuit and sufficient reports in media could hurt revenue.

How the company continues to respond and what it does next is crucial. Already, Activision Blizzard has muddied its response by first claiming that the lawsuits were “inaccurate” and “distorted.” The company then walked back on its initial statement, admitting that management had been tone-deaf. Activision Blizzard CEO Bobby Kotick has hired law firm WilmerHale to review the company’s policies. The “World of Warcraft” team also put out a statement saying it will remove “inappropriate” content in its games, although details are minimal.

“We are fully committed to fostering a safe, inclusive and rewarding environment for all of our employees around the world,” says an Activision Blizzard spokesperson in a statement. “We are taking the current situation extremely seriously and it is our utmost priority to protect the interests of our most valued partners.”

Carla Bevins, assistant teaching professor of business at Carnegie Mellon University’s Tepper School of Business, says the brand needs to revisit its core branding and culture to move forward.

“There have been multiple PR missteps throughout the crisis, and it's essential the company has a clear and aligned marketing strategy to successfully rebound in the coming months and to lead change in the industry,” she says. The company's reputation is at stake as well as the gaming industry at large. This is a watershed moment to make significant change, and Activision Blizzard must move forward authentically and listen to all of their stakeholders, including employees, customers and stockholders.”

In moving forward, marketing experts say Activsion Blizzard needs to align their communications across marketing, human resources and the C-suite divisions. “Marketing working without those other two critical parties will seem hollow,” says Cieslak. “It needs to be sincere, actionable and immediate. It needs to feel comprehensive and signal a significant shift.”

If Activision Blizzard moves beyond promises and takes “actual actions that demonstrate tangible changes in the eyes of consumers,” it can reclaim customers lost, says Proulx. Forrester's “Cancel Culture” study found that 46% of U.S. Gen Z adults will go back to a brand that they have boycotted if the brand takes genuine steps to redeem itself.