Activision Blizzard delays two games as another leader departs

Activision Blizzard Inc., the video game publisher facing lawsuits for sexual discrimination and harassment, delayed two of its most anticipated games and gave a fourth-quarter forecast that fell short of expectations. Diablo IV and Overwatch 2 will take longer than anticipated to finish, Activision said in a statement Tuesday. They are two of the biggest projects from Blizzard, the division that has been acutely affected by the sexual misconduct scandal. The company didn’t provide release dates. Activision also said Jen Oneal will step down as co-head of Blizzard. That leaves Mike Ybarra as the studio’s sole chief. They took on a shared role in August following the departure of J. Allen Brack, the former president who left in the wake of a lawsuit from California. Meanwhile, the fourth-quarter outlook suggests that even the release of a new Call of Duty game won’t lift Activision out of its quagmire. The company’s shares were down about 15% in the first minutes of trading Wednesday. The biggest independent U.S. video game publisher, which is also responsible for Candy Crush and World of Warcraft, expects adjusted revenue of $2.78 billion in the last three months of the year. Analysts had expected $2.95 billion, according to an average of estimates compiled by Bloomberg. Related: Fernando Machado's next marketing challenge is saving Activision Blizzard's Reputation Santa Monica, California-based Activision is in the midst of a cultural reckoning after the California Department of Fair Employment and Housing sued the company in July for sexual discrimination and unlawful pay practices. The Securities and Exchange Commission is investigating the company over how it handled the allegations and has subpoenaed several senior executives, including CEO Bobby Kotick. Employees have been upset over Activision’s initial dismissive response to the lawsuit and have since expressed disappointment with the company, using a shared Twitter account to demand further action. Last week, Kotick said he would take a 99.9% pay cut and outlined several measures that the company hoped would mollify angry employees, such as ending mandatory arbitration of sexual harassment and discrimination claims. The company has also committed to increasing pay transparency and to hiring 50% more women and non-binary people within the next five years. Activision has denied some of the claims in the lawsuit while also taking steps to punish those accused of harassment. Last month, the company ousted more than 20 employees and reprimanded 20 others. In the third quarter, adjusted revenue rose to $1.88 billion, matching analysts’ projections. Earnings were 72 cents a share, slightly beating analyst estimates of 70 cents. Despite the controversies, which were especially acute within the Blizzard division, the company said people are still playing Blizzard games. First-week sales for the recent title Diablo II: Resurrected “were the highest recorded for a remaster from the company,” Activision said. The upcoming mobile game Diablo Immortal is also on track for release in the first half of 2022, Activision said. But Diablo Immortal, which is developed in conjunction with NetEase Inc., was expected to be a big hit in China and may suffer if the country’s gaming ban continues. Activision shares are down 16% this year, more than its two other main publicly listed rivals, Take-Two Interactive Software Inc. and Electronic Arts Inc. Those two companies are scheduled to report results on Wednesday. Collectively, gaming stocks have suffered in the market from a perception that interest would slow as the Covid-19 pandemic eased and people returned to other activities. The tepid forecast could be due in part to a slim lineup of games through the end of the year, as well as ongoing fallout from this summer’s lawsuit. Activision said fourth-quarter earnings will be $1.29 a share, missing estimates by 10 cents. The Call of Duty series is expected to have a down year, said Matthew Kanterman, an analyst at Bloomberg Intelligence. The upcoming Call of Duty: Vanguard is set during World War II, which has not proven to be as popular as the Modern Warfare or Black Ops titles, Kanterman said. World of Warcraft is also struggling to retain unhappy players and is facing stiff competition from Square Enix Holdings Co.’s Final Fantasy XIV. Combine those factors with the social issues that Activision has been facing, and: “It’s going to be messy,” Kanterman said. The delays to Diablo IV and Overwatch 2 were due to “a change in leadership,” said Ybarra, now the sole leader of Blizzard. Diablo IV’s director left in the wake of the misconduct lawsuit in August, while Overwatch 2’s executive producer resigned by choice in September, Bloomberg reported at the time. “We looked at what was left in the final phases of production with fresh eyes, and we saw that allowing the teams more time” would make for better games and give Blizzard a chance to further expand both teams, Ybarra said in a conference call with analysts Tuesday. Subscribe to Ad Age now for award-winning news and insight. —Bloomberg News

Activision Blizzard delays two games as another leader departs

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