Activision, Inc., had three of the top ten video games in 2007, and over $1 billion in revenue. But it didn’t have a big title in the fast-growing multiplayer online gaming market. It could only envy the leader, World of Warcraft, which boasts upward of 10 million subscribers spending $15 a month to play against each other in a scary gothic fantasyland populated with dwarves, gnomes, night elves, and, of course, the undead. In late 2007 Activision CEO Robert Kotick, the jolly-looking entrepreneur known as one of the smartest and toughest in the business, approached Vivendi Games, which published World of Warcraft through its subsidiary Blizzard Entertainment, Inc. Kotick made an offer for Blizzard, but Vivendi countered by suggesting that the two companies mergewith Kotick at the helm. The merger, which was completed in July, created a publicly traded company, Activision Blizzard, Inc., that is the most impressive video game business in the worldrunning neck and neck in revenues with longtime leader Electronic Arts, Inc. and surpassing it in profits. “Vivendi acquired a [60 percent] controlling interest in the new company,” says Wedbush Morgan analyst Michael Pachter, “for the sole purpose of getting Activision management to run the business.”
It wasn’t just a desire to bulk up in size that prompted the merger. Kotick could see the Internet changing the rules of the video game industry just as it has so many others. Activision’s games, like its top seller, Guitar Hero, are played mostly on dedicated gaming consoles, such as Sony PlayStation 3 and the Microsoft Xbox 360. But the market for multiplayer online games, which can be played on any computer, is growing even faster. Indeed, online games are the only way to make much dent in markets like China, where few players can afford a specialized console. There players gather in cafes to play online games on computers, racking up revenue for gaming companies by paying by the hour, or through microtransactions like buying new clothes for their avatar.
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