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Activision Blizzard warns financials could be hit by California lawsuit

Activision Blizzard warned investors that the State of California’s lawsuit against the company could impact its financial outlook in the months to come.

Activision Blizzard’s management kicked off its second quarter earnings call today, and warned investors that the State of California’s lawsuit against the company might impact its financials in the months to come.

Kotick opened the call with a number of comments in defense of Activision Blizzard, reinforced that the company “would not tolerate harassment,” and said it would act to terminate any employee or manager found to be in violation of company policy. These were followed by promises to ensure the company would be a “safe and welcoming” place to work for a diverse range of employees in the future.

No mention was made of recent employee pushback against Kotick's planned actions to improve life at the company.

That said, the company seems to be coming to grips with how the lawsuit is impacting life at the company—or at least, how it could impact its financials. Activision Blizzard leadership cautioned investors that the lawsuit may drive continued negative publicity and reduced productivity within the company, possibly impacting the future financial state of the business. “We are carefully monitoring all aspects of our business for any such impacts,” they stated.

Despite multiple participants on the call doing their best to reinforce Kotick’s message about “not tolerating harassment,” it was difficult not to view the company’s boastful numbers against the light of the allegations made by the State of California and other employees on social media.

For the second quarter ending June 30, 2021, Activision Blizzard’s GAAP net revenue crossed $2.30 billion, up from $1.93 billion for the same quarter in 2020. It drew in $2.03 billion in GAAP net revenue from digital channels. Each of the company’s three divisions--Activision, Blizzard, and King--drew in a significant amount of revenue contributing to that total.

Operating income for the quarter clocked in at $959 million, up from $749 million in the same quarter last year.

Activision’s end of the company earned $789 million in revenue, while King drew in $635 million (a 15 percent growth year-over-year from last quarter). Blizzard Entertainment, the company at the center of the State of California’s lawsuit, only drew in $433 million.

Call of Duty Mobile is apparently on track to exceed $1 billion in “consumer spending” for the financial year for the free-to-play title. The company also gave updates on an array of upcoming mobile projects, including a pair of previously unannounced Warcraft mobile games, and aims to launch the (somewhat controversial) Diablo Immortal in the first half of 2022.

After more and more details have emerged about life at Activision Blizzard in the last few weeks, it’s difficult to look at these successful numbers and not feel sorrow for the additional cost they represent. The long-term success of games like World of Warcraft have allegedly been built off of a work environment that tolerated an excessive amount of abuse and discrimination in the workplace.

Each of Activision Blizzard’s executives on the call made comments doubling down on the welfare of employees, but each statement just raised the question “why wasn’t action taken sooner? Why did it take a regulatory lawsuit to drive the company to action?”

Answers to those questions were probably not coming in an investor call, but they’ll linger as more news about the company continues to break in the weeks ahead.

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