LOS ANGELES — In the early 1980s, Bobby Kotick, a University of Michigan undergrad who religiously studied the Forbes 400, co-founded a software company. Kotick didn’t know anything about how computers worked. But his roommate, Howard Marks, did. Their idea was to make computers accessible to Luddites using a program they named Jane, which would simplify certain tasks on an Apple II.
Kotick persuaded casino magnate Steve Wynn to invest, and the employees of their company, called Arktronics, included members of the university’s 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 “the confidence and dedication you have demonstrated by your deferral of salary for stock, it is appreciated and should prove rewarding.”
But Apple’s next model made Jane obsolete, and the employees claimed their thousands of shares — said to be worth $1 each — were in fact worthless. “We felt that we had been lied to and perhaps cheated,” said former employee John Wiersba.
Five employees sued Arktronics and its principals in 1985, records show. Arktronics and the employees reached a settlement — but then the company claimed the agreement should not be enforced due to a “mistaken assumption” about expected revenue. In 1989, a Michigan judge ordered Arktronics to honor the settlement: $17,000.
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.
The dispute would drag on for six more years, with interest accruing. Kotick’s spokesman, Mark Herr, said the judgment was “paid and satisfied,” though he did not specify when. Wiersba said he was never paid, and a second employee said he couldn’t comment because he signed a nondisclosure agreement. Available court records don’t indicate whether the debt was ultimately paid.
“Our intention was not to hurt people. Our intention was to start another company and become successful,” said Kotick’s partner Marks, who added that he didn’t recall specifics of the dispute. “And it turns out it was unfortunate for the original people.”
The early enterprise — with Kotick blazing toward profits while leaving behind a trail of aggrieved employees — was a case study in his approach to business, which would become well known over the decades that followed.
That approach was on full display last month when Microsoft, in an industry-shifting megadeal, 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’s overhaul since Kotick revived it from bankruptcy three decades ago. And it demonstrated why Kotick is revered 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.
That reputation has helped make Kotick one of America’s 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 — including when he fired two of the company’s most prominent developers, and when he pushed the company to pursue a stock deal that a judge ruled meant a disproportionate profit for himself.
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 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.
A corporate spokesperson has said Activision Blizzard “fell short of ensuring that all of our employees’ behavior was consistent with our values,” and that the company is cooperating with the SEC investigation. But the company has broadly disputed the various allegations, including calling the California lawsuit’s claims “distorted, and in many cases false,” and Kotick has not conceded that he did anything wrong.
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.
Herr, Kotick’s spokesman, described Kotick as a “reluctant litigant” who rarely files suit himself and whose lawyers defend him “professionally and with determination.” An outside law firm representing Kotick also sent a five-page letter to The Post’s attorneys, calling this article “an attempt to discredit Mr. Kotick’s stellar reputation as a businessman who has built an $80 billion enterprise from bankruptcy.”
Activision Blizzard’s sale has been described as a hastily arranged concession to the damage done to Kotick and the company’s reputation in under a year. But its terms also showcased Kotick’s ability to survive — and to weather, for now, a scandal that might have meant a quick and inglorious exit for other executives of publicly traded corporations.
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’s on his terms.
A new game in town
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.
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 “Pitfall!” and “Dragster.”
But revenue had plummeted, and Kotick’s 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.
Kotick revived the Activision name, laid off much of the staff, and moved the company to Santa Monica, partly to better poach talent from the film industry. A full-page ad in the Hollywood Reporter in 1992 featured the Hollywood sign replaced by letters spelling “Activision” and the tag line, “We have big plans for this town.” The ad didn’t mention the term “video games,” instead referring to “interactive media” as “The Next Big Thing.” It called for “writers, screenwriters, special effects people, animators, producers, and illustrators” to call Kotick, listing his direct extension.
At the time, Hollywood dwarfed the gaming industry, which was cordoned behind the pornography section at the annual CES technology show. But with Kotick at the helm, the company produced franchises, including “Tony Hawk’s Pro Skater” and “Call of Duty,” that far out-earned even the most successful films in history.
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.
Kotick’s plan was to “do it all IN HOUSE to CONTROL everything,” Rothman warned, according to an email leaked in the Sony hack. But they might have a chance, Rothman wrote, if they were able to “COAX him toward us, by letting him retain control.”
The role reversal reflected industry realities that have only become more pronounced, as the gaming industry has recently out-earned the professional sports and film industries combined.
Kotick has personified that shift, carrying himself more like a film boss than a product of gaming’s scruffy programmer roots. His personal art collection has been valued at $100 million, and he’s vice-chair of the Los Angeles County Museum of Art. He has close relationships with business titans like “Uncle Steve,” as he’s 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’s professional esports circuits.
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.
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’d be joined by the “senior litigation partner” of a major law firm. “I will assure you the financial and reputational consequences of a litigated outcome will be to [the contractor’s] great disadvantage,” Kotick wrote.
When the contractor’s company then sued Kotick for allegedly not paying his bill, his lawyers said in a counterclaim that the company’s “secret practice of hiring undocumented and unknown workers … placed the Koticks and their children at risk,” including causing an explosion in his house and the venting of “lethal carbon monoxide.” They tried to depose the contractor’s 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’s lawyer said Kotick was trying to hurt the company’s reputation.
A judge ruled against the celebrity depositions. Kotick’s spokesman said last month that he terminated the contractor because of “overbilling, safety and quality of work,” but settled to “avoid protracted litigation.”
In 2010, when the rock group No Doubt sued Activision over the use of their likeness in the game “Band Hero,” Kotick appeared to take it personally that one of the band’s lawyers, who had previously represented Kotick, was now opposing him. In an email filed in court, Kotick chastised the lawyer for not having “given me the courtesy of a phone call” about what he called the “frivolous lawsuit,” writing: “Do you understand that this will prevent you from ever doing any business with Activision, Universal Music or ANY Vivendi company anywhere in the world?” Kotick’s spokesman said he couldn’t comment on the No Doubt case because of the terms of a settlement.
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’t 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 “likely damage the Koticks’ irreplaceable art collection,” including pieces by Mark Rothko and Robert Rauschenberg.
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. “He always liked the saying, ‘The one who has the most things when they die, wins,' ” Marks said. “Well, he might win, but I never wanted to be in the race in the first place.”
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. “Bobby denies he believed it then or now,” Herr said.
Kotick’s stamina for legal combat was on display again during a dispute that could be seen as a precursor to the sort of allegations he’s recently faced atop Activision Blizzard.
In 2007, a flight attendant for Kotick’s 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 “scorched earth defense.”
After the flight attendant mentioned during a deposition that she had an abortion, Kotick’s 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 “distracted [her] from properly performing her job duties” or caused the “emotional distress” she was now blaming on her firing, Kotick’s lawyer argued in a legal filing.
The flight attendant’s lawyer described the line of inquiry as “pure harassment.” Kotick’s spokesman defended their legal argument, noting that she brought up the abortion herself, “unprompted.”
Kotick and the flight attendant ultimately settled, with Kotick agreeing to pay her $200,000 plus $475,000 in legal fees. After Kotick then refused to pay his own lawyers all of what they said he owed, claiming they overbilled him, they took him to court, too. The arbitrator described Kotick’s strategy as being more concerned with vengeance than business sense, citing statements Kotick allegedly made during meetings with lawyers that he would “ruin” the flight attendant to ensure she would “never work again.” At the time, Kotick’s lawyer disputed the arbitrator’s account of those statements as “inaccurate” and “taken out of context.”
Kotick’s spokesman said Kotick only defended himself against the attendant’s lawsuit, which “the facts clearly showed was without merit.” 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 could have been settled early on for a tenth of that.
According to the arbitrator, however, Kotick said during the proceedings that he was unconcerned with the cost. “He was worth one-half billion dollars,” the arbitrator wrote, paraphrasing what he said was Kotick’s position, “and he didn’t mind spending some of it on attorneys’ fees.”
Reached by The Post, the flight attendant declined to comment, writing, “I have [a] gag order with him.”
A disputed stock deal
Each time that Kotick, as Activision Blizzard chief, has weathered major storms of his own making, he has emerged richer.
When Kotick fired Jason West and Vincent Zampella, the two developers behind the massively lucrative “Call of Duty,” 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.
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 “comes from Bobby directly.” Activision Blizzard’s version was that the developers were investigated and terminated for insubordination, after the company discovered they were allegedly planning to leave for rival Electronic Arts.
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’s spokesman declined to comment on the litigation, saying that the settlement had rendered it “strictly confidential.”
The episode cost Activision Blizzard tens of millions of dollars, but the company and Kotick’s bottom line proved unaffected. The company’s stock price has increased roughly ninefold since the scandal, and it maintains full control of the multibillion-dollar Call of Duty franchise.
Within a year of that settlement, the company’s board faced a direct test of its loyalty to Kotick, over a deal that appeared to particularly benefit him.
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’s stake in the company. Kotick and Kelly’s plan included forming a private entity in the Cayman Islands, separate from Activision Blizzard, that they would use to purchase billions of dollars’ worth of shares for themselves and outside investors.
An adviser hired by the board warned that Kotick and Kelly would wind up with a “disproportionate influence” on the company. But when a board committee proposed alternate plans, according to the Delaware judge’s opinion, Kotick repeatedly shot them down. The committee, “concerned that Kotick might resign if they did not support a deal on his terms,” disbanded. A version of the deal went through in 2013, and Kotick and Kelly’s group immediately profited by $712.8 million — a quarter of which was shared by the two men — according to the court opinion.
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’s group. Kotick’s spokesman told The Post that the deal “created tens of billions of dollars of long-term value for shareholders.”
In approving the settlement, the judge didn’t disagree, writing that the transaction’s problem “was not the lack of benefit to Activision,” which also profited, “but rather the extraordinary benefits that Kotick and Kelly extracted for themselves.”
Marks, Kotick’s old partner, described such maneuvers as Kotick’s real specialty, and said his “golden parachute” from the trouble at Activision Blizzard was his finest work. “That’s like a chess move,” Marks said. “No one saw that coming.”
For fun and money
Kotick’s 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’s nickname was the “Enfant Terrible.”
But Hawkins suggested that style was bound to clash with new expectations for executives. “Bobby is a brilliant businessman,” Hawkins said, “but he’s the opposite of ‘woke.' ”
Unlike the business landscape, Kotick appears to have changed little since his Arktronics days. In 1984, he told an interviewer for PBS about an aborted attempt by another computer company to buy the Michigan start-up.
“And they said, ‘This is going to be great fun,’ ” Kotick, 21 at the time, said of that meeting, accentuating the word. “ ’We’ve been in business for two years, we have a lot of fun doing it, and we’re in it for the fun.' ”
“We’re in it for the fun, too,” Kotick said. “But we’re in it, really, for the money.”