Activision was the first independent third-party publisher of console video games, founded October 1, 1979 by a group of former Atari developers. Activision proved successful, becoming the largest and most enduring publisher of video games for both game consoles and computers of its era. What happened to Activision was its successor company, Activision Blizzard, was acquired by Microsoft on October 13, 2023, ending a 44-year run.
Activision’s early years
Activisions founders left Atari because they didn’t think Atari compensated them fairly for their work. Atari titles were uncredited, not containing the names of anyone involved. And the game developers received modest salaries regardless of how well their games sold.
Activision produced a large library of titles for the Atari 2600 game console, crediting their developers and paying royalties based on sales. It was hugely successful. Its bestselling early title, Pitfall, sold 4 million copies, making it the second most popular Atari 2600 cartridge of all time, trailing only Pac-Man in total sales.
Atari sued Activision and lost, in a frequently misunderstood court case. Case. Atari’s lawsuit with Activision frequently gets confused with their lawsuit against Coleco.
The volatile years between 1983 and 1997
Activision prevailed in court against Atari, but it had far reaching implications. Legitimizing third party development led to a flood of additional third party developers. The Atari 2600 was notoriously difficult to program, so the quality of many of these third party games was, to put it diplomatically, uneven. This contributed to the 1983 video game crash and diluted the prices Activision could get for its games.
Activision was quick to pivot to developing for home computers, so it survived the 1983 video game crash, but not unscathed. Co-founders Alan Miller and Bob Whitehead left in 1984 as a result of the value of their share in the company declining. Miller and Whitehead formed Accolade. David Crane departed in 1986.
Activision remained solvent enough to acquire several other publishers during the 1980s, and changed its name to Mediagenic in 1988 because it had ambitions beyond video games. But the company had its ups and downs throughout the 1980s and 1990s.
What happened to Activision in 1991 proved pivotal. In 1991, a group of investors led by Bobby Kotick purchased Activision for $500,000. Kotick ascended to the CEO post, where he restructured Activision’s debt and started efforts to turn the company around. By 1997, Activision had returned to profitability.
Merger with Blizzard
In 2006, Activision entered into merger talks with the parent company of Blizzard, publisher of World of Warcraft. Activision saw multiplayer online gaming as an area of growth and saw the merger as a possible way to make inroads into new markets, including China. On July 8, 2008, Activision closed on the acquisition at a cost of $18.9 billion. The combined company took on the name Activision Blizzard. The merger of the two companies proved to be complementary and it created the largest company of its kind.
What happened to Activision next was a misstep that left it vulnerable to acquisition.
Activision’s acquisition by Microsoft
On January 18, 2022, Microsoft announced its intention to acquire Activision Blizzard. Activision Blizzard had fallen into some HR-related legal troubles in 2021 that made such an acquisition possible. It took a record payout to make it happen, but the money required prior to 2021 to make a deal happen would have been ruinous.
Because Microsoft produces the Xbox console in addition to producing operating systems and software of all kinds, including video games, the acquisition had significant antitrust concerns, including fears that game titles like Call of Duty would become Xbox exclusives, not available on Sony’s Playstation consoles.
Microsoft made concessions, including a guarantee to continue producing Activision titles for other consoles for 10 years and selling streaming rights of Blizzard titles to Ubisoft for 15 years. The deal closed October 13th, 2023, at a cost of $69 billion. As part of the deal, CEO Bobby Kotick agreed to leave the company at the end of 2023.
What happened to Activision in the end was it came full circle. Technically Activision remains a third party publisher, at least when developing for Sony or Nintendo consoles. But 44 years after its founders left a video game console maker to strike out on their own, Activision found itself under the ownership of another manufacturer of game consoles.
David Farquhar is a computer security professional, entrepreneur, and author. He started his career as a part-time computer technician in 1994, worked his way up to system administrator by 1997, and has specialized in vulnerability management since 2013. He invests in real estate on the side and his hobbies include O gauge trains, baseball cards, and retro computers and video games. A University of Missouri graduate, he holds CISSP and Security+ certifications. He lives in St. Louis with his family.
I’ve written about the “Mediagenic” period of Activision under Bruce Davis. In context what he tried to do made some sense. The market for computer games was not that big when he took over in 1987. Activision’s two main competitors, Electronic Arts and Broderbund, both diversified beyond games into “home productivity” software. And more importantly, Apple released HyperCard in late 1987. The Mediagenic pivot was largely about trying to build a new software line on HyperCard stacks. It didn’t work out as Davis had hoped, but I can see why he thought it would.
I wasn’t aware of that HyperCard angle. That’s interesting. I do remember in the late 80s, there was a widespread belief that HyperCard was the future. I seem to recall someone showing me a HyperCard stack controlling a Laserdisc player sometime around 1989.