Behind the Activision-Blizzard union

Q&A It's probably safe to assume that many executives spat out their morning coffee when news of the biggest merger in game industry history broke. Sunday morning, Activision and Vivendi Games announced that they were joining forces to create Activision Blizzard, a new, publicly traded company.

If the merger is approved, the new entity is expected to leapfrog over Electronic Arts to become the biggest independent third-party publisher on the planet, with estimated joint revenues in excess of $3.8 billion. That princely sum is dwarfed by the estimated combined value of Activision Blizzard's assets--a massive $18.9 billion.

While unexpected, the union makes perfect sense. Though its Call of Duty and Guitar Hero franchises are established success stories in the first-person shooter and rhythm game markets, Activision has no massively multiplayer online role-playing games in its portfolio.

Since the Creative Assembly was bought by Sega, its profile in the real-time strategy space has been nearly nonexistent. Enter Vivendi, whose Blizzard Entertainment subdivision owns the most popular MMORPG on the planet--World of Warcraft--and whose RTS roster includes the hugely anticipated Starcraft II.

As the game industry picked up its collective jaw up off the floor, GameSpot got ahold of Mike Morhaime, Blizzard's co-founder, president, and CEO, to get some insider perspective on this landscape-altering union.

Q: Obviously this is huge. Can you speak about the origins of the deal at all?
Morhaime: Well, I guess it originated out of a phone call earlier this year. (Activision CEO) Bobby Kotick went out and had lunch with (Vivendi CEO) Bruce Hack, and they chatted about possible things the two companies could do together. I think both companies left feeling like there was a lot of merit exploring the combination of the two companies. But before I get too far, I just want to clarify something--Vivendi is not buying Activision; they're acquiring a majority stake in Activision Blizzard, which is pretty different.

So it's more of a merger in which Vivendi has a controlling interest.
Morhaime: Yeah, that's perfect. Something Bobby (Kotick) has always wanted to do is grow his company to be the No. 1 game publisher in the industry. This provided him a way to do that. Activision's got a great track record, very strong in console gaming. In fact, the last several months they've been the No. 1 third-party publisher in console gaming.

Q: Yeah. The kids, they like the Guitar Hero.
Morhaime: Call of Duty has also been doing very well...

Q: Really? I hadn't noticed.
Morhaime: (Laughs) Right. Anyway, we've been very strong in PC games and online games. We're the publisher of the No. 1 massively multiplayer online subscription game in the world--9.3 million subscribers and counting. We're the only successful Western publisher in Asia.

Q: I hear you're popular in Korea.
Morhaime: (Laughs) Yeah, a bit.

Q: The total deal is worth nearly $19 billion, but it's not the only big deal of late and comes not long after EA bought BioWare/Pandemic, in large part for their upcoming massively multiplayer online role-playing game. Now, Activision Blizzard will be taking that project on head-on. Was this deal accelerated at all by the BioWare/Pandemic buyout?
Morhaime: I don't really think there was any correlation. We've been talking about this a long time before we heard about the other deal. There was a lot of due diligence. There was a lot of understanding of Vivendi's business and Activision's business. It really took some time.

[AndrewRich]

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