Long prior to their acquisition of Blizzard, Activision already had a long-standing position in the North American video game market. As a matter of fact, they’ve been around for nearly 40 years! If anything, Activision can be considered one of the industry’s first ever North American (some say in the world) 3rd party developer. So, how did Activision find its way to its initial position and continue to stay in business after four decades? Read today’s Editorial Tuesday to find out!
The Atari Years (David Crane, Larry Kaplan, Alan Miller, and Bob Whitehead)
As we previously stated, Activision has been in the game for 40 years, and that means the days of the original Atari. Prior to the founding of Activision, Atari was the sole developer and publisher to the Atari console, and Magnavox was the sole developer and publisher to its Odyssey console, etc. The unfortunate downside to this was that the people who worked on the game got no credit, no royalties or any financial gain if any game they worked on succeeded. No longer tolerating this, David Crane, Larry Kaplan, Alan Miller, and Bob Whitehead—four of the Atari 2600’s top programmers—had a meeting with then Atari CEO Ray Kassar in May of 1979 to negotiate similar deals akin to how musicians get credit and royalties in the record label business.
What sparked this meeting is that shortly after Nolan Bushnell sold Atari to Warner Brothers, the company passed out a memo to the developers showing what games were big hits. Crane noticed that his games did $20 million in revenue, and he was still making $20,000 without any credit and royalties. Miller attempted to renegotiate his contract to get royalties only to be rejected, while Whitehead and Kaplan also faced the same failures. It is reported that Kassar brushed off their claims by saying they’re no different from assembly line workers who put the cartridges in the box.
Five months later, Crane, Miller and Whitehead left Atari and founded Activision which initially started in Crane’s home. They also managed to recruit Jim Levy (at the advice of their attorney), a former music big wig, and Richard Muchmore, a venture capitalist. With Levy as CEO and his experience in music, he can get the developers the credit they were looking for. Shortly after, Kaplan jumped ship once everything settled. Initially, the name of their company was going to be VSync, Inc. (With the V standing for Vertical), but Levy chose Activision as a means of combining “active” and “television,” an excellent way of describing what video games are.
The following year, they released six games for the Atari 2600; Boxing, Bridge, Checkers, Dragster, Fishing Derby, and Skiing. They practiced what they preached by displaying proper credit to the developers by dedicating a page in the instruction manual to them. Prior to Nintendo Power magazine doing something along the lines of its old Tetris score challenges, Activision encouraged players to submit their scores to their respective games for some prizes.
Third Party Recognition in the American Video Game Industry
After Activision debuted their games, the sales of their Atari 2600 games made up for half of the console’s market share to the point that it became a legal battle between Activision and Atari. The nature of Atari’s lawsuit against Activision was copyright and patent infringement since Atari felt they should have been the exclusive developer to the console. The case was dismissed in 1982 and this gave rise to officially recognizing third party developers in the North American market. Thanks to the ruling making front page news in some media outlets, it actually helped boost Activision’s reputation.
Also around 1982, Activision continued to create many unforgettable classics prior to the infamous crash. One notable hit is Pitfall, largely the creation of Crane. Pitfall is considered to be granddaddy of platform games, which would be the hot thing between the 8-bit and 16-bit eras. As opposed to playing a space fighter jet, a bar, or a tank (which was the norm in video games at that time), Crane wanted to make a game where players played an actual human that could run, jump, and climb. He actually came up with the technology in 1979 and wanted a game that could best represent that. After about 10 minutes of conceptualizing it on paper, he got to work on the programming (which took much longer than 10 minutes). Due to its mechanics of allowing a human character to jump, run, and climb, it paved way for not just your typical platform game, but for other classics such as Prince of Persia, which further expanded those traits.
How Activision’s Success Paved Way For Other Companies That Led to The 1983 North American Video Game Crash
Shortly after Activision found success, many other 3rd party companies were coming out of the woodwork. Thanks to Activision’s achievements, many of these copycat companies could easily get up to $3 million in venture capital. Since these companies didn’t have the same minds, experience, education, and success as Activision’s founders and staff, many of the titles of these wannabe companies were negatively received and sold on clearance for $5. Due to Atari’s and the industry’s lack of quality control of the games that were coming out, the oversaturation of the market at the time led to what we all know as the 1983 North American Video Game Crash. As we shared before, many people blame E.T., but it was just the final nail in the coffin compared to the big picture of just the industry having quantity over quality.
Activision’s Struggles Post-Crash
Though Atari still made it through the crash, it never really regained its position as the top dog in video gaming. As for Activision, they were able to see the writing on the wall and expanded to the PC market, which was still doing well. For example, Pitfall II had a multi-platform release to not only the Atari, but to the Commodore and original Apple computers as well. But just because Activision was diversifying didn’t mean that it didn’t have its problems. Their stock did decline around the time of the crash and its founders ironically abandoned ship. Miller and Whitehead left to form Accolade, and Kaplan actually returned to Atari as Vice-President!
As everybody knows, Activision acquired Blizzard a few years ago, but it wasn’t their first significant acquisition. In 1986, their first acquisition was Infocom, a company that made PC games. Prior to the acquisition, Infocom mostly made text adventure games such as The Lurking Horror and The Hitchhiker’s Guide to the Galaxy. After the merger was completed, they finally started graphical adventure games such as Battletech and James Clavell’s Shogun. However, the merger did have its share of complications. Around that time, Jim Levy was ousted as CEO, and was replaced by Bruce Davis, who thought the merger was too costly for Activision. After the deal was completed, Activision sued former Infocom shareholders to recuperate some money.
As for David Crane, he personally couldn’t work with Bruce Davis and didn’t agree with the direction he wanted to take Activision. Crane felt that Davis didn’t have the proper talent to run a company and the only company he worked for prior coming to Activision went out of business. Feeling that the Activision he helped create no longer existed, Crane left in 1988 and formed Absolute Entertainment.
With all of its founders now gone, Activision lost its identity and for a while, change their name to Mediagenic, which produced business software. Even so, the company continued to lose millions into the 1990’s. At the start of that decade, Robert Kotick bought Mediagenic and fired Bruce Davis as CEO. Under Kotick’s leadership, he re-named it back to Activision and relocated it from Silicon Valley to Los Angeles. Before they could get back to gaming, they had to work out the company’s debts and restructure under Chapter 11 by the American court system. Once that was settled, they were ready to get back in business.
In 1995, Activision made their big comeback with MechWarrior 2, which was in long development due to numerous internal complications. As opposed to its more strategic oriented predecessor, Activision made the game more arcade-like to appeal to a console audience. The strategy worked and it became a household name in the 90’s. In addition to MechWarrior 2, Activision also acquired the rights to Heavy Gear, which was originally a pen-and-paper game. It took the original concept, and made it into a shooting game, but wasn’t as well-received as MechWarrior 2. However, Heavy Gear 2 would garner superior ratings and become a smash hit.
Towards the end of the 90’s, Activision started their conquest throughout the North American video game industry. In 1997, they acquired Raven Software, and together, they released Hexen II, Soldier of Fortune, and Quake 4. The following year, a couple of former Activision employees founded Pandemic Studios with an equity investment from Activision. Around that time, they had licensing deals with Marvel, Disney, and LucasArts. In 1999, they got Neversoft, the developing company that gave us Tony Hawk.
Tony Hawk and Spider-Man
If there is any franchise that helped put Activision back on the map for a wide audience, it is without a doubt, Tony Hawk’s Pro Skater, which has a unique history of its own. The late-90’s was a time when the X Games entered the mainstream and Sega made its own unique skateboarding game, Top Skater, which was exclusive to the arcade. Wanting to bring that experience home, Activision tasked Neversoft to make a skateboarding game for that market. Needing expert advice, the team turned to Tony Hawk, one of the world’s best skaters. Tony Hawk was impressed with Neversoft’s approach to the game and with Activision, they got his approval to use his name and likeness. Thankfully, Hawk was able to get a long-term contract depending on the game’s success and it is still a hit franchise to this day while he gets a big payday!
Thanks to Spider-Man being a hidden character in the second Tony Hawk’s Pro Skater game, it inspired Neversoft and Activision to make a Spider-Man game based on the Tony Hawk engine back in 2000. Like Tony Hawk, the Spider-Man game was excellently received, and was a hit-seller. Not only did it get a sequel, it helped the company make Spider-Man games for years to come.
In 2008, Activision made their biggest acquisition yet when they merged with Vivendi Games, or the holding company of some of PC gaming’s biggest names in the 1990’s, Sierra and Blizzard Entertainment at a price of $18.9 billion. As a result, they became Activision Blizzard but would allow studios to publish under their respective names and retain autonomy such as WarCraft games are still recognized solely as Blizzard games. However, the Activision name acquired some of Sierra’s former titles such as Crash Bandicoot and Spyro the Dragon.
Beyond their classic titles, Activision Blizzard makes a huge majority of their money on their Call of Duty games (a series which can qualify as its own Editorial Tuesday). Say what you want about them, but their revenues generate billions! Thanks to the success of Call of Duty and now owning the rights to the StarCraft series through the Blizzard acquisition, they have a significant presence in e-sports through both franchises. Thanks to their contributions, they own Major League Gaming, one of the biggest e-sports leagues in the world! Through the Blizzard brand, they also sanction the Overwatch League, an e-sports promotion dedicated to Overwatch!
As for its initial founders, Crane is proud of what Activision has achieved, but feels it’s not the same company that he started. In the 90’s, he actually helped make some Simpsons games and was a programmer on Night Trap. In 2012, he launched a Kickstarter campaign to make a new game, but failed to reach its goal. Larry Kaplan was a technical director for the CG movie Antz, but was only on staff for a limited time. In 1997, Alan Miller co-founded Click Health, a software company dedicated to educating children with medical conditions such as diabetes. According to clinical studies, children who played his games experienced a 77% reduction in urgent visits within six months. However, it was forced to shut down in 2001 since he couldn’t find any investors. For Bob Whitehead, he doesn’t like the present state of the industry and mostly spends time with his family and helping low income families get businesses started. If these four stayed on, would they be billionaires? Probably so. Do they have regrets leaving the company they started? From the looks of it, they don’t.