gaming stocks

Should I Be Worried About Activision Blizzard’s Legal Troubles?

Blizzard Entertainment is in hot water and its legal troubles are affecting the whole company, but what does this mean for investors?

Activision Blizzard (NASDAQ: ATVI) is a well-known game publishing company. It has produced many well-loved franchises such as ‘Call of Duty’, ‘Overwatch’, ‘World of Warcraft’, ‘Crash Bandicoot’, and ‘Spyro’, amongst others. The company is split into three segments, Activision, Blizzard Entertainment, and King Digital. Activision and Blizzard both focus on console and PC games whilst King focuses upon mobile games such as the ‘Candy Crush’ franchise, the ‘Bubble Witch’ saga, and the ‘Crash Bandicoot’ mobile game. 

There is definitely still sexism in the gaming industry as a whole, however, recent allegations have sent shockwaves through the sector and angered investors. Blizzard Entertainment has been accused of not only fostering a sexist working environment but also turning a blind eye to a myriad of cases of harassment for its staff. In one particular case, the “frat boy” behavior at the company has lead to the death of one female employee. 

With 33 current and ex-employees now suing the company for sexual harassment and gender discrimination, Activision Blizzard is in hot water with the law. Alongside this, investors in the company have also opened a class-action lawsuit, alleging that the company neglected to inform them fully of the investigation into abusive workplace practices.

With all this on its plate, should you be worried about the future of this company? 

How will this affect Activision’s share price? 

Activision Blizzard’s stock has taken a hit on receipt of this news by the wider public. However, this gaming company is only the latest on a long list of companies that have been sued over discrimination and/or sexual harassment. Indeed, 99% of Fortune 500 companies have paid at least one settlement in this area. 

Some of the more recent ones include: 

  • In March 2020, Chelsea Henke became the tenth woman to join a lawsuit against Disney on the grounds of ‘‘rampant gender pay discrimination’’.
  • At Google, a similar lawsuit on behalf of four women, claiming that women are paid more than $16,000 less than their male counterparts. Last year, these women asked the court to make their case a class action to include the 10,800 other female Google employees.  
  • In May 2021, five women filed lawsuits against Amazon, claiming that the tech giant has violated labor laws by allowing employees to experience harassment, discrimination, equal pay infractions, and retaliation against complaints. 

These companies have not had any long-term negative effects due to these lawsuits. All three are some of the largest corporations on the planet and, as such, they have the resources to handle lawsuits like this with no slow down on the business side of things. Thus, their share prices are not seriously affected by these cases. 

Activision Blizzard on the other hand, whilst it is one of the largest gaming companies in the world, does not have nearly the same amount of employees as the above tech giants. With around 10,000 staff members, any large-scale lawsuit is likely to affect a larger percentage of its staff base.

Jeff Hamilton, a senior system designer for ‘World of Warcraft’, stated that employees have been so affected by the controversy that “almost no work” was being done on the game. This could mean further delays and a poor quarterly report, which will definitely impact its share price.  

However, whilst the company did initially react rather poorly to the multiple allegations of harassment and discrimination, it has since turned itself around. It will now be bringing in two new Blizzard Entertainment co-presidents to replace J. Allen Brack, who has stepped down. One half of this promising duo is a very experienced woman who, alongside her male counterpart has said that they will be tackling the workplace culture head-on. If they manage this, then Activision Blizzard’s share price will likely recover in the long run. 

Should I be worried as an Activision shareholder? 

As a shareholder, you should be worried about the impact that a lawsuit will have on productivity as well as the settlements that it will have to payout. 

However, moving forward, the company is now being forced to re-evaluate its workplace culture and has brought in new leadership to ensure that change is implemented. In the long run, this lawsuit should have a positive effect on the company as it is still small enough that these issues of harassment and discrimination won’t be swept under the rug – unlike those at Disney, Facebook, and Google.

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