Looming Large: Activision’s split with Destiny developer Bungie has sent shares tumbling.

Looming Large: Activision’s split with Destiny developer Bungie has sent shares tumbling. Photo by Ringo Chiu.

Are there chinks in Activision Blizzard Inc.’s armor?

The Santa Monica-headquartered video game stalwart faces market backlash and lawsuits over severed ties with game developer Bungie Inc.

The Bungie breakup came after the departure of company executives, a drop in quarterly revenue and a share price that was already in decline.

Industry watchers warn against sounding the alarm bells too fervently, however. Forty-year-old Activision, which declined comment for this article, is the best-selling video game publisher in the world, and there likely nothing on the horizon to change that.

“Activision has several strong franchises that continue to do well,” said Joost van Dreunen, co-founder of SuperData, a Nielsen Holdings company that tracks the video game industry.

Still, the company may need to rethink how it distributes games, said Anthony Borquez, a USC Marshall School of Business professor – and also might simply need more games to distribute.

“There is a new generation of gamers, and Activision needs to keep a pulse of how the industry is changing,” Borquez said.

Bungie jump

The partnership with Bellevue, Wash.-headquartered Bungie first looked like another home run for Activision.

Activision brought to market in 2014 the “Destiny” title developed by Bungie and touted that the video game raked in $325 million during its first five days on the market − at the time, a record opening for a title.

But the sequel, “Destiny 2: Forsaken,” underperformed expectations, then-Activision Chief Financial Officer Spencer Neumann noted in the company’s third quarter earnings call, without elaborating why.

The franchise was relegated to No. 5 on Activision’s list of bestselling games, trailing Call of Duty, World of Warcraft, Overwatch and Candy Crush.

Activision and Bungie announced Jan. 10 that they planned to end their relationship, two years before a 10-year contract was set to expire.

“Since ‘Destiny 2’ wasn’t on par with its predecessor it’s possible that rather than accept a subpar performance of a possible Destiny 3 down the line, Activision offered Bungie to take it independent,” Van Dreunen said.

The day after the Bungie announcement Activision’s stock price fell $4.81 to close at $46.54. The stock price has hovered at that level since, closing Jan. 31 at $47.24.

The stock decline triggered five separate lawsuits filed on behalf of investors who bought Activision stock between August 2018 and last month.

The lawsuits, which list Neumann and Robert Kotick, Activision’s chief executive since 1991, as co-defendants, claim company executives deceived investors by not warning they might end their Bungie agreement.

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