ActivisionBlizzard: Preliminary Proxy Filed

Activision finally filed its preliminary proxy statement with the US Securities and Exchange Commission today. You can access it here.

In a nutshell, the proxy statement, when final, is the document describing the deal in excruciating detail that Activision will send to its stockholders when seeking their approval for the deal. There is a lot to digest here as is typical in business combination transactions of this nature.

To me the most interesting parts of the document to me would be “Risk Factors” which are supposed to be doom and gloom, but give insight into what the company believes its stockholders should be concerned about, and the “Background of the Transaction” section which gives a comprehensive, if antiseptic, blow-by-blow timeline of the deal.

Interesting that the deal started getting kicked around as early as November 2006 though discussions didn’t really get going in any significant way until Spring of 2007. Also interesting was that the deal, like all good deals, blew up twice– once in early June essentially over differences in price and again in September over “post-transaction corporate governance” which I read to be who’s running Blizzard after the deal closes.

The pivotal point seems to have been a dinner that Robert Kotick, CEO of Activision, had with Mike Morhaime and other members of Blizzard’s management in mid-September after the second blow up which seemed to break the log jam and ultimately resulted in the deal they announced in early December.

Lots of good stuff in there that deserves more time than I have today! Enjoy.

What Lies Beyond the Seventh Seal? RMT

By way of Mrrx and Cyanbane we are informed of Livegamer’s entry into the RMT world as:

“the premier provider of a publisher-supported, secure platform for real money trading of virtual property. Live Gamer is partnering with top massively multiplayer online game (MMOG) publishers and virtual world operators worldwide, including Funcom GMBH, Sony Online Entertainment, 10TACLE STUDIOS, Acclaim, GoPets LTD, and Ping0 Interactive Limited.”

Go them. Just take my messages, I’ll be down in the bunker with the canned goods, visqueen and duct tape making flint arrowheads. Roll file footage of the Monty Python Mr. Neutron episode and world domination by the post office. The sixth rider of the apocalypse has arrived. (Number five was fat free bacon, but that’s another post).

Now RMT is the third rail of MMO politics. FWIW, here’s my $0.02 on the whole thing– RMT as it exists in the primarily publisher UNsanctioned form is Bad. As as student of the dismal science, I know there are plenty of arguments that RMT (or more specifically gold farming) has limited impact since the fundamental input into the game economy is time played and gold farmers have to play in real time to acquire the gold or items they sell. They are really not much different from other “hardcore” forms of play.

I don’t really care about that. Still it has some impact, though only indirectly on a mostly PvE carebear like myself. At best it accelerates mudflation by increasing the rate at which money and nontradeable items flow into the economy. So long as NPC prices are not indexed to the game money supply, then I probably suffer more of a moral injury than a virtual economic one, if any. I don’t really have to participate in the mudflated part of the economy so long as the content doesn’t tune itself to the money supply.

The dirty secret of this inflation in any economy is that all goods sell for more than they would in an uninflated economy. So actually, I should be pro because if I’m a PvE carebear and acquiring all my gear upgrades while adventuring, and I acquire through myself or my guildmates the other materials I need to craft, etc. then I’m actually an arbitrageur selling into an inflated economy (the player economy) and buying only from the static economy (the NPC economy). So, as long as I, or my guild mates can harvest raws and craft consumables, I’m probably a net winner from increasing the inflow rate of money into the virtual economy. It still pisses me off though on a more fundamental level.

Yes, revenue and purchasing models change over time. Was a time when peeps laughed at we chumps paying for the game and THEN paying a subscription to play it. ZOMFGWTF! You bought the game and can’t play it forever for free?!? Will be a time when many games will be based around various incremental revenue models like the current free to play but pay more for gold/items/enhancements or the velvet rope model. Are traditional expansions so different from a velvet rope model? Discuss.

No what alarms me about this rush to RMT by publishers is that it will be inevitably bolted on (poorly) to existing games once legitimized by the publishers. What an epiphany publishers must have had when they realized they can sell both heroin AND the needles (and bleach too, FFS, lets be safe out there)((and rehab too FTW!)). I find it a bit disingenuous to sell me the game that gave me the disease as well as the cure.

My fundamental issue with RMT is that the existence of RMT at all in a game is prima facia evidence of a deep seated disconnect between the game’s design and the market that is actually playing the game. If the game dynamic wasn’t borked in some (or many) ways, folks wouldn’t conceive of parting with hard earned cash to claw their way up to a basic level of “enjoyment” of the game in question. Recall that devs have at best only 1/2 the votes in what kind of game they have created will become. Players have the other half. And Players have a particularly effective form of voting– with their feet. Attention devs: if a significant portion of your player base is buying gold/plat/isk then you might want to rethink the whole money-grind thing…

Yes, there will always be a niche market for peeps that want the giant leap forward (cheating bastards), but when that “niche” market proves to be $1.8 billion dollars (their numbers), we should stop and say “holy fucking shit batman what the fuck is going on with these games?” and why are corpulent puss filled capitalists with pimples on their loathsome spotty behinds extracting cash-money on the barrelhead from hapless chumps to simply reach some ambient level of enjoyment of a game they’ve already paid for and continue to subscribe too. Roll file footage of Viennese psychoanalyst discussing “Battered Game Syndrome.”

The vast majority of current successful(tm) MMOs out there that are not and were not built to be RMT friendly. Name them, at least the western implementations of them aren’t. If the advent of publisher supported RMT means that we will soon be seeing legit RMT soon in existing successful MMOs, I suspect those games will start dying a horrible economic death under a pyroclastic flow of mudflation.

As I mentioned, the very existence of RMT related to existing games is evidence that for many ($1.8 billion worth many) think that the existing game mechanic is borked. I think they are probably right for the most part. RMT isn’t the answer, design is the answer for these games.

For future games built with RMT as part of their revenue model, I can’t really complain. If Funcom has really designed Age of Conan with RMT in mind, I’ll give them the benefit of the doubt that they’ve engineered its effects into the equation. I tend to prefer “earning” to merely “paying” in all the existing MMOs I’ve played, but lets face it we’ve already been doing both to some extent. I earn my progress while I still pay for access (and expansions).

So if RMT showed up on your EQ2 server, or in PotBS or SWG or Planetside (or WoW for that matter) in the near future, what would you do? What do you think will happen to the game on which you may have spent hundreds of hours (and likely hundreds of dollars, yes, hundreds… e.g., $50 box + 24 months@ $15/month = $410)?

My personal jury is out on a game built on micro transactions or RMT because I haven’t played one that was as compelling as anything that is currently subscription based. That doesn’t mean that it wouldn’t work, but it pisses me off that what is tantamount to a design flaw in many games today gets fixed by increasing the amount we pay for these games.

Perpetual Litigation

Ten Ton Hammer (and Cameron at Random Battle which is where I saw it) is reporting about the latest chapter in the Perpetual saga. In a nutshell, Perpetual’s PR company, Kohnke Communications, is suing them to get paid and alleging that they fraudulently transferred assets out of Perpetual before initiating the assignment for the benefit of creditors (which is, in greatly oversimplified terms, a common law bankruptcy) thus impoverishing Perpetual and thereby preventing them from paying Kohnke’s bill (at least in full). Lots of other stuff in there too, but that’s the main gist of it.

But why risk mischaracterizing it? Here is the actual complaint in full. Read it yourself here(pdf) and make your own conclusions. Keep in mind this is a complaint and the facts alleged are just that– the facts as alleged by the plaintiff in the case, not necessarily what they may be proven to be. My original post is here with some background.

Seems my speculation on Bildo’s site was pretty close to the mark. Seems Perpetual was playing it pretty close to the vest and being more than a little cute about what they were saying when they were saying it. If the facts in the complaint are true, then indeed the shell game occurred just prior to the assignment for the benefit of creditors, of which the filing of the notice by Gravity started this whole story.

[Update] For those of you scoring at home, P2 Entertainment, Inc., the entity to which the assets were alleged to have been transferred, appears to have been formed on October 3, 2007 according to the Delaware Secretary of State.

desosp2.jpg

The hits just keep on coming for Perpetual.

[Another update: I borked the original linked pdf. Its fixed now]

More Activision Blizzard FAQ

Yesterday, Activision posted the following FAQ on its employee website discussing a range of topics. As part of the pending deal, they were required to file it with the SEC so you can find it here.

Not a lot of red meat in there, but a couple of minor tidbits:

“4. Why is our company name going to change to Activision Blizzard?

The name change reflects the significant brand recognition, employee headcount and profit contribution that Blizzard will make to the combined organization.”

 

“Operating and Organizational Structure

1. Why will Blizzard operate as stand-alone business?

Blizzard currently operates as a separate business unit within the Vivendi Games organization. It has a unique business and revenue model and it makes good business sense to have it operate as a stand-alone business reporting to Mike Morhaime who, in turn, reports to Bobby.

The three Vivendi Games businesses that will report to Mike Griffith are more like the businesses that Activision currently operates.”

Its certainly not unique to this deal by any means, but you gotta love the B-Speak(tm) throughout:

“9. Are the Sierra businesses struggling?

The Sierra businesses are not yet generating an acceptable rate of return.

10. How will the performance of the Sierra businesses affect Activision?

We will evaluate the Sierra businesses through our normal business and greenlight processes to maximize the long term value creation potential.

11. Where will the cost savings come from?

Potential cost savings will be identified through the integration planning process.

12. What do we mean by “revenue synergies”?

“Revenue synergies” means using the combined scale and capabilities of the two companies to generate more revenue from what we make. For example, using the strength of our combined selling capabilities to generate more sales per title.”

Still waiting for the proxy to be filed.  Should be good stuff when it hits.

Activision Blizzard SEC Filings

Peeps are starting to get into the details and implications (and speculation) about what’s going to happen as a result of the Activision Blizzard deal. Tobold, Darren at The Common Sense Gamer and others have good discussions going about the implications of the deal.

In a continuing effort to put original source material at our fingertips, here are some of the various Activision SEC filings discussing the deal. Since the deal needs to be approved by Activision shareholders, the vast majority of their communications to the outside world that discusses the deal is deemed to be proxy solicitation materials and required to be filed with the SEC.

Vivendi, the parent of Vivendi Games is traded on the Paris exchange and isn’t required to file information with the SEC in the U.S. Neither my French language skills nor my knowledge of French securities law is good enough to be able to glean any info from the AMF, the French securities regulation agency. Also, because the deal is not required to be approved by shareholders of Vivendi, there may not be much information there anyway other than at very general level.

Here is the announcement webcast transcript.

Here is the powerpoint presentation that accompanied the announcement (html, not PowerPoint format).

Here is the Activision employees announcement and powerpoint (again, html, not PowerPoint format).

Lots to sift through in there, so go to. I’ll link other stuff as it becomes available.

[update 12/7]

Here is the link to the latest Report on Form 8-K describing the deal in detail. Attached to this report as exhibits are the actual deal documents (pretty dry stuff unless you do these things for a living). Here is the business combination agreement, Kotick’s employment agreement (and bonus agreement), Kelly’s employment (and bonus)as well and that of Activision Publishing’s Mike Griffith.