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Activision

The Atari designers who started the third-party cartridge business

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Founded in 1979 by four of Atari's VCS designers and Jim Levy, Activision was the first company to sell its own cartridges for Atari's console, and it put its designers' names on the box. It made Pitfall! and Ghostbusters, moved from cartridges to home computers, bought Infocom, and by 1990, renamed Mediagenic, was losing millions. Under Robert Kotick it came through bankruptcy, bought the studios behind Call of Duty and Guitar Hero, merged with Vivendi Games as Activision Blizzard in 2008, and was bought by Microsoft in 2023.

Until 1980 every cartridge for Atari’s Video Computer System came from Atari. Activision changed that. In 1979 four of the programmers who had written Atari’s own VCS cartridges left to sell cartridges of their own for Atari’s machine, and every Activision box carried the name of the person who made the game. Within three years the company was selling more than $60 million a year, and by the company’s own account David Crane’s Pitfall! was the best-selling game of 1982. Within ten it had been renamed, had bought and dismantled Infocom, and was losing money fast. It came through bankruptcy to publish Call of Duty and Guitar Hero, merged with Blizzard’s owner, and in 2023 became part of Microsoft, whose announcement of the deal began with Pitfall!.

Fast facts

  • Founded: 1979 by Alan Miller, David Crane, Bob Whitehead and Larry Kaplan, VCS designers at Atari, with Jim Levy as president.
  • First games: Dragster, Fishing Derby, Boxing and Checkers for the Atari VCS, 1980.
  • Atari’s lawsuit: settled in December 1981, with Activision making games under a technology licence from Atari. See Atari vs Activision.
  • Biggest hits: Pitfall! (1982) on the VCS; Ghostbusters (1984) on home computers.
  • Renamed: Mediagenic, in 1988; back to Activision after the 1991–92 bankruptcy.
  • Biggest later series: Call of Duty (from 2003) and Guitar Hero (bought with its publisher, RedOctane, in 2006).
  • Activision Blizzard: formed in July 2008 by merging with Vivendi Games.
  • Owner since October 2023: Microsoft.

Five founders

The four designers had written a large share of Atari’s VCS games, and they wanted credit and a share of what those games earned. They did not simply walk out. Through a lawyer they met Jim Levy, a former executive of the tape company GRT, who became president; a venture capital firm backed the plan; and only then, in late September 1979, did the four resign. Video Games reported in 1982 that the founders started with “almost a million dollars in startup money”. How they left Atari, what Atari’s chief executive Ray Kassar is supposed to have said to them, and how Atari’s $20 million trade-secrets suit ended in a settlement rather than a verdict are told in Atari vs Activision.

Crane described the start plainly to Compute!’s Gazette in 1985: “There was a group of us that knew we were good, so we set out to start a company.” Their first products were four VCS cartridges, Dragster, Fishing Derby, Boxing and Checkers, and Crane said the plan had always been to start on the VCS “and move into the more elaborate home computers that we knew would exist about this time”.

Original games only

Video Games visited in 1982, when Activision was releasing two cartridges a quarter. It noted that the company owned no arcade licences and wanted none: Fishing Derby, Laser Blast, Freeway, Skiing and Kaboom! were all original designs. Sales had grown from $6 million to over $60 million in three years, and in March 1982 alone Activision shipped more than a million cartridges. “I think we electrified the industry,” Levy said.

The games came from the designers’ own lives. Crane’s Freeway, in which a chicken crosses ten lanes of traffic, began when he and some friends left a Chicago trade show by the wrong exit and had to dodge across Lake Shore Drive; later that day Kaplan saw a man from a bus doing the same thing. Whitehead’s Stampede came from the annual stampede in his parents’ farming town. In 1988 Amazing Computing summed up the company’s early reputation as “pushing more color and detail out of the modest Atari VCS than anyone thought the machine was capable of”.

Not all the founders stayed. Video Games reported in January 1983 that Kaplan, who had designed Kaboom!, had quit Activision.

Carol Shaw’s River Raid followed in 1982. Activision’s instructions named her as its designer and included her advice on fuel, enemies and learning the river’s sections. Her biography follows the game, its different versions and the programming work around it. (Original instructions.)

Pitfall!

Crane’s Pitfall! was the company’s biggest cartridge. In May 1983 Electronic Fun with Computers & Games reported Activision’s claim that Pitfall! and Crane’s Laser Blast had each sold a million copies, and that Pitfall! had been the best-selling game of 1982. The figures grew as they were retold: Commodore User wrote in 1985 that it was “reputed to have sold more than five million copies around the world”. The game and how it was made are covered in David Crane and Pitfall!.

Activision kept its players close. A December 1984 note in Ahoy! offered Commodore 64 owners Programming Pitfall Harry, a booklet by Crane, for 25 cents postage. It contained a 102-line program that put a moving Pitfall Harry on screen, with instructions for “changing the background scenery, the figure’s speed and color”. “Tape your quarter to a piece of paper, please, and mail to Activision.”

From cartridges to computers

When the American cartridge market collapsed in 1983 and 1984 (see the 1983 crash), Activision moved to home computers. ACE thought in 1990 that the switch “brought even greater success”. Crane’s Ghostbusters (1984), a Commodore 64 game built on the film, topped the charts in Britain and America, according to Commodore User. Activision also published Hacker, Alter Ego and Crane’s Little Computer People; ACE called Little Computer People and Alter Ego “two of the most original computer games ever”.

In Britain, Activision UK also sold other companies’ games. ACE listed System 3, Sierra On-Line and Lucasfilm among the labels it had handled, “including: The Last Ninja, Leisure Suit Larry, Rescue on Fractalus, Koronis Rift, The Eidolon and Ballblazer”. For British players, the Activision name on a box did not always mean an Activision game.

Infocom and Mediagenic

In 1986 Activision bought Infocom, which ACE called a “prestigious adventure developer”. Computer Gaming World later reported that the deal was finalised on 19 February 1986 and valued at $7.5 million, much of it in Activision stock. Over the next three years Activision absorbed Infocom’s sales, manufacturing, public relations and customer support, and in 1989 moved its development to the West Coast, leaving Infocom “only a label”.

In 1988 the company changed its own name to Mediagenic. Computer Gaming World explained that the new name was meant to be “more reflective of the total corporate personality” than one “which still causes potential investors to think of cartridge games”. The magazine was less kind in 1991, listing the change among management’s “many mind changes”.

By October 1990 the position was grim. ACE reported that Mediagenic had lost nearly $20 million the previous year and faced a $6 million bill after “losing a long and embittered court battle with Magnavox”, the Philips subsidiary, which had “successfully claimed copyright infringement on a video game from the early eighties”. Mediagenic was believed to be up for sale, and Activision UK, which was dropping the Amiga, ST, Spectrum, C64 and CPC to concentrate on the PC, NES and Game Boy, would be down to two people by January 1991. “The whole situation is very sad,” ACE wrote. “Activision has sold some great games in the past.”

A few months later a group led by Robert Kotick bought more than 20% of Mediagenic’s stock, and Computer Gaming World reported in April 1991 that Kotick would become chairman and chief executive in place of Bruce Davis.

Bankruptcy and Los Angeles

Kotick’s group knew what it was buying. Computer Gaming World later reported that its due diligence ran under the codename “Project Lackovision”, and that employees stacked aluminium cans in the staff lounge to show what their shares were worth. On 7 October 1991 Mediagenic filed for Chapter 11 bankruptcy. The company called the Magnavox judgment “the final straw”; the magazine added that “industry observers cite vacillating management and disappointing sales as significant causes, as well.” Under the reorganisation plan almost all of the debt became shares: the creditors would own 80% of the company and the old shareholders about 4.5%.

By April 1992 the name on the door was Activision again. Computer Gaming World described the company as “the updated version of Mediagenic as it emerges from Chapter 11 bankruptcy”. It had hired Accolade’s Peter Doctorow as president and moved its headquarters to West Los Angeles to cut costs. The magazine summed up the Kotick years in one sentence in 2001: he “took it into bankruptcy, moved it to L.A., and hauled it out of bankruptcy”.

The rebuilt company went back to its own shelves. Return to Zork (1993) revived the Infocom world Activision had bought in 1986, with filmed actors and a point-and-click interface in place of a text parser. Computer Gaming World’s adventure reviewer Scorpia was not persuaded. “So, is Return to Zork anything like Zork? Of course not,” she wrote. The original had been a lonely place of exploration; “by comparison, Return to Zork is overpopulated.”

Studios and Call of Duty

From 1997 Activision grew by buying other companies. Its annual reports list Raven Software of Madison, Wisconsin, whose Hexen II Activision published that year, in August 1997; CentreSoft, the Birmingham distributor whose credit had launched U.S. Gold, in November 1997; Neversoft, which made the Tony Hawk’s Pro Skater games, in September 1999; and Treyarch in October 2001. CentreSoft gave Activision a distribution business in Europe; Raven, Neversoft and Treyarch gave it studios of its own.

The most important purchase started small. In May 2002 Activision bought 30% of Infinity Ward, a new studio in Encino, California, with an option on the rest. Computer Gaming World explained who they were: after Electronic Arts took its Medal of Honor series back from 2015, the studio that had made Medal of Honor: Allied Assault, “23 members of the 2015 team left to form a new studio called Infinity Ward”. The magazine said the team had “something to prove: They want to build a better WWII shooter and beat EA at its own game.”

Call of Duty came out on the PC in late 2003, and Edge was impressed. The team had “shown itself to be extraordinarily competent”, its computer-controlled squadmates took cover and threw enemy grenades back, and the D-Day glider landed at Pegasus Bridge “at the exact co-ordinates where it touched down in real-life”. “Call of Duty is about the most fun you’ll get on the PC this side of Christmas,” the review said. In October 2003 Activision bought the remaining 70% of Infinity Ward for about $3.5 million.

Guitar Hero and Activision Blizzard

The next hit also came from outside. Guitar Hero, built by Harmonix and the peripherals maker RedOctane around a plastic guitar controller, was, in Edge’s words, “a surprise hit upon its 2005 release”. In 2006 Activision bought RedOctane for $100 million. Harmonix did not own the Guitar Hero name, “and so found itself cut loose”. While Activision built up the Guitar Hero series, Harmonix went on to make Rock Band.

On 2 December 2007 Activision agreed to merge with Vivendi Games, the French media group’s games business, which owned Blizzard Entertainment, the makers of World of Warcraft. The deal valued the new company at $18.9 billion, and Kotick stayed as chief executive. It closed on 9 July 2008, when Activision renamed itself Activision Blizzard; by the end of that year Vivendi owned about 55% of it. Edge’s industry analysts noted in 2010 that the merger had taken Activision’s digital business “from almost nothing to $1bn overnight”, and that 28% of its 2009 revenue came from subscriptions and licensing, “a huge share compared to other US publishers”.

In 2013 Activision Blizzard bought itself back. In October it completed the purchase of most of Vivendi’s shares for about $8.2 billion: the company itself paid $5.83 billion, and an investment group led by Kotick and the chairman Brian Kelly paid $2.34 billion. Vivendi kept about 12%.

The Infinity Ward firings

Call of Duty became Activision’s biggest series, and in 2010 it led to a very public fight. On 1 March 2010, a few months after Modern Warfare 2 went on sale, Activision fired Jason West and Vince Zampella, the Infinity Ward founders who had run the studio, after what its quarterly report called an internal inquiry into “breaches of contract and insubordination”. Two days later the pair sued Activision for breach of contract and wrongful termination, and claimed more than $36 million. Activision countersued. West and Zampella then set up a new studio, Respawn Entertainment, to make games for Electronic Arts, and in January 2011 Activision added EA to its case.

Neither side won in court. Activision and EA settled in May 2012; the Associated Press reported that Activision had sought $400 million from EA, and neither company disclosed the terms. The case brought by West, Zampella and around 40 other former Infinity Ward developers over Modern Warfare 2 bonuses was due to go to trial that month. It was settled on 31 May 2012, as the trial was about to begin, again on undisclosed terms. Respawn went on to make Titanfall, and in 2017 Electronic Arts bought it.

Lawsuits and Microsoft

In July 2021 the California Department of Fair Employment and Housing sued Activision Blizzard after a two-year investigation. The suit alleged a “frat boy” culture, mainly at Blizzard, in which women were harassed, paid less and passed over for promotion. The company “strenuously denied the claims”, Wireframe reported. Blizzard’s president J. Allen Brack stepped down within weeks, and a separate federal case brought by the Equal Employment Opportunity Commission was resolved with a consent decree in 2021. In February 2023 the company paid $35 million to settle charges by the Securities and Exchange Commission about how it handled workplace complaints, without admitting or denying the findings.

The state case was settled in December 2023 for about $54 million, most of it for women who had worked for the company in California between 2015 and 2020. The settlement covered the pay and promotion claims. As part of it the state agency, by then renamed the Civil Rights Department, agreed to withdraw the sexual harassment allegations from its complaint, and the agreement stated that no court or independent investigation had substantiated allegations of “systemic or widespread sexual harassment” at the company.

By the time of the settlement the company had a new owner. On 18 January 2022 Microsoft agreed to buy Activision Blizzard, which by then also owned King, the maker of Candy Crush Saga, for $95 a share: $68.7 billion in cash. Regulators took nearly two years. Britain’s Competition and Markets Authority blocked the deal in April 2023 over cloud gaming, then approved a revised version on 13 October 2023 in which Microsoft handed the cloud streaming rights to Activision Blizzard’s games to Ubisoft. Microsoft completed the purchase the same day. “From Pitfall to Call of Duty,” its announcement began, the studios had “pushed the boundaries of gaming”. Kotick stepped down at the end of 2023.

Activision became a division of Microsoft’s Xbox business. In January 2024 Microsoft cut 1,900 jobs across its games divisions, and in September 2026 it moved Rare, the studio the Stamper brothers had founded while still running Ultimate, and World’s Edge under Activision, along with development of the next Halo game.

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