Activision Blizzard's (ATVI) stock fell 1.3% on Wednesday amid a 1% gain for the Nasdaq, as a backlash over the punitive actions taken against an eSports player due to his support for Hong Kong protesters swelled.
Wall Street has good reason to be worried about the bottom-line impact of the controversy, given how it arguably leaves Activision between a rock and a hard place.
To recap: On Sunday, a Hong Kong-based player taking part in an eSports tournament known as Hearthstone Grandmasters -- it involves the Hearthstone digital card game developed by Activision's Blizzard Entertainment unit -- shouted out a slogan popular with Hong Kong protesters ("Liberate Hong Kong, revolution of our times.") during a post-match interview that was being live-streamed. In response, Blizzard removed the player, who goes by the handle Blitzchung, from Grandmasters, while also rescinding his prize money and banning him from all Hearthstone eSports competitions for 12 months. Blizzard also said it would cease working with the two eSports commentators (casters) who were interviewing Blitzchung.
The reaction to Blizzard's actions has been swift and furious, with many gamers calling for boycotts of Blizzard franchises such as Hearthstone, Overwatch and World of Warcraft. The hashtag #BoycottBlizzard has trended on Twitter; Reddit has blown up with threads mocking and condemning Blizzard; and prominent eSports players, game developers and U.S. politicians have also denounced Blizzard. In addition, some Blizzard employees staged a walkout on Wednesday at the company's Irvine, CA headquarters.
On Wednesday afternoon, Engadget reported hearing from a Blizzard spokesperson that the Activision unit is "assessing" the situation for now. Notably, the uproar is taking place just three weeks before Blizzard is set to host its annual BlizzCon gaming conference in Anaheim, CA.
While the Blizzard backlash has naturally drawn comparisons to the backlash that the NBA has seen over its handling of a now-deleted tweet by Houston Rockets GM Darryl Morey that expressed support for the Hong Kong protests, there are some important differences between the situations that make the odds of Blizzard seeing a large impact to its U.S. revenue (assuming it doesn't backtrack) meaningfully higher.
Though there's much that one can criticize about the Rockets and the NBA's handling of Morey's tweet, Morey (unlike Blitzchung) wasn't fired for his action. And on Tuesday, NBA commissioner Adam Silver defended the right of people affiliated with the league to express their political views, even as it witnesses some economic fallout from the controversy in China. In addition, the fact that the NBA has a de facto monopoly -- there's nothing comparable if one wants to watch the world's best basketball players -- provides it with a measure of protection against potential boycott attempts.
As strong as its core game franchises are, Activision generally doesn't claim monopolies in the gaming genres it operates in. And while Silver's Tuesday remarks have tempered (though by no means fully ended) the U.S. uproar over the NBA's initial response to Morey's tweet, neither Blizzard nor its parent company has issued any such promise to protect the speech of eSports players taking part in its leagues. Nor has Blizzard, for that matter, rescinded the punitive actions taken towards Blitzchung.
Meanwhile, in the event that such actions are taken, it could put Activision's substantial Chinese revenue streams at risk -- particularly given the likelihood that such a move would motivate some eSports players to make a point of voicing their support for Hong Kong protesters. Blizzard has partnered since 2008 with Chinese gaming giant NetEase (NTES) to offer its games in China, and in recent years has also granted NetEase the right to operate eSports leagues involving Blizzard games. Earlier this year, the Blizzard/NetEase partnership was extended to Jan. 2023.
Moreover, Activision proper is currently seeking Chinese approval for the wildly popular Call of Duty: Mobile, which launched outside of China on Oct. 1 and has already racked up more than 100 million global downloads. It's worth adding here that Call of Duty: Mobile was developed by TiMi Studios, a unit of Chinese tech giant Tencent (TCEHY) .
Blizzard was likely quite mindful of it and Activision proper's Chinese revenue exposure when it responded harshly to Blitzchung's remarks. But it probably didn't realize how much blowback there would be for its response on the other side of the Pacific. Now, it might have no choice but to accept damaging either its American or its Chinese revenue base.