A Video Game Kingpin Rises and Coke Admits Defeat

On this day in economic and business history...

The world's largest dedicated video-game publishing company began operating on July 10, 2008, a day after Activision and Vivendi shareholders agreed to create Activision Blizzard (NASDAQ: ATVI  ) . The new company, majority-owned by Vivendi and led by controversial Activision CEO Robert Kotick, had first been proposed in an $18.9 billion deal at the end of 2007 but had been delayed while European regulators ensured that no antitrust laws would be broken.

The deal brought together two of the video game industry's pioneering developers: Activision had been the first independent video-game developer established during the Atari era, and Blizzard had helped to popularize real-time strategy games on PCs before launching World of Warcraft, the most popular MMO game in the world.

Each half of Activision Blizzard brought industry-leading titles to the table as well, with WoW matched by Activision's Call of Duty first-person-shooter franchise. Each publisher was firing on all cylinders as the deal closed, and both would soon enjoy phenomenal success with their flagship titles. Activision had launched the Modern Warfare subseries of Call of Duty shortly before announcing the merger, and a Black Ops prequel was launched during the 2008 holiday season. Each of these sold more than 11 million copies apiece across all platforms. WoW's Wrath of the Lich King expansion, also launched during the 2008 holiday season, became the fastest-selling PC game of all time (only to be displaced by the next WoW expansion two years later) and would push the MMO to its all-time peak of 12 million subscribers within two years of release.

Activision Blizzard shareholders, unfortunately, did not enjoy much gain from this industry-leading tie-up. Shares only returned to near breakeven for the five years following the merger's close at the start of 2013. The video game industry can be brutal, and even Activision Blizzard isn't immune: World of Warcraft has lost more than a million subscribers since the merger was first announced. Activision lived through the video game crash that destroyed Atari. Will it apply the lessons of that collapse to avoid its own?

The end of an error
The New Coke fiasco came to an end for Coca-Cola (NYSE: KO  ) on July 10, 1985. That day, less than three months after introducing its new formulation, the company announced the return of Coke Classic. Coke's backtracking was so momentous that famed news anchor Peter Jennings interrupted a daytime soap opera on ABC to break the news to the nation.

Replacing Coke had been almost like replacing Santa Claus -- a marketing icon Coke had a hand in developing. People just weren't ready or willing to accept something different from what they had grown up with. Coke President Donald Keough admitted as much at the time, saying, "We did not understand the deep emotions of so many of our customers for Coca-Cola."

The high-profile flameout of New Coke gave the public a new cultural touchstone for corporate failure. Whenever a new product bombed spectacularly, it would be a "New Coke moment." New Coke stuck around for a while, but it was never especially popular. Coke Classic, on the other hand, surged on its return to store shelves. The company rode Coke Classic and the hugely popular new Diet Coke -- which actually lent its formulation to New Coke -- to greater sales, and its dominance of the soft-drink industry earned it a placement on the Dow Jones Industrial Average (DJINDICES: ^DJI  ) two years later.

Like Coke, Apple is also known for creatively destroying its own products. However, Apple knows its customers want something newer, better, and cooler, and it's willing to bet big on revolutionary new products that will make "Apple classic" obsolete. Read about the future of Apple in the free report "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.


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