Bufetico
Daniel Weltz was on the committee that bargained his team’s first union contract at Blizzard, the maker of World of Warcraft, while its owner, Microsoft, was cutting thousands of jobs. Blizzard’s workers ratified the contract this month, and one of the main issues at the table was what happens to them in a layoff.
Weltz is a principal software engineer, and the committee he sat on bargained for Blizzard’s platform and technology unit. He’s been at Blizzard for 20 years. In a statement the union put out, he said he’s stayed because he loves the company and the people he works with.
The union grew team by team. Quality assurance testers in Albany, New York, went first. The World of Warcraft team and the testers in Austin, Texas, followed, and Weltz’s unit and several others joined last year. Getting to a contract took two years of bargaining. It covers nearly 1,900 people across Blizzard’s game teams and the groups that support them. Besides the layoff terms, it brings raises, and Blizzard now has to bargain with the union over how AI gets used at work.
In July, Xbox’s new chief executive, Asha Sharma, announced what she called the most significant restructuring in Xbox’s history. She told staff the business wasn’t healthy. Microsoft said its video game division would cut about 3,200 jobs over the next year, around a fifth of its people, and four studios would leave Xbox for new management. About 1,600 of the jobs went the day she announced it. Sharma wrote that the cuts would hit people who’d helped build Xbox, many of whom had arrived through acquisitions.
The Communications Workers of America, the national union behind the contract, says the cuts across Xbox reached hundreds of its members, though Blizzard itself was mostly spared. After the July announcement, the union says, workers made layoffs a priority in the talks. Union members and supporters rallied against the layoffs in the US and Canada, including outside Activision’s building in Austin in August. When the vote came through, Blizzard’s president, Johanna Faries, called the ratification a milestone and thanked the bargaining committees and the rest of Blizzard’s staff, who’d kept working through the talks.
Blizzard came with the biggest of those acquisitions. It belongs to Activision Blizzard, the Call of Duty publisher, which Microsoft bought on October 13, 2023, for $75.4 billion, mostly in cash. By then Weltz had been at Blizzard for well over a decade. The annual report Microsoft filed this July still says the purchase will speed up the growth of its gaming business.
The year Blizzard’s sales became Microsoft’s
A company’s revenue can grow two ways. It can earn the growth, by making more sales itself, or it can pay for another company that’s already making them. In the year of the purchase, both look like growth. I keep them apart, because only the earned kind tells you what the business does when it isn’t writing a check.
When a public company makes a purchase this big, the accounting rules make it show what its results would have looked like with the new business in both years. Accountants call it pro forma, and Microsoft’s sits in a note near the back of its 10-K, the annual report it files with the SEC. In the fiscal year through June 2024, the year Blizzard joined Microsoft, reported revenue grew $33.2 billion, or 15.7 percent. With Activision counted in both years, it grew $27.7 billion, or 12.6 percent. So about one dollar in six of the reported growth came with the purchase. The other five were earned, and more than half of those in one segment: the one Microsoft calls Intelligent Cloud grew $17.5 billion that year, as Microsoft reported it then.
Microsoft counts Activision Blizzard’s games in its gaming line, and that line shows what the bought growth did next. Gaming revenue jumped 39 percent in fiscal 2024, which held eight and a half months of Activision, and rose again in fiscal 2025, the first full year, to $23,455 million. Bought growth arrives in one step, gives the next year a second lift while the calendar fills in a full twelve months, and after that it’s the base, the number every later year gets measured against.
From there the base has to be earned. In fiscal 2026 the line, now labeled Xbox in the 10-K, came in at $21,790 million, below fiscal 2025. Hardware revenue fell 29 percent on fewer consoles sold, and Activision doesn’t make consoles, while games and subscriptions, taken together, slipped against a year the 10-K says had been lifted by Microsoft’s own games selling well. The rest of Microsoft kept earning. In fiscal 2026 Microsoft’s revenue grew $50.1 billion, led by the cloud again, with nothing bought that year anywhere near Activision’s size.
Sharma’s memo went out six days after that fiscal year closed. She wrote that she knew a restructuring stretched over a year makes things harder, but that there was no way to make every change in a single day, so the cuts run across the whole of the next fiscal year.
For a union member at Blizzard who gets laid off, the new contract gives, among other things, the right to be called back into an open job in any of Blizzard’s union units, and four extra weeks of severance, however long they’ve worked there. Weltz said it adds “strong protections around layoffs, job security, and remote work.”
Where this breaks
I start from the pro forma note. It’s built on estimates, and Microsoft says so. It warns that the figures aren’t what the two companies would have made as one, and it covers only two years, fiscal 2023 and 2024. After that, I split bought from earned by hand, using the gaming line, and that line mixes the games with the consoles. Since the purchase, Microsoft’s own games include Activision’s, so even the games can’t be split cleanly.
I measure the revenue. If Microsoft bought more than that, franchises like Call of Duty and World of Warcraft, and the players who come with them, it has to show up in the accounts in later years. Separating growth this way is the same move I made with Inditex, reading its sales with and without currency.
What Weltz bargained for
Under Weltz’s contract, the right to be called back lasts 14 months from the day a layoff is announced. Microsoft paid for Activision Blizzard once, in October 2023. Part of the price is still coming off its profit. Two thirds of the price, $51,001 million, was booked as goodwill, the part that couldn’t be attached to anything specific. Goodwill never passes through profit unless a test one day finds it’s worth less. Another $11,619 million went into what accountants file as marketing-related intangible assets, things like trademarks and trade names, and those come off profit a slice at a time. The 10-K gives them an average life of 24 years.