Inside the World of Blizzard

"Why does Blizzard succeed where others don't?" asks Jay Wilson, a lead game designer with a shock of spiked hair and a wry disposition. "It isn't a magic trick. We work at it, and if a product isn't good enough, we cancel it."

Blizzard Entertainment, of course, is the Irvine (Calif.)-based maker of the world's most popular and profitable online game, World of Warcraft (WoW), which boasts nearly 11 million monthly subscribers around the globe. The company is also at the heart of the recent $18.9 billion merger with Activision, primarily a maker of console titles such as Guitar Hero and Call of Duty. Born in early July, the newly combined entity, Activision Blizzard (ATVI), is now the industry's biggest player, with projected annual revenues of nearly $4.5 billion.

But Activision is acquiring much more than World of Warcraft. Blizzard is behind a string of best-selling, industry-shaping PC games including the StarCraft and Diablo series, which have sold nearly 10 million and 20 million copies, respectively. The new company is also tapping into a corporate culture that champions creativity, both productive and experimental, inspiring enduring devotion from paying players.

Company Changed Hands Several Times

Blizzard began life in 1991, founded by UCLA graduates Allen Adham, Frank Pearce, and Michael Morhaime, currently the firm's CEO, as a group of coders-for-hire toiling on other companies' games. The 1994 release of Warcraft vaulted the company toward becoming one of the most admired and profitable game makers in the world. (That year, the company was purchased for $10 million by distributor Davidson & Associates and changed hands a number of times before finally coming under the control of Vivendi Universal (VIV.PA) in 1998.) Like Disney's (DIS) Pixar animation studio or electronics impresario Apple (AAPL), Blizzard has stayed ahead of competitors.

Indeed, the 250-person outfit has become one the games industry's leading innovators, creating games that players crave and profitable new businesses that rival executives envy. "[They're] essentially design geniuses, making games easy enough for casual players and deep enough to attract and hook hard-core players," says Jeff Green, editor-in-chief of online gaming magazine 1Up.com. "Simple to learn, difficult to master is the holy grail of game design," he adds. "Blizzard does this every single time."

As Wilson suggests, Blizzard's purpose is simple: to make fun games. Sounds easy enough, but the task is complicated by the nature of modern video games, which can require development budgets rivaling those of blockbuster Hollywood releases or major corporate product rollouts. As the games industry has emerged as a serious business, Blizzard's hallmark has been its effective and persistent effort to remain in touch with players.

Learning from Criticism

It's also learned to feed on criticism. Betas of future expansions to World of Warcraft include reporting software that allows players to offer instant feedback from within the game. Employees endlessly play and replay games both on and off the clock, constantly looking to make improvements. At lunch, "strike teams" play concentrated sessions of games in development to provide feedback. "You know a game is ready when management has to send e-mails out after lunch begging people to get back to work," jokes Wilson. Some designers even plan vacations to coincide with major release dates in order to play alongside regular consumers.

Starbucks: Big Investors’ Divorce Grounds

GM Cuts Corners to Save Its Bottom Line