Success IngredientMike Lai

Lai transferred from KPMG in Hong Kong to KPMG in Los Angeles before joining the gaming industry as director of financial reporting

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Approximately every two seconds, a Call of Duty game is sold, accord-ing to Activision Blizzard Inc., the United States-based developer behind the hit franchise. The first-person shooter video game has sold over 175 million copies since its first release in 2003, according to previous reports, with the publica-tion of new titles each year since. “It just amazes me,” says Mike Lai, Vice President and Assistant Con-troller at Activision Blizzard, Inc. and a member of the Hong Kong Institute of CPAs. “When I was playing video games at a young age, I never thought they would evolve to the digital and cinematic level that we have taken our franchises to today.”

Activision Blizzard is composed of four operating units, Activision Publishing, Blizzard Entertain-ment, Activision Blizzard Studios

and its e-sports-focused Media Networks division. Established in 1979, Activision was the world’s first independent video game soft-ware developer and distributor and began by developing titles for the Atari 2600 console in the 1980s. Blizzard was founded in 1991 and sold to French publisher Havas in 1998 before being acquired by Vivendi Games in the same year. Activision Blizzard was formed in 2008 as the result of the Activision merger with Vivendi Games. Since then, Activision Blizzard has been creating breakthrough entertain-ment experiences for media, tech-nology and entertainment.

The gaming industry has seen tremendous growth over the years, with market value expected to reach US$81.5 billion in 2015, according to games market research company Newzoo. The

THE GAME CHANGERHeadquartered in Santa Monica, California, Activision Blizzard, Inc. is one of the world’s most successful standalone interactive entertainment company. Tigger Chaturabul talks to Mike Lai, Vice President and Assistant Controller, about the development of the gaming industryPhotography by Michael Fletcher

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Success IngredientMike Lai

trend is moving from the classic video game played on consoles and PCs to the online platform where gamers can play together over the Internet, and now to the mobile arena, where casual gaming has made its place in the everyday routine. The market is changing, acknowledges Lai. “Nowadays people are instantly downloading and streaming content more than before because of the Internet and next-generation consoles,” he says.

From a cinematic standpoint, video games have undergone continuous facelifts in graphic artwork and gameplay strategies thanks to technological innova-tions in design and program-ming. Console manufacturers are currently pushing next generation models like Sony’s PlayStation 4 and Microsoft’s XboxOne, both of which have gone into their third year of sales. Consoles today are capable of accelerated processing, motion tracking and cloud-based subscription gaming for players to stream video game content.

At the time of writing, this year’s Call of Duty: Black Ops III launch exceeded US$550 million in worldwide sales, making it the biggest entertainment launch of 2015, including theatrical box office, music and book launches. Digital sales nearly doubled and engagement per player set a new record for the franchise – gam-ers played more than 75 million

hours online during the three-day opening launch, as reported by Business Wire.

While Call of Duty operates on a pay-to-play model where box sales generate the majority of rev-enue, World of Warcraft – created by Blizzard Entertainment – fol-lows a subscription model where players pay monthly rates to access the game, and is the world’s most-subscribed massively multiplayer online role-playing game. “These two franchises attract millions of passionate gamers,” says Lai. “We keep them engaged through updates and downloadable content throughout the year.”

Mobile is kingAsia Pacific is currently the big-gest market for mobile games, with 48 percent of the total market share, while the global mobile games market is expected to dou-ble in 2016, according to research conducted by Newzoo and mobile games marketing platform Applift. Candy Crush, words familiar to everyone from children to adults and the elderly, is a key example of casual mobile gaming’s success. One out of every seven people in Hong Kong played Candy Crush in 2012, according to mobile games site Modojo.com.

In early November, Activision Blizzard announced its proposed acquisition of social games com-pany King Digital Entertainment,

Sony saw its most successful Black Friday in the company’s

history this year, with the PlayStation 4 becoming the fastest selling home console

ever, said Andrew House, President and Global Chief

Executive of Sony Computer Entertainment in an interview

with the Financial Times.

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Asia Pacific is currently the biggest market for mobile games, with 48 percent of the total market share

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Success IngredientMike Lai

Lai had to learn everything from video game development to technology to Activision’s business models.

the maker of the Candy Crush game, for US$5.9 billion. The company is well established in the mobile game space and has captivated a wide audience of casual gamers, namely anyone who has a mobile device, with over 200 titles designed to be daily entertainment. According to King, the interactive entertainment company had 330 million average monthly unique users across web, social and mobile platforms as of the third quarter in 2015.

Free-to-play mobile gaming follows a completely different business model from pay-to-play games. Players can opt for paying

small fees for virtual goods, such as extra lives or power ups, to enhance the gameplay experience, or enjoy the game for free over time.

Perfect timingSoon after finishing his accoun-tancy degree at the Hong Kong Polytechnic University, Lai joined KPMG in Hong Kong, where he moved up the ranks from accoun-tant to senior manager position in audit, earning his Hong Kong Institute of CPAs qualification at the same time. Through the firm’s Global Opportunities programme, Lai joined KPMG Los Angeles and proceeded to pursue his American

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Institute of CPAs qualification. “Having sat through both exams and trained in both KPMG Hong Kong and Los Angeles, I was able to build a strong foundation over time,” elaborates Lai. “As a CPA, being able to know and do the right thing is key. The CPA title gives me credibility and reinforces that I act with integrity,” he adds.

Lai began his career in the U.S. during the implementation of the Sarbanes-Oxley Act in 2003, when public companies and account-ing firms began adopting the new requirements set by Congress in reaction to Enron and WorldCom scandals. “[At KPMG Los Ange-les], we did a lot of advisory work about Sarbanes-Oxley, focusing on process and system controls and the right amount of documenta-tion. It was quite an interesting year to be at an audit firm,” says Lai, looking back.

In 2007, Lai picked up a head-hunter’s phone call that would take his career from auditing to commercial accounting. “It was the right time for me to change industries and I joined Activision as director of financial reporting at a time of growth [right before it merged with Blizzard Entertain-ment in 2008],” he says. “I went from reviewing and auditing a company, jumping from one client

to another, to really becoming part of one company and appreciating how the business and financial processes are done from the ground up.” The transition from a Big Four to a company environment required Lai to have a stronger sense of ownership of the numbers and financials, and deep knowledge of systems and processes.

In his new job, Lai had to learn everything from video game devel-opment to technology to Activision’s business models. “The U.S. Gener-ally Accepted Accounting Princi-ples for a software company are very specialized and have their own set of rules, so I learned a lot internally from our auditors and from my own research,” adds Lai. “I had to under-stand the business before I could apply the accounting.”

In 2013, he became the Vice President and Assistant Control-ler, expanding his role into most of Activision Blizzard’s accounting and reporting matters as a record-to-report global process owner.

In such a fast-paced industry, Lai stresses the importance of keeping the accounting and report-ing processes and systems strong to support the company’s growth. “In my view, these are the two biggest areas we want to keep improving to make sure that the accounting backbone stays aligned with the

business,” he says. Lai believes that the right, tal-

ented people are the greatest asset to overcome any challenges, espe-cially in a fast-paced, dynamic industry, “As the manager of the record-to-report process within Activision Blizzard, we focus on the training and development of the teams – not just on the financial processes. It’s our job to be a good partner with the busi-ness, and I truly feel privileged to work with the teams at Activi-sion Blizzard because everyone is contributing their best to the final outcome.”

The proposed acquisition of King gives Activision Blizzard a major presence in the mobile gam-ing space, where games sales are expected to grow 21 percent this year to US$20.6 billion, according to Newzoo. “Social and mobile gaming will be able to reach a broader audi-ence base, one that might not have an Xbox or a PlayStation, but will have a mobile phone,” says Lai, who admits he is sometimes surprised by how much gaming has changed. “Twenty years ago, I would have never imagined the video games I was playing in my living room in Hong Kong could evolve to where they are now,” says Lai. “And they’re going to keep evolving in the future.”

“I would have never imagined the video games I was playing in my living room in Hong Kong

could evolve to where they are now.”

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