Microsoft Acquires Activision Blizzard
What a great way to start the year for the gaming industry.
Soon after Take-Two Interactive announced its $13 billion acquisition of Zynga to set a new high at nearly twice the valuation of the previous record of Microsoft’s acquisition of Zenimax Media, Microsoft reclaimed its title with the $68.7 billion acquisition of Activision Blizzard.[1] Paying with all cash at +45% premium, Microsoft strengthened its gaming business across mobile, PC, and console with Activision Blizzard’s lucrative IPs like Candy Crush, Warcraft, and Call of Duty.[2] The acquisition also signaled Microsoft’s interest in the metaverse, as Satya Nadella, chairman and CEO, said, “[g]aming … will play a key role in the development of metaverse platform.”[3] In fact, Microsoft’s virtual reality platform and cloud service are fit to create synergy with wider gaming content; as Nadella also said, “[a]nd finally, and not least, cloud gaming. As we’ve talked about, we deliver the joy and community of gaming by putting players at the center of their entertainment, enabling people everywhere to stream games in high fidelity.”[4]
Many tech giants are turning into metaverse builders.[5] While the metaverse is not here yet, Microsoft may be a step ahead in the competition, having one of the leading cloud services, Azure, and an AR/VR technology, HoloLens. Inside its virtual space, Microsoft seeks to place games as the nexus; hence, Nadella said: “[a]s a company, Microsoft’s all-in on gaming. We believe we can play a leading role in democratizing gaming and defining that future of interactive entertainment, quite frankly, at scale.”[6] Google and Amazon also have cloud gaming services, Stadia and Luna, respectively, which compete with Microsoft’s Xbox Cloud Gaming.[7] Nonetheless, Microsoft’s acquisition of Activision Blizzard will further strengthen Microsoft’s gaming portfolio while potentially depriving its competitors of some popular content. For example, there is a rumor that “Call of Duty: Warzone” would remain a multiplatform release while the yearly release of “Call of Duty” would become Xbox exclusive.[8] However, to survive the antitrust scrutiny and as the merger is not expected to close until 2023, Microsoft insists that it does not intend to remove games from other platforms.[9] To further reassure the federal regulators, Microsoft also argues that even with acquiring Activision Blizzard, it would still be behind Tencent and Sony in the wider gaming industry and that “Apple and Google, not Microsoft, distribute mobile games and are paid by consumers for those games.”[10] There is still a concern about the FTC or EU blocking the acquisition; however, since Microsoft’s platform and Activision’s games do not compete directly, the merger is seen as a vertical merger and thus much harder to challenge than ones that are horizontal.[11]
For the Blizzard fans and employees, the merger could be great news. Blizzard has been struggling to eliminate its toxic work culture, especially under CEO Bobby Kotick, who failed to address it for years.[12] He is expected to finally leave the company once the merger is complete, but with a tremendous exit package.[13] Jason Schreier, a Bloomberg reporter, tweeted that while monopolies are bad, Microsoft’s acquisition of Activision Blizzard could positively affect “Blizzard both culturally and strategically.”[14] As for gamers, the merger could lead to the revival of some of the older Activision Blizzards IPs, such as Guitar Hero, StarCraft, and King’s Quest, into Xbox and PC, as Microsoft Gaming CEO Phil Spencer said he wants to make sure the company has “resources to work on franchises that [he] loves from [his] childhood.”[15]
The current obsession with the metaverse is driving the big deals in the gaming industry. Admittedly, the metaverse is not here with us yet. Still, we live in an exciting time as companies seek synergy between their technology and content to deliver the metaverse future where we will enter the game, select our characters, and level up.
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