Microsoft’s record-breaking $68.7bn deal to acquire Activision Blizzard
Two weeks ago, on January 18, tech company Microsoft announced that it would be acquiring video game producer Activision Blizzard in an all-cash transaction ($95.00 per share) for an estimated $68.7 billion, making them the third largest video-game publisher behind Tencent and Sony. The move suggests that Microsoft is aiming to broaden its specialties beyond its gaming console Xbox. CEO Satya Nadella states that the acquisition of Activision Blizzard “an incredible opportunity to invest and innovate to create the best content, community and cloud for gamers to build substantial new value for our shareholders”. He continued by expressing Microsoft’s interest in gaining access to the mobile gaming sector as Activision Blizzard’s division, King, averages around 245 million monthly players, most of whom play ‘Candy Crush’. Doing so would greatly assist Microsoft’s presence in a rapidly expanding mobile gaming community, where the accelerating value of the mobile gaming industry (estimated $272 billion by 2030) is too good to miss out on.
Buying Activision Blizzard would add to Microsoft’s lengthy ownership of video-game studios such as Mojang (Minecraft), Bethesda (The Elder Scrolls franchise), Playground (Forza Horizon 1-5) and others. The biggest studios being the developers of Call of Duty Treyarch Games and Infinity Ward, as well as the developers of Overwatch, Diablo and World of Warcraft by Blizzard Entertainment. Doing so puts Microsoft in a dominant position in the video-game industry as adding more content to their rotating catalogue of games in their Game Pass, which bolsters 25 million subscribers annually, would ultimately draw more consumers away from their rivals.
However, the video-game industry being increasingly dominated by giants could have a “creative stagnation and other symptoms of monopolization, like limited choice and higher prices” according to one Bloomberg report. Nonetheless, Nadella’s vision moving forward seemed to be dedicated towards being able to deliver entertainment more freely to broaden the gaming community and increase the accessibility.
Unfortunately, the timing of the announcement came whilst the Federal Trade Commission (FTC) and Department of Justice (DOF) announced newer guidelines with regards to mergers. The move is as Sara Morrison of Vox states is the equivalent of daring antitrust regulators to act against tech firms. Even though the record-breaking acquisition within the video-game industry went through, Mr. Nadella stated that the acquisition would “be too small to have an anti-competitive impact”. However, Microsoft’s chief suggested that regulators would persist in investigating the impact of the acquisition on the development of the Metaverse.
Microsoft’s acquisition of Activision also ties into Activision’s plans to move forward into the Metaverse, as their partnership seemed essential for the construction of a successful initiative as mentioned by Bobby Kotick. The acquisition also plays a key role in helping Microsoft push forward their plans to propel its customer base into the metaverse. Unlike most forms of entertainment, videogames offer consumers the chance to dive into immersive virtual worlds, where they themselves along with friends, regardless of their geographic location, can share an experience. This popular form of entertainment is the reason why Newzoo, a market-research firm thinks that 75% of revenue earnt comes from games that allow the sale of virtual goods. Additionally, a staggering $178 billion spent on videogames in 2020 implies that consumers are willing to spend money on virtual products. With Activision Blizzard under Microsoft, innovation along with a diverse range of content would allow Microsoft to gain a foothold in the Metaverse as the potential to generate revenue in the metaverse are endless.