In an acquisition that dwarfs others, Microsoft today announced plans to buy digital game development company Activision Blizzard in an all-cash deal worth €68,7 billion.
If the acquisition goes through, it would add significantly to Microsoft's already sizable video game operation, which includes "Minecraft" and "Doom." Activision's stable of popular video games includes "Call of Duty," "World of Warcraft" and "Candy Crush," all of which are now available through Microsoft's Xbox console business.
The deal would give Microsoft a strong footing in the emerging Metaverse industry, which blends the traditional online world with the virtual one thanks to augmented reality headsets.
"Ultimately, the line between the enterprise and consumer metaverses is always going to blur, and you can't focus on just one," said Thomas Bittman, vice president and distinguished analyst at Gartner Research. "Microsoft is now getting big on both."
The acquisition would be the largest and largest of any of Microsoft's video game companies, dwarfing Take-Two Interactive's $12.700 billion acquisition of Zynga earlier this month. That's more than double Microsoft's next biggest acquisition: its €26 billion purchase of LinkedIn in 2016.
Microsoft said the purchase of Activision would make it the world's third-largest game company by revenue, behind China's Tencent Holdings Ltd. and Japan's Sony Group Corp.
Lewis Ward, director of research at IDC, whose area of coverage includes global gaming and augmented and virtual reality (AR/VR) markets, said the deal raises concerns about too much consolidation and market concentration in the gaming space.
Microsoft's gaming strategy has expanded significantly in recent years with the acquisition of Zenimax Media (Bethesda Software) in September 2020 and the launch of Xbox Game Pass and Xbox Cloud Gaming. “While Microsoft is more focused on building the platform, both in the enterprise and in the game, in the game they are significantly shifting to content delivery,” Bittman said.
Microsoft CEO Satya Nadella says the Activision Blizzard business will report to Phil Spencer, CEO of Microsoft Gaming.
"We believe we have an incredible opportunity to bring the joy and community of gaming to everyone on the planet, and we will invest and innovate to create the best content, the best community and the best cloud for gamers," Nadella said in a statement. . . "We want to make it easy for people to connect and play great games where, when and how they want."
In the consumer and gaming metaverse, Meta Platforms (formerly Facebook) is now Microsoft's biggest competitor.
About 100 Microsoft employees recently left the company's mixed-reality Hololens project; many deserters are said to have joined Meta. That's concerning, Bittman said, because it indicates that "at least some of Microsoft's employees have lost faith in its VR strategy, and that needs to change."
"I don't interpret this as a metaverse game at all," said IDC's Ward. "I don't see Activision-Blizzard as a leader in this emerging space."
The deal, Ward said, is more about Activision-Blizzard, which believes it is in a weakened position and creates an "exit" for Activision CEO Kotick and his company.
Activision has come under scrutiny from several government agencies after California regulators filed a lawsuit against the company in July over sexual harassment and the gender pay gap. In the lawsuit, the California Department of Fair Employment and Housing alleged that Activision discriminated against female employees "despite the fact that women did substantially similar work, assigned women to a lower level, and promoted them to a lower level." slower pace than men, and fired or forced women to resign from higher positions. frequencies than men.
In November, more than 800 of Activision's roughly 10.000 employees signed a petition calling for CEO Bobby Kotick to resign. Employees also staged walkouts in response to a Wall Street Journal investigation that claimed Kotick had been aware of sexual harassment and discrimination practices for years.
In today's announcement, Microsoft said Kotick will retain its position after the acquisition closes. But the Wall Street Journal, citing sources, reported that Kotick would leave once the deal closes.
Bittman said he hopes Microsoft will allow Activision to keep "the good parts" of its culture, and Microsoft's support will only speed up Activision's games. By contrast, Microsoft will not tolerate sexual harassment, "so it's a good thing" for Activision employees, Bittman said.
"Obviously, Activision-Blizzard has been going through a difficult time since last summer and I can understand why," Ward said. "From Microsoft's perspective, this is the right time to make such an offer."
Activision-Blizzard has become one of the largest independent cross-platform game development and publishing companies, Ward said. “So if the deal passes regulation, it will still be a blow to the idea of independent studios and potentially the idea of cross-platform game publishing.”
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