Huge tech acquisition, as software giant seeks major expansion of its gaming credentials with purchase of leading gaming holding company
Microsoft is looking to “bring the joy and community of gaming to everyone,” in one of the biggest acquisitions to date in the tech industry.
The software giant announced it is to acquire the Call Of Duty, World of Warcraft, and Starcraft powerhouse, Activision Blizzard, which was formed when Activision and Vivendi Games (Blizzard) merged their operations in July 2008.
The acquisition signals how mainstream gaming has now become, with three billion people actively playing games today. This number has been helped by global lockdowns triggered by the Covid-19 pandemic, as well new technologies such as the metaverse, virtual reality, and cloud streaming.
Activision Blizzard acquisition
Microsoft of course has had a foothold in the gaming sector since 2001, via its Xbox console and gaming brand.
Over the year gaming has been a steady performer, but in January 2021, on the heels of huge demand for its Xbox Series X and Series S consoles, Microsoft’s gaming revenue surpassed $5 billion for the first time.
Click here to read Silicon UK’s Tales in Tech History piece about Microsoft’s gaming adventure.
Now Microsoft is spending heavily to become the third largest gaming company behind Tencent and Sony in revenue terms.
Indeed, Redmond said it will acquire Activision Blizzard for $95.00 per share, in an all-cash transaction valued at $68.7 billion, inclusive of Activision Blizzard’s net cash.
This, the software giant said, will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse.
The planned acquisition will give Microsoft access to a huge library of classic games that span the Playstation, Xbox and PC platforms.
These games include Call Of Duty, World of Warcraft, Diablo, Candy Crush, and of course Starcraft.
The acquisition will also provide Microsoft with immediate access to the global eSports activities through Major League Gaming.
Activision Blizzard has studios around the word including the likes of Treyarch and Infinity Ward, and the firm has nearly 10,000 employees.
That said, the firm has been rocked recently by staff walkouts over alleged sexual harassment and employee discrimination.
This has triggered investigations by the California Department of Fair Employment and Housing, and the US Securities and Exchange Commission.
Besides staffing problems, Microsoft said that Bobby Kotick will continue to serve as CEO of Activision Blizzard, which could be a controversial move.
Protesting staff have previously called on Kotick to resign for having allegedly been aware of widespread harassment and discrimination problems at the company for years.
Once the deal closes, the Activision Blizzard business will report to Phil Spencer, CEO, Microsoft Gaming.
“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” said Satya Nadella, chairman and CEO, Microsoft.
“We’re investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all,” said Nadella.
“Players everywhere love Activision Blizzard games, and we believe the creative teams have their best work in front of them,” added Phil Spencer, CEO, Microsoft Gaming. “Together we will build a future where people can play the games they want, virtually anywhere they want.”
“For more than 30 years our incredibly talented teams have created some of the most successful games,” said Bobby Kotick. “The combination of Activision Blizzard’s world-class talent and extraordinary franchises with Microsoft’s technology, distribution, access to talent, ambitious vision and shared commitment to gaming and inclusion will help ensure our continued success in an increasingly competitive industry.”
Mobile gaming is apparently the largest segment in gaming, with nearly 95 percent of all players globally enjoying games on mobile.
The acquisition (if it passes regulatory clearances) will also bolster Microsoft’s Game Pass portfolio, which has reached a new milestone of over 25 million subscribers.
Activision Blizzard meanwhile has nearly 400 million monthly active players in 190 countries.
Upon close, Microsoft will have 30 internal game development studios, along with additional publishing and esports production capabilities.
The deal is expected to close in fiscal year 2023 and has been approved by the boards of directors of both Microsoft and Activision Blizzard.
Microsoft’s surprise acquisition of Activision Blizzard has triggered a response from industry observers.
“This is yet another play by Microsoft to secure its stake in the nascent metaverse,” noted Forrester VP, research director Mike Proulx. “The company previously announced it’s vision for a metaverse tech stack back in May.”
“The acquisition of Activision Bilzzard gives the company a 3D gaming experience layer that complements their XBOX gaming hardware,” said Proulx. “What this means is that Microsoft is now holding a number of important cards in the developing metaverse: back-end infrastructure, devices, and now an experience platform.”
Content is king
Another analyst pointed to Microsoft’s previous acquisition to gain gaming content.
“Not content with buying Bethesda/Zenimax, Microsoft is keeping with the mantra of their founder’s view that ‘content is king’ by buying out Activision Blizzard,” noted Neil Campling, global TMT analyst at Mirabaud Equity Research. “It is just the latest in a long line of gaming deals.”
“Last week, Take Two stepped up to buy Zynga, having already bought Playdots and (Zynga had themselves acquired Peak Media), said Campling. “EA outbid Take Two for Codemasters, having already acquired Gluu Mobile. And last year Microsoft acquired Zenimax.”
“Technology is naturally deflationary, and with communication costs having tumbled, internet access speeds doubling every 18 months, ease of access (App economy, smartphones, smart TVs) and consumers’ willingness to pay for entertainment – the opportunity of economic returns for differentiated content means that all the heavyweight tech companies want a piece of the largest entertainment vertical of them all – gaming,” said Campling.
“This latest deal to acquire Activision Blizzard brings scale in all three segments of the market in-house (AAA big hitting franchise Call of Duty to consoles and PCs, WoW and Overwatch to PC/Online, and King, aka Candy Crush to mobile),” said Campling. “The family of Xbox game studios now looks very healthy indeed, and should form a backbone enabling the push of the subscription model even further.”