Satya Nadella is shaping the history of Microsoft by taking the company in a new direction. Microsoft’s decision to buy Activision Blizzard, the video game company with intellectual properties like Call of Duty, World of Warcraft and Overwatch, for $68.7b is as big as it gets. Activision Blizzard is one of the largest game publishers worldwide across console, PC and mobile, and it’s home to nearly 400 million monthly active players.
The immediate outcome involves catapulting Microsoft into a leading spot in the video game industry while long-term vision is around strengthening its position in the virtual and augmented reality space.
The announcement from Microsoft Gaming CEO Phil Spencer makes the purchase the company’s biggest in decades-long existence and definitely among one of the largest acquisitions in the tech industry. It surpasses Microsoft’s 2016 acquisition of professional networking site LinkedIn for $26.2b. Further, the deal will make the Bill Gates-Paul Allen founded company the third-biggest player by revenue in the gaming space, only behind Tencent and Sony.
Metaverse goals
A bigger implication would be Microsoft’s push into the metaverse space. Last year, Facebook rebranded itself as Meta to underscore its commitment and metaverse will open up a whole new space in the tech industry.
“Our vision of the metaverse is based on intersecting global communities rooted in strong franchises. A big part of that is the fact that mobile is the biggest category of gaming, and it’s an area where we have not had a major presence before,” Phil Spencer has said in a statement.
With a reported cash pile of more than $130b, the Nadella-led company has been eyeing different options, including the popular social network Tik Tok and the chat app, Discord.
Mobile space action
The announcement has also come at a time when Activision is being sued by California’s Department of Fair Employment and Housing, alleging gender-based discrimination and sexual harassment at the company. On the other hand, regulators in Washington — cutting across party lines — are trying to control the power tech giants wield. Microsoft also makes Xbox consoles and owns gaming studios, besides having sway over other segments.
After the announcement, share in Japanese technology giant Sony slumped in Tokyo trade as the deal is a major step for Microsoft’s Xbox gaming brand in its battle against Sony’s PlayStation. It also comes a year after Microsoft bought another influential gaming company, Bethesda for $7.5bn. In recent years, Sony has played to its strengths by giving more power to its network of in-house games studios while delivering a number of exclusive hits including in its Spider-man franchise.
For gamers, the merger may lead to more of Activision’s back catalogue becoming available, and the company’s tentpole franchises, such as Call of Duty and World of Warcraft could become more easily accessible via Microsoft’s cloud streaming technology.
During the pandemic, revenue flow from the gaming industry has increased substantially. Activision also has a substantial slice in the mobile gaming space and owns mobile-gaming studio King, maker of Candy Crush. With the purchase, Microsoft, which at the moment has almost no presence in mobile gaming, will be in the middle of the action. Now Microsoft will be in a better position to attract gamers directly instead of fighting over Apple and Google’s app store charges. Microsoft said that the deal is not expected to close until fiscal 2023, as regulators will take time to examine the antitrust implications of the merger.
Our vision of the metaverse is based on intersecting global communities rooted in strong franchises. A big part of that is the fact that mobile is the biggest category of gaming, and it’s an area where we have not had a major presence before — Phil Spencer, Microsoft Gaming CEO
