Microsoft acquisition of Activision Blizzard
Microsoft acquisition of Activision Blizzard
In January 2022 Microsoft announced plans to acquire Activision Blizzard for a record-breaking $67.7billion. This deal is not just unprecedented because of the large sum Microsoft will be spending on it, but it is also an all-cash deal.
So why is Microsoft spending so much on two gaming companies? What does it mean for the industry? What is going on behind the scenes?
Bear in mind that this deal has not been finalised, but it is all but certain. Microsoft has stated that they aim to have this deal completely done and dusted between July 2022 and July 2023, which is an incredibly short window of back-tracking for an acquisition of this size.
Why It Matters
DA Creative Studio looks at key events in the tech industry, and we consider how these events will impact marketing two, three, ten steps down the line. By analysing these transitions of power between large-scale companies we have put together a comprehensive explanation of what has happened, what it means for our future as consumers, and how it will affect Microsoft.
Microsoft acquiring Activision Blizzard will put them on a whole new level in the gaming industry alone. In 2020, it was reported that Microsoft had a share of 6.5% of the gaming industry. After the new additions brought on from these two gaming companies alone they will have a projected 10.7% share of the gaming industry – a single company owning a tenth of the market will be a huge game-changer in regards to what games are released, how they’re marketed, and how they’re experienced.
This will then have another earthquake of an impact on the industry. Currently, the top three gaming companies in the world are Tencent, Sony, and Nintendo. After Microsoft officially acquires Activision Blizzard they will then topple Nintendo and replace them as the third largest gaming company in the world – at least in regards to global revenue.
Alright, that’s the essentials of what has happened and why it’s important for the industry. But if you’re an avid gamer, or someone who uses video games to relax after a long day, then you’re probably wondering how this all affects you. Take a second to analyse how the gaming scene has changed around us for the last ten years. We still remember the days when we would go to Game, Gamestation, CEX (or even HMV!) to either trade in new games or buy new ones.
We all know the glory days of buying physical copies of games is well and truly in the past, only reserved now for collectors or a generation avoiding occupying a digital space. A few years back, buying digital copies of games became the norm. And now, we have subscription-based services which means that we don’t even own the games we play anymore, we essentially rent them while we are active members of a certain subscription.
This is normal now, we don’t even bat an eye. Whether it be Amazon Prime, Netflix, Spotify or Xbox Game Pass – the way we consume our media and entertainment is all run through subscription services. This is huge for the gaming industry, not only because of what games they release but also how they develop their games in the first place. Developing a game that can’t be ‘completed’ or ‘finished with’ makes a lot more sense to gaming industries than games with a limited story to tell.
With Microsoft’s acquisition of Activision Blizzard, they are in a better position than ever to release content that will keep gamers hooked, subscribed, and hungry for more. Big names have been added to their roster, having IP control over Call of Duty, World of Warcraft, Starcraft, Crash Bandicoot and many more (including Candy Crush) means that their impressive library could become an attractive selling point for millions of consumers around the world.
And what to do with all these new goodies in their bag? Microsoft has the ability to make every new game released under their umbrella to be Xbox and PC exclusive for starters. With all the active Call of Duty players alone, Sony could be facing a huge loss if people decided that they felt buying an Xbox would be better than the new Playstation so they can continue to play with their friends.
Potentially harsh. It would be a bold move by Microsoft to wage the exclusivity war to such a degree. However, we have seen both Sony and Microsoft release their exclusive games in the past with a ‘limited exclusivity’ window attached.
God of War is a great example of Sony releasing the game on the Playstation 4 in 2018, and then being released again on PC a whopping four years later in 2022. This is the most likely outcome of the Activision Blizzard acquisition, all games which are already released will still be available to the same platforms as before. But, if you want to play the new Call of Duty, you’ll have to wait a while to play it on anything other than Xbox or PC.
However, this isn’t the first big purchase from Microsoft which drastically increased their share of the gaming industry. Back in 2014, Microsoft bought out Mojang, giving them exclusive rights to one of the most popular games of the 21st century – Minecraft. And then again in 2020 Microsoft acquired Zenimax, this may not be a household name but you’ll know which gaming company falls under Zenimax – Bethesda. That’s right, the gaming company behind gaming showstoppers like Elder Scrolls and Fallout.
When it comes to games which Microsoft have the right to hold exclusivity over, they pretty much have the entire gaming stratosphere in the palm of their hands. Sure, they’ll never get hold of Mario, and I’m sure Sony is holding onto the rights for Spiderman with an incredibly tight fist, but with the rights to Bethesda, Minecraft, World of Warcraft, and Call of Duty – Microsoft are in a position now to control the industry around them.
Baggage of Activision
I doubt this acquisition will be viewed as ‘The Big Guy’ buying out ‘The Little Guy’ from Activision Blizzard’s perspective though. In fact, I wouldn’t be surprised if there was a collective round of applause followed by a giant sigh of relief. Because if you’ve been paying attention, those guys haven’t been doing too well in the court of public opinion lately, and a great deal of news coming out about something new and exciting is exactly what they needed in 2022.
A couple of years ago, sexual misconduct allegations came forward against numerous high-ranking managers of both Activision and Blizzard, as separate companies, and very quickly more allegations followed. Until, eventually, Activision Blizzard was facing a shitstorm of bad publicity. Countless employees were suspended or sacked, Activision released a press release stating that there was to be a two-drink maximum at all work functions (pretty tone-deaf response) and over $18million spent on settlements.
All of this within the space of a year or two. You almost feel bad for the guy in charge who finds out about the allegations and has no time to handle the situation before it gets out of time, right?
Wrong. Because the man in charge is none other than Bobby Kotick, still chief CEO of Activision Blizzard. A man who, in 2006, sent a voicemail to an assistant threatening to kill them if the misconduct allegations became public.
Bobby Kotick also received a pay package of $154million in 2020, and earns more than 319x the average Activision Blizzard employee, when in 2021 hundreds of employees were laid off – even after they were promised pay rises, which none of Activision Blizzard saw (apart from maybe Bobby Kotick). So, with all of this bad publicity, layoffs, strikes, and slimy CEOs – Microsoft will be taking on a huge project in whipping this company into a shape which they can proudly march forward under their conglomerate umbrella.
How it benefits Microsoft
With all this being said, if you are sitting there thinking that Microsoft acquired all of the negative scandals of Activision Blizzard for the ability to stick their fingers up at Sony and Tencent by releasing popular content exclusively to their platforms, well you may be wrong. Because Microsoft isn’t gobbling up tech companies left and right in order to bulk up their Xbox Game Pass library, they have higher ambitions than just being the third largest gaming company in the world.
Amassing so many tech companies is good for gaming, but more importantly, it is good for the next stage of internet media consumption. In late 2021, Mark Zuckerberg announced that Facebook will change its name to Meta. On top of this, they also changed their brand from a social networking service to a social technology company. The metaverse isn’t something Facebook (now Meta) has created, but there are moves now more than ever for them to monopolise that digital space.
With all the resources and money Meta has to pour into research and development to create a name for themselves when the metaverse becomes a cultural norm, it is going to take a lot of foresight to match them. And suddenly, Microsoft’s acquisition of all of these tech giants makes a lot more sense.
The metaverse is still more of a concept than an actual platform. If you got ten people in a room to individually describe what it means, you would surely have ten unique answers.
We all see the metaverse as the next stage in our digital consumption, but to one person it will be reminiscent of Minority Report, waving our arms through the air to scroll through data only we can see. To someone else, it will be a merging of Second Life and VR headsets. In reality, it’ll be a bit of both, and so much more.
It isn’t as far off as you’d imagine. Not only are we all connected through social media (which is where Meta will be finding their footing), but if you play games such as Fortnite, Roblox, World of Warcraft, and Call of Duty then you are simultaneously connected to millions of people and engaged in a digital world.
These games are digital worlds with digital currencies, with digital assets like skins and items of clothing which can transfer from one game and platform to another. I recently bought Spyro on the Xbox One, with that purchase I got a small Spyro that flies around my Xbox avatar – an avatar that follows me through to the PC and even onto several games across.
So, if Meta are trying to carve their names into the foundations of the metaverse through their knowledge and resources in social media, then Microsoft will do the same within the gaming community. Although social media companies have gained their fortunes through advertisement revenue and a high user base, we have seen a lot more advertisements being used across online games.
Even Fortnite has started selling ad-space for digital billboards in-game. With that, on top of microtransactions and in-game currencies, Microsoft could be looking at building an empire for themselves in the future digital space which would rival Meta itself.
All in all, this ground-breaking almost seventy-billion-dollar acquisition could be the best money Microsoft ever spent. It’s an investment into the future of gaming as well as the future of the entire digital stratosphere. Regardless of what shape the metaverse forms around us, whether it be VR headsets or Neuralinks – or a combination of them all, Microsoft are putting the groundwork in now to be a major player in the new digital age.
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