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Microsoft surprised gamers all over when it bought Activision Blizzard for $68.7 billion on January 18. This acquisition pushes Microsoft to become one of the top gaming businesses across mobile, PC, console, and cloud. Technically, Microsoft buying Activision will place it in the world’s third-largest gaming company by revenue, behind Tencent and Sony.
To understand what is going on, we will go over the backstory and cover the main points:
How It All Began
Activision’s stock dropped sharply in December. Combined with the company being embroiled in accusations of sexism and workplace discrimination for the past six months, it opened up the possibility for Microsoft to step in. Seizing the opportunity, Microsoft reached out to the CEO of Activision, Bobby Kotick, with a takeover bid. Initially, Kotick dismissed the offer, but—Activision faced pressure from the media and employees calling for Kotick’s resignation—later told Microsoft to offer a better deal.
When Microsoft did, rapid negotiations went underway to hash out an agreement. Once the deal concludes, Kotick is likely to resign, although Microsoft looked into the accusations and determined that most of the issues were in the past.
This buyout could be Microsoft’s golden goose, which leads us to wonder why and how Microsoft decided to get into the gaming business in the first place.
Microsoft’s Incentive
While the obvious answer is to increase its profits, Microsoft’s acquisition is still a risky endeavor. Perhaps spending about $69 billion is not much for a company worth $2.3 trillion. Nevertheless, Microsoft saw value in the purchase. And we think the following reasons are what led to Microsoft’s decision:
Scope
As mentioned earlier, Microsoft buying Activision makes it the number 3 gaming company by revenue, behind China’s Tencent Holdings Ltd., and Japan’s Sony Corp. Microsoft would not have been able to compete against those gaming giants on its own. But now, having adopted Activision’s 400 million users, it has the reach. In a statement on January 18, Microsoft CEO Satya Nadella told investors that “together [with Activision] our ambition is to bring the joy and unity of gaming to everyone on the planet.”
Mobile Gaming
It is the fastest-growing segment of gaming. Activision owns the maker of the game Candy Crush, one of the best mobile games of all time. This acquisition propels Microsoft to become one of the leading companies in mobile gaming when it previously had no presence.
Metaverse
Like every other tech giant, Microsoft is also involved in the metaverse and metaverse-related technology. Gaming happens to be one of the main elements in the metaverse. “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.
Today, games like Minecraft already offer a similar experience to the metaverse concept. This acquisition will give video game communities the ability to create their own metaverses. Nadella stated that “We believe there won’t be a single centralized metaverse, and there shouldn’t be. We need to support many metaverse platforms, as well as a robust ecosystem of content, commerce, and applications.”
What Does This Mean for Gamers?
More Activision games might exclude players using only Sony or Nintendo consoles. Activision makes games for multiple platforms, but this could mean trouble for some gamers with Microsoft buying the company. Should future games become home to Xbox Game pass only, this will get in the way of Microsoft’s “ambition is to bring the joy and unity of gaming to everyone on the planet.” But, Microsoft’s gaming CEO, Phil Spencer, assures that they will “plan to continue to support those communities moving forward.”