Introduction
We're discussing Microsoft's recent acquisition, why this likely occurred, what it means for the industry as a whole, and why you should care. When a company buys another company, it's usually for very specific and strategic reasons–so why does this most recent purchase by Microsoft matter even more than the rest?
Let's dive deeper into what just happened and how it will change the entire landscape of gaming forever.
What Just Happened?
As of January 18, 2022, Microsoft secured a deal to acquire Activision/Blizzard and all of their properties and assets for $68.7 billion. That's enough money to buy 68,700,000,000 McDonald's Sprites! And just like McDonald's Sprite, this news is a lot to swallow because Activision/Blizzard owns a substantial amount of market share in the gaming industry, 4.81% to be exact.
With such industry oversaturation and low barriers of entry, gaining any percent of the massive video game software industry is no small feat. Microsoft's market share will increase from their 2020 percentage of 6.5% to 10.7% with their record-breaking new purchase.
To put this acquisition into perspective, the entire video game industry is estimated to total nearly $175.8 billion as of 2021. So Microsoft has spent nearly 40% of that total with one purchase. This also marks the largest acquisition in both Microsoft's and video game history!
What This Means for the Video Game Industry and Gamers
The most obvious result of Microsoft's acquisition of Activision/Blizzard is the sheer number of titles and properties that Xbox will now own and control.
The following list of studios and teams were acquired:
Activision Publishing
Blizzard Entertainment
Beenox
Demonware
Digital Legends
High Moon Studios
Infinity Ward
King (A massive mobile phone gaming company)
Major League Gaming
Radical Entertainment
Raven Software
Sledgehammer Games
Toys for Bob
Treyarch
With the acquisition of Bethesda and now Activision/Blizzard, Microsoft will soon own most of the biggest first-person shooters of all time. This would include Halo, Fallout, Doom, Wolfenstein, Overwatch, and Call of Duty.
Microsoft will own the following games with the most notable titles underlined:
Blur
Caesar
Call of Duty
Candy Crush
Crash Bandicoot
Diablo
DJ Hero
Empire Earth
Gabriel Knight
Geometry Wars
Guitar Hero
Gun
Hearthstone
Heroes of the Storm
Hexen
Interstate ’76
King’s Quest
Laura Bow Mysteries
The Lost Vikings
Overwatch
Phantasmagoria
Pitfall
Police Quest
Prototype
Quest for Glory
Singularity
Skylanders
Solider of Fortune
Space Quest
Spyro the Dragon
StarCraft
Tenchu (legacy games)
TimeShift
Tony Hawk’s Pro Skater
True Crime
World of Warcraft
Zork
With such an extensive list of successful titles such as Call of Duty, Crash Bandicoot, and World of Warcraft, the big question that reminds is: Will Microsoft start making these Activision/Blizzard games exclusive to Microsoft platforms like Xbox and Game Pass?
At this moment, the answer is unclear. However, we can look at Microsoft's past acquisitions to give us a better idea.
A Timeline of Recent Microsoft Acquisitions
On September 15, 2014, Microsoft acquired Mojang, the studio behind Minecraft for $2.5 billion. As many of you may know, Minecraft only expanded to more and more platforms including the Nintendo Switch and mobile devices while existing alongside the pc-moddable version.
On March 9, 2021, Microsoft acquired ZeniMax, the parent company behind Bethesda for $7.5 billion. That's less than a year ago! While it's still unknown whether or not Microsoft plans to make many of Bethesda's beloved titles Xbox exclusives at this time, what we do know is that Phil Spencer has stated that the commitments made prior to the acquisition will continue to be honored.
That means any title that was being developed exclusively for the PlayStation 5 or Sony, in general, will continue without change to make good on the contracts already made. On the other hand, Phil Spencer also alluded to some Bethesda games becoming Xbox exclusives in time.
That leads us to Microsoft's most recent acquisition of Activision/Blizzard for $69 billion. Phil Spencer said the following in a statement:
"Until this transaction closes, Activision Blizzard and Microsoft Gaming will continue to operate independently. Once the deal is complete, the Activision Blizzard business will report to me as CEO, Microsoft Gaming." -Phil Spencer
This would imply that in the meantime, Bobby Kotick will continue to be CEO at Activision/Blizzard but the company will eventually report to Phil Spencer who may or may not outright replace Bobby Kotick in the end.
Phil Spencer continued in his statement:
"Upon close, we will offer as many Activision Blizzard games as we can within Xbox Game Pass and PC Game Pass, both new titles and games from Activision Blizzard’s incredible catalog. We also announced today that Game Pass now has more than 25 million subscribers. As always, we look forward to continuing to add more value and more great games to Game Pass." -Phil Spencer
It appears that Phil Spencer seeks to improve the value proposition of the Game Pass by increasing the volume of hit video games offered. However, Spencer has been careful to exclude any details of any future titles produced by their newly acquired studios and has yet to comment on title exclusivity.
Only time will tell how gaming communities will be affected if their favorite games become exclusives overnight.
Regarding Microsoft's vision for future video game platforms and accessibility:
"The fantastic franchises across Activision Blizzard will also accelerate our plans for Cloud Gaming, allowing more people in more places around the world to participate in the Xbox community using phones, tablets, laptops and other devices you already own." -Phil Spencer
It's clear that Microsoft seeks to offer their video game software and services to every possible device which could obviously exclude competing consoles. In doing so, they could potentially create a Microsoft-owned ecosystem of video game-focused devices.
Why Did This Happen?
As one of the world's largest video game software publishers, Activision/Blizzard (or AVTI) owns a tremendous amount of high-revenue video game studios and their properties. So whoever owns and runs the parent company of these assets will obviously have a great deal of influence and control over how they are developed, priced, distributed, where they're distributed, and much, much more.
As of last year, new information has revealed that, unfortunately, Activision/Blizzard has not been running as smoothly as everyone had hoped (to put it extremely lightly). The company has become engulfed in scandals, lawsuits, and investigations under the failed leadership of its CEO, Bobby Kotick.
For a large corporation once valued at $80 billion (now $50.9 billion), Activision/Blizzard must play their best strategic hand which is possibly why they were open to the acquisition in the first place.
As a result, Xbox, and therefore Microsoft, had an opportunity to save Activision/Blizzard from themselves before ATVI slowly implodes and their valuation continues to buckle under the weight of controversy and angry stockholders. This not only provides a window of opportunity for possible buyers but an incentive for Activision/Blizzard to press the reset button and re-establish themselves as a renewed company under fresh external leadership.
What better company to take the reigns on a burning cargo wagon than Microsoft who is actively looking for companies with intangible assets to strengthen their strategic advantages against competing console companies.
What do we mean by intangible assets? Why, exclusive ownership and rights to beloved video game and tech properties of course. The more of the video game market Microsoft owns, the more they can control and the less crowded the playing field becomes.
Conclusion and Corporate-Level Strategy
Microsoft now owns a massive slice of the video game industry with their recording-breaking and history-making $69 billion acquisition of Activision/Blizzard. If we take a step back and look at the big picture; everything is slowly moving toward the cloud. Block Busters have been replaced by Netflix. Many storefronts have been replaced by E-commerce platforms such as Amazon.
The video game industry is now the most lucrative and soon to be the fastest-growing industry in the entertainment category. Consequently, Google, Sony, Nintendo, Nvidia, Valve, and many others are trying to gain market share in cloud gaming. Even Amazon, Apple, and Netflix are actively working towards building their online platforms and potential audiences right now.
Microsoft must plan ahead–beyond short-term console launches–towards a long-term console-less future.
Microsoft isn't just competing with Sony and Nintendo. They're now also competing with Amazon and Apple who have the same kind of capital to make the same large acquisitions as Microsoft themselves.
So the best way to prevent other monolithic companies from acquiring major video game publishers is to quickly acquire them yourself and it's becoming more and more clear that Microsoft is doing just that.
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