Microsoft's Big Business Buyout of Activision Blizzard, and Why it's a Huge Deal
Microsoft is done playing games.
Company acquisitions and mergers are nothing new, especially in the entertainment industry. Whether it be Disney’s acquisition of Marvel or AT&T’s rather rocky acquisition of Warner Brothers, we live in a world where big companies can be sold out to even bigger companies, slowly moving the entertainment and technology industries into a single dystopian singularity. However, one such entertainment acquisition has turned video game fans completely on their heads in what many have described as one of the most clever and important acquisitions in the videogame industry in the last decade- Microsoft’s buyout of Activision-Blizzard, the owners of Call of Duty, Overwatch, World of Warcraft, Crash Bandicoot, and Spyro the Dragon. This event has astronomical implications for the industry, and could hopefully make the gaming landscape a safer place.
Part of Microsoft’s official statement on the acquisition, showing the Activision, Blizzard, and King franchises now owned by Microsoft.
Microsoft officially announced the acquisition on January 18th of this year. The CEO of Microsoft’s gaming division, Phil Spencer, stated that “Players everywhere love Activision Blizzard games, and we believe the creative teams have their best work in front of them. Together we will build a future where people can play the games they want, virtually anywhere they want.” This was an incredibly shocking development to most of the tech world, and one of the biggest things to note was the sheer amount of money spent on it. In short, Microsoft paid an estimated 68.7 billion dollars for Activision Blizzard. To put that into perspective, Disney paid only 4 billion dollars for Marvel and 4 billion dollars for Star Wars. Microsoft themselves only had to pay 2.5 billion dollars for Mojang, the owners of Minecraft- the best selling game in all of human history. And to really nail in how much money 68.7 billion dollars is, Nintendo- the creators of franchises such as Super Mario and The Legend of Zelda- is worth around 70 billion dollars (with a margin of error). In other words, Microsoft nearly paid the worth of Nintendo to buy Activision Blizzard. Without contest, this acquisition is the most expensive in all of video game history, and is the 20th biggest company buyout in general in the past 12 years. This might sound like huge cash, but it’s little more than chump change to Microsoft, as they’re currently worth more than 2 trillion dollars. Because of these deep pockets, Microsoft has been lining their software library up with many of the industries finest. As mentioned, they also purchased Mojang Studios in 2014. They’ve also recently purchased ZeniMax media, which you might know better as the owners of Bethesda Studios, the developers of Doom (2016), The Elder Scrolls V: Skyrim, and Fallout. Microsoft has been on a spending spree, and it’s clear that their newest purchase of Activision Blizzard isn’t even close to the end of their plans
This graphic from the website Visual Capitalist puts into perspective individual gaming corporation mergers and acquisitions. The second largest gaming acquisition ever, Take-Two Interactive’s (the publishers of Grand Theft Auto and NBA 2K) buyout of Zynga (Words with Friends) was only worth a 5th of Microsoft’s deal.
Now, this development isn’t exactly fresh news- this buyout happened more than a month ago, and yet even now it has been the source of much speculation from investors and fans alike of these two companies. But why? Why has this specific business decision caused so much discourse compared to other deals? It can’t just be because a lot of money was spent on it, right? Well, there are several huge factors at play when it comes to formulating an answer to that question, and the biggest one actually was the price- but not because it was expensive. Rather, it was cheap. However, it wasn’t cheap for a good reason. Activision Blizzard and all of their subsidiaries are behind some of the most profitable games in history. The Call of Duty Franchise, World of Warcraft, and even games like Candy Crush. These games rack in hundreds of millions of dollars of profit each year, and have skyrocketed the company's value to the moon. However, this is where things take a turn for the worse. Since 2020, Blizzard has been the center of numerous scandals, all involving sexual harassment and general immoral workplace conduct. Some accuse the workplace environment of promoting “frat boy” culture, and claim the company is full of men mistreating women employees and bragging about it in private online circles. There are also claims of inappropriate jokes, low wages, harassment, shirking responsibilities to women employees so male employees could slack off- and all of these scandals were known to and ignored by the upper crust of the company, including CEO of Activision Blizzard Bobby Kotick, who consistently denied any wrongdoing and attempted to push any reported incidents under the rug. These scandals and serious issues have severely devalued the company to the point where $68.7 billion looked like a bargain sale. Stock prices dropped by over 15% in the past year since the scandals came to light, and multiple projects were put on hold. Many fans have since disconnected themselves from the company, choosing to boycott their games and no longer buy their products until serious reform was implemented and Bobby Kotick was removed from his position as CEO.
And guess what happens when your company is bought out by a bigger one?
Microsoft’s buyout was, quite frankly, genius. It kills as many birds as possible with a single 68.7 billion dollar stone- it removes the current CEO, it reforms workplace behavior, and it breathes new light into stale and underperforming games (such as World of Warcraft, which has infamously lost its mark of quality over the past few years). Microsoft wouldn’t just buy an immoral and controversial company without having plans for it, and one of the changes people are hoping for is the total restructuring of Activision-Blizzard's workplace conduct. This is a highly likely scenario, as Microsoft has been trying to regain the public’s trust since the disastrous launch of Microsoft's Xbox One back in 2013. The Xbox One was Microsoft’s biggest gaming market failure in its entire history due to its anti-consumer design, and re-gaining the trust of diehard consumers has taken a long time. If Microsoft were to suddenly buy Activision blizzard and not make any attempts to correct the problems that plague the company, it would make Microsoft look incompetent all over again as well as continue the cycle of abuse and mistreatment for women employees. Another smaller yet very significant plus is the additions to Microsoft’s Game Pass service, which they recently announced just passed 25 million monthly subscribers. For those unfamiliar with Game Pass, think of it as gaming Netflix that you can use either on your PC or on an Xbox, where you pay a monthly fee to play an unlimited amount of whatever games Microsoft currently has in their library. Now having all of Activision Blizzard's games under their belt, Game Pass has become what many consider to be the best bang-for-your-buck deal in all of gaming.
A list of every company and studio under the Microsoft Games division.
Now let’s discuss the elephant in the room- what about Sony? Sony has been Microsoft’s biggest rival for years with their PlayStation consoles, and has dominated the market in terms of hardware sales. According to the website VGCharts, The PS4 has sold 115.79 million units lifetime, the Switch 88.14 million units, and the Xbox One 50.19 million. Even the family-oriented Switch that started selling 4 years after the Xbox One outsold it, and the PS4 straight up doubled the Xbox One in sales, which is a trend that’s continuing with the PS5. However, a big chunk of PS5 owners use their consoles just to play the newest Call of Duty games- and now that Call of Duty is owned by Microsoft, what will happen to that install base if those games become exclusive to Xbox? That mystery is still up in their air. With huge juggernauts like Call of Duty, it’s possible that it would make more money for Microsoft to simply keep the games multiplatform. That’s a strategy they used with Minecraft, which is why it continues to sell on platforms other than the Xbox. Sony is definitely winning in terms of hardware, but in terms of sheer software, Microsoft finally has the advantage. However, it’s not like Sony isn’t trying to fight back- they recently acquired Bungie, the previous developers of the Halo franchise (before that torch was passed off to the Microsoft-owned 343 Studios) as they moved on to create the Destiny franchise. However, having the creative backing of Destiny won’t be enough to fight back. It’s possible Sony might have something up their sleeves- perhaps a purchase of Take Two Interactive, the publishers of Grand Theft Auto? Only time will tell what happens.
Now, as much as it sounds like this deal is a positive for the gaming industry, it’s not without its negatives. There are several downsides to any business decision, and one of them being fear of a Monopoly. Microsoft already owns an expansive software catalog, and their constant expansion might be seen as a threat to antitrust law. However, as the deal has already been approved by the Federal Trade Commission, it seems as if the law doesn’t constitute this deal as being a threat just yet. There are still many powerful gaming companies out there- EA, Ubisoft, Nintendo, and Sony- and they all still have their fair share to work with. The fear isn’t without precedent though, as Microsoft’s constant buyouts might eventually spell disaster sometime down the line. Another more significant issue is the treatment of Bobby Kotick, who will more than likely get off with little more than a slap on the wrist. Until the buyout is officially confirmed in 2023, he will “continue to serve as CEO of Activision Blizzard, and he and his team will maintain their focus on driving efforts to further strengthen the company’s culture and accelerate business growth” as stated in the official press release. And it’s more than likely that he will eventually get a huge bonus as he leaves the company, as well. It’s up to the many lawsuits against his name on whether or not he faces any punishment.
Overall, though, many see this as a positive step forward for the gaming industry, and is being touted as an example of a good investment. However, this is one of the few exceptions. Microsoft is known to not make good use of their subsidiaries in the past, an example being the Nokia phone brand. If Microsoft can make good on their promises, then things in the industry might start to get a bit more exciting.