On 18th Jan 2022 the world woke up to a shock when Microsoft announced that it has decided to acquire Activision Blizzard Inc. for a mind wobbling sum of $68.7 billion dollars. This is the biggest acquisition in the gaming industry, biggest acquisition by Microsoft and one of the biggest in the entertainment industry.
To give you a perspective of the size of this deal let’s look at some numbers.
Microsoft acquired LinkedIn in 2016 for $26.2 billion
Microsoft acquired ZeniMax Media, parent company of Doom & fallout studio Bethesda software for $7.5 billion in 2020.
Microsoft acquired Minecraft game for $2.5 billion dollars in 2014
The Disney- Fox deal was $ 71.3 billion dollars.
US consumer spending in games was $60.7 billion in 2021.
This clearly shows that the deal was a mammoth. After this deal closes Microsoft will be the 3rd largest gaming company in the world behind Tencent & Sony.
Let us try and understand the implications of this deal for Microsoft, its competitors,
and the gaming industry overall.
This deal is a winner for Microsoft because Activision Blizzard Inc. owns some of the biggest names in the video game industry. Call of Duty, World of Warcraft, Diablo, Overwatch, Candy Crush all of which will add major stream of revenues for Microsoft in the years to come. This acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse.
How this deal will do wonders for Microsoft only time will tell. But one thing is for certain it will add fuel to the console wars between PlayStation (Sony) and Xbox(Microsoft). Call of Duty has been a hugely successful franchise which is a big revenue stream for both Play Station & Xbox. Microsoft can decide going ahead it will not release all the future editions of Call of Duty on Sony’s Play station. And although
Phil Spencer, CEO, Microsoft Gaming has said
“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.”
These words do not sound very promising to keep continuing their partnership with PlayStation in the future. They have done in the past where they have acquired games and made them exclusive. Starfield, an upcoming action role-playing video game developed by Bethesda Game Studios and published by Bethesda Softworks which was acquired by Microsoft will not be released on Play Station.
I came across a thread on Reddit by u/BoulderCAST which explained the financials as to why it makes sense for Microsoft to remove PlayStation from the equation.
While the numbers may be incorrect, it still gives a perspective that Microsoft can go ahead with this decision.
Shortly after this deal was announced Game exclusivity fears following wiped $20 billion off Sony's valuation.
Sony released a statement
“We expect that Microsoft will abide by contractual agreements and continue to ensure Activision games are multiplatform.”
This statement’s wording is less than definitive. We can assume that the Microsoft agrees to value the current deal but once the deal gets over, Sony will be powerless over the long-term future of Call of Duty’s future with Play Station. This is a concerning news as Sony revealed in November 2021 that Call of Duty: Black Ops Cold War was the second most played PS5 game for the whole of 2021, behind only Fortnite. Call of Duty also secured both top spots for US game sales for the whole of 2021, according to NPD, highlighting its impact on the market.
It would be interesting to see how Sony will change their strategy because of this deal. What should Sony do? How will they tackle this challenge? Could there be a bigger reason by Microsoft for this acquisition? Eager to hear your thoughts in the comments.