The deal will make Microsoft the third-largest gaming company behind Tencent and Sony and represent the tech major's bet on the "metaverse.
Microsoft is acquiring Activision, the publisher of Call of Duty, World of Warcraft, and Candy Crush for $68.7 billion in the biggest ever gaming industry deal in history as the global tech giant bets big on the metaverse. The deal will make Microsoft the third-largest gaming company by revenue, behind Tencent and Sony and also represents the tech major’s bet on the “metaverse,” or virtual online worlds where people can work, play and socialize.
Microsoft plans to add many of Activision’s games to Xbox Game Pass once the deal closes. The acquisition includes iconic franchises from the Activision, Blizzard and King studios like “Warcraft,” “Diablo,” “Overwatch,” “Call of Duty” and “Candy Crush,” in addition to global eSports activities through Major League Gaming. The company has studios around the world with nearly 10,000 employees.
Bobby Kotick 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. Once the deal closes, the Activision Blizzard business will report to Phil Spencer, CEO, Microsoft Gaming.
“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, chairman and CEO, Microsoft.
“We’re investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all,” he added.
“Players everywhere love Activision Blizzard games, and we believe the creative teams have their best work in front of them,” said Phil Spencer, CEO, Microsoft Gaming. “Together we will build a future where people can play the games they want, virtually anywhere they want.”
Bobby Kotick, CEO, Activision Blizzard stated, “The combination of Activision Blizzard’s world-class talent and extraordinary franchises with Microsoft’s technology, distribution, access to talent, ambitious vision and shared commitment to gaming and inclusion will help ensure our continued success in an increasingly competitive industry.”
The acquisition also bolsters Microsoft’s Game Pass portfolio with plans to launch Activision Blizzard games into Game Pass, which has reached a new milestone of over 25 million subscribers. With Activision Blizzard’s nearly 400 million monthly active players in 190 countries and three billion-dollar franchises, this acquisition will make Game Pass one of the most compelling and diverse lineups of gaming content in the industry.
The deal is expected to close in fiscal year 2023 and thereafter, Microsoft will have 30 internal game development studios, along with additional publishing and esports production capabilities.
Data analytics firm Newzoo estimates the global gaming market generated $180.3 billion of revenues in 2021, and expects that to grow to $218.8 billion by 2024. Tech companies from Microsoft to Nvidia have placed big bets on the ‘metaverse’, with the buzz around it intensifying late last year after Facebook renamed itself as Meta Platforms to reflect its focus on its virtual reality business.
However, there are a number of challenges Microsoft may have to face going forward. One, Activision has been mired in controversy for months amid several lawsuits over allegations of gender discrimination and harassment. Kotick, who has led the company for three decades, has been under pressure from employees to resign. The scandal has taken a toll on a company already struggling to adapt to the end of a pandemic-fueled video game boom.
Also, Microsoft expects the Activision Blizzard deal “to close in fiscal year 2023,” which means we might not see this deal approved for up to 18 months. That’s a long period of time for a deal to close. Moreover, Activision Blizzard operates in a number of markets, which could make regulatory approval more complicated for Microsoft. We need to watch out this space!