Microsoft is buying Activision Blizzard in a $68.7 billion deal, uniting two of the greatest forces in video games: “Our ambition is to bring the joy,” said Satya Nadella.
Mobile, metaverse, and getting around Apple App Store fees are key to the purchase – The Microsoft-Activision Blizzard deal is a $68.7 billion cash acquisition. It has united 2 of the greatest forces in video games. It’s the biggest deal ever for the software maker, nearly three times the size of LinkedIn’s 2016 purchase. Here are five key reasons it happened.
1. Size of Microsoft-Activision Blizzard deal: The transaction, if regulatory approval can be obtained, will create the world’s No. 3 global gaming company, putting Microsoft just behind Tencent Holdings Ltd. in China, the publisher of League of Legends, and games console rival Sony Corp., maker of the PlayStation. Activision couldn’t compete alone in the new world of gaming, Chief Executive Officer Bobby Kotick said in an interview. “You look at companies like Facebook and Google and Amazon and Apple, and especially companies like Tencent – they are huge and we realized we needed a partner to realize the dreams and aspirations that we have,” he said. As for Microsoft, “Our ambition is to bring together the fun and unity of gaming to everyone on the planet,” Microsoft CEO Satya Nadella told investors on Tuesday.
2. Microsoft-Activision Blizzard Deal Mobile: It is the fastest growing segment of gaming. Activision owns the mobile gaming studio King, creator of Candy Crush, one of the most popular mobile games of all time. Microsoft is virtually non-existent in mobile gaming. “We all know that the No. 1 gaming device in the world today is mobile phones,” Phil Spencer, the Xbox chief who was named CEO of Microsoft Gaming on Tuesday, said in an interview. For similar motives, see Take-Two Interactive Software Inc.’s deal announced earlier this month. to mobile game maker Zynga Inc. to buy for $11 billion.
3. Microsoft-Activision Blizzard Deal Bypasses App Store Fees: Satya Nadella wants his gaming empire to be big enough that gamers will head straight for it, taking the App Store from Apple Inc. bypass. Microsoft is at war with Apple, and Alphabet Inc.’s Google, over the fees the app stores charge for games. “Today we face strong global competition from companies that generate more revenue from game distribution than our share of game sales and subscriptions,” Nadella said during an investor interview. “We need more innovation and investment in content creation and less restrictions on distribution.” Or, as Spencer said when talking about mobile gaming, “The distribution on those devices is controlled by two people, two big companies.” So Microsoft wants its own “untethered” ability to distribute games and content, Spencer said.
4. Microsoft-Activision Blizzard Deal Brings Metaverse Closer: Gaming is one of Microsoft’s two big metaverse plays (the other being Office and conferencing software). Nadella and Spencer already see the communities of gamers raised around titles like Minecraft and Halo as similar to the metaverse concept. The acquisition will provide even more massive and committed gaming communities to create their own metaverses. “When we think about our vision of what our metaverse could be, we believe there won’t be any centralized metaverse, and there shouldn’t be,” Nadella said. “We need to support many metaverse platforms as well as a robust ecosystem of content, commerce and applications.”
5. Microsoft-Activision Blizzard deal fits the three C’s: Nadella’s business strategy is bundled around cloud, content and creators. Microsoft wants to get as much of Activision’s past and future content as possible on its cloud gaming service, Xbox Game Pass, which has boosted the software maker’s sales with a steady stream of subscription revenue. The deal also lets Microsoft leverage a pool of players who create their own game content and worlds. After adding Minecraft, LinkedIn, and GitHub, Nadella was looking for a great asset that would give him another large community of creators. He failed to land the social video service TikTok, and talks with Pinterest Inc. and Discord Inc. didn’t come to anything either. Activision is the latest attempt, and this time it seems to have succeeded.