Tech giant Microsoft has announced that it has purchased game publisher Activision Blizzard for $69 billion. The record-breaking deal gives the company the chance to tap into several video game franchises for its metaverse initiative.
Microsoft’s acquisition of video game maker Activision Blizzard for nearly $69 billion is yet another play by the tech giant to secure its stake in the nascent Metaverse and bring more intellectual property (IP) under the Xbox and Game Pass umbrella, industry experts said on Wednesday.
In the biggest deal ever in the world of gaming, Microsoft has announced to acquire Activision Blizzard, the maker of popular games like Call of Duty (CoD) and Warcraft.
When the transaction closes, Microsoft will become the world’s third-largest gaming company by revenue, behind Tencent and Sony.
Microsoft still has to win approval from Activision’s shareholders and, more importantly, from regulators. Two recent mega-deals in the semiconductor industry Nvidia’s effort to buy Arm and AMD’s agreement to purchase Xilinx have both been held up in regulatory review for over a year.
For Microsoft, the purchase price is more than double what the 47-year-old company has ever paid. Its top previous acquisition was LinkedIn in 2016, which cost over $26 billion.
But Nadella, who succeeded Ballmer as Microsoft CEO in 2014, has the capital to spend and an investor base that’s urging him to be aggressive.
At the time of the LinkedIn announcement, Microsoft was valued at about $400 billion, so the purchase amounted to roughly 6.5% of its market cap. When it tried to buy Yahoo, Microsoft’s market cap was around $260 billion, meaning it would’ve been giving up almost 20% of the company.
Activision, which has a long history with Microsoft’s Xbox, will also help the software giant better compete with rival Sony Corp.’s PlayStation. The publisher’s largest franchise, Call of Duty, became successful largely due to Microsoft’s online platform Xbox Live, which allows gamers to connect for multiplayer matches. Most of Activision’s games are designed to run on Xbox consoles.
“Gaming has been key to Microsoft since our earliest days as a company,” Nadella said in a note to employees. “Today, it’s the largest and fastest-growing form of entertainment, and as the digital and physical worlds come together, it will play a critical role in the development of metaverse platforms.”
Taking on Activision also introduces a whole host of legal and potential regulatory problems to Microsoft. Activision has been shrouded in controversy since last July after a California state agency filed a sexual bias lawsuit against the Santa Monica, California-based company, describing in lurid detail its “frat boy culture,” and accusing leadership of failing to take action to stop it. The U.S. Securities and Exchange Commission later launched its own investigation into how the company handled the reports of misconduct.
The deal will also likely face tough regulatory scrutiny in the U.S., where big technology companies are being probed by regulators for their reach and influence. China, which has been sparring with the U.S. already over technology issues, will also likely review the merger.
Getting to Microsoft’s future requires building at least one metaverse. While Nadella points to games as proof we’ve already reached that stage, other metaverse-builders are not sure that counts. Having some expensive new video game properties may not get Microsoft closer to the metaverse, because the concept needs to expand beyond gaming “to really make it real,” Vivek Sharma, a vice president at Facebook gaming, wrote on Twitter the day the Activision deal was announced. Still, he said, “What a time to be alive!”
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