Microsoft is now in the process of buying the beleaguered Activision Blizzard for a monstrous US$68.7 billion (AU$96 billion) at US$95 (AU$132) per share in โthe largest all-cash acquisitionโ in both video game and tech history. Precisely why is the tech giant willing to fork out a 45% premium for the powerhouse publisher as of Friday close? Aside from the latterโs franchises which range from Call of Duty, World of Warcraft, Diablo, Overwatch, to Candy Crush โ whatโs clear is Microsoft intends to position itself favourably for the coming arms race.
Setting aside the Bill Gates and Paul Allen-founded companyโs more obvious ongoing war against Sony and its PlayStation โ as well as the desire to bolster its heavyweight portfolio hosted on its subscription platform Xbox Game Pass โ Microsoft is essentially hedging quite a sizable bet on future by staking an equally sizable claim the next frontier. According to the press release announcing the forthcoming transaction, the hope is that absorbing Activision Blizzard will โaccelerate the growthโ in its gaming business (mobile, console, PC, cloud) as well as provide โthe building blocks for the metaverse.โ
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โGaming 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,โ says Satya Nadella, Microsoft Chairman & CEO.
โWeโre 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.โ
โPlayers everywhere love Activision Blizzard games, and we believe the creative teams have their best work in front of them,โ adds Phil Spencer, CEO of Microsoft Gaming.
โTogether we will build a future where people can play the games they want, virtually anywhere they want.โ
In other words, this can all be perceived as Nadella and Spencerโs way of putting Microsoftโs competitors on notice; and a solid indicator weโll all be spending a lot more time in the โnascent world of virtual and augmented reality.โ The other aspects should, by no means, be deemed small potatoes โ but neither should the metaverse play.
CEO of Activision Blizzard, Bobby Kotick, will remain at the helm, eventually overseeing the entire operationโs 30 internal games development studios once merged with Microsoft. Microsoft notes the strength of Activision Blizzard in the fast-evolving mobile gaming sector was a major attraction to the overall deal.
โFor more than 30 years our incredibly talented teams have created some of the most successful games,โ says Bobby Kotick, referencing Activision Blizzardโs 10,000 global employees.
โThe combination of Activision Blizzardโs world-class talent and extraordinary franchises with Microsoftโs 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.โ
While many have been quick to celebrate, many others have pointed out a deal of this sheer scale and magnitude will likely draw the attention of regulators. Especially when you consider the fact this would make Microsoft the worldโs third-largest gaming company. Wedbush tech + media analyst Daniel Ives, on the other hand, believes itโll receive the green light given Microsoft is โnot under the same scrutiny and pressureโ as the likes of Facebook, Amazon, Apple, and Google. Though not without its fair share of hurdles.
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โWe expect this deal to ultimately clear regulators,โ Daniel Ives expressed in a note to investors.
โHowever, there will be some inherent speed bumps navigating both the Beltway and Brussels on a tech deal of this size.โ
Ives also believes the acquisition of Activision Blizzard by Microsoft will crank its consumer strategy all the way up to 11, which โ up until this point โ has โbeen on a treadmill approach,โ in contrast to its wildly successful business-to-business efforts.
โAcquiring Activision will help jump-start Microsoftโs broader gaming endeavours and ultimately its move into the metaverse with gaming the first monetisation piece of the metaverse in our opinion.โ
โWith Activisionโs stock under heavy pressure over the last few months, Microsoft viewed this as the window of opportunity to acquire a unique asset that can propel its consumer strategy forward.โ
โThis is a significant deal for the consumer side of the business and more importantly, Microsoft acquiring Activision really starts the metaverse arms race,โ says David Wagner, equity analyst and portfolio manager at Aptus Capital Advisors.
โWe believe the deal will get doneโฆ [but] this will get a lot of looks from a regulatory standpoint.โ
Suffice it to say, thereโll be a fair few dollars flying about soon enough for more than one reason.
