A closer look at Microsoft’s £54 billion attempt to acquire Activision Blizzard

As part of Bdaily’s coverage of National Video Games Day, Senior Correspondent Matthew Neville dissects one of the biggest deals in the history of the industry and weighs up its impact upon the future of the medium. Read on to find out more…

Press Start

In January of last year (2022), tech giant Microsoft announced its ambitious intentions to acquire gaming publisher Activision Blizzard for a monolithic $68.7bn (approximately £54bn) in cash. Under the terms of the proposed agreement, Microsoft would gain ownership of Activision, Blizzard Entertainment and King.

This is easily the largest and most significant deal attempted within the gaming industry for many years, if not ever. However, the process has been anything but straightforward for the two companies, with roadblocks being erected at every turn by trade bodies and the like. So, let’s get into the nitty gritty of things to determine just what this means for gaming in general.

Enter Player 1

First things first, let’s delve a bit deeper into the backgrounds of the respective companies involved with this monumental moment in the industry. Microsoft needs little in the way of introduction, particularly given the fact that it is one of the primary drivers behind being able to read this article right now.

Founded in 1975 by Bill Gates and Paul Allen, the multinational tech giant has been a driving force in the world of computing ever since, and eventually broke into the gaming console market in 2001 with the original Xbox, which introduced the world to new staple franchises like Halo and sold over 24 million units in its lifetime.

In the years that followed, Microsoft grew its market share considerably with the Xbox’s successor, the 360 in 2005. This machine sold a mind-boggling 85 million units and put Microsoft in direct competition with Sony and its PlayStation in the HD home console market.

However, Microsoft fumbled the reveal of its next console in 2013, with the Xbox One being touted as a multimedia powerhouse, intended to replace a number of devices that might make up one’s media centre.

This strategy, however, did not resonate with Xbox’s core audience, leading to Sony’s dominance in the eighth console generation with the PlayStation 4. While Sony’s machine has sold over 117 million units (making it the fifth best-selling console of all time), Microsoft’s effort proved a regression of its predecessor with an estimated 58 million units sold.

Selecting a new level

Which brings us neatly to the present day, as Microsoft has shifted its focus with the latest generation of Xbox consoles (the Xbox Series X and Series S), positioning itself as a pioneer in the new frontier of gaming subscription services.

Serving as a sort of ‘Netflix for video games’, Xbox’s Game Pass allows users to access a library of titles for a rolling fee, cutting out the necessity of buying new releases at full price. However, this new strategy requires a vast selection of titles in order to be appealing, thus Microsoft has been vacuuming up notable names within the industry in order to fill out its service.

Examples of this include the company’s acquisition of ZeniMax, parent company of legendary developer and publisher Bethesda, for a whopping $7.5bn (approximately £5.9bn). This deal gave Microsoft control over some huge IPs including DOOM, Fallout, Wolfenstein and the Elder Scrolls.

Although this deal at first appeared to give Microsoft a significant boost to its exclusive library, it has yet to truly bear fruit, as until recently the only title that had been released post-acquisition was the critically panned Redfall from Arkane Studios.

However, things may be starting to click into place for Microsoft’s grand strategy, as last week (September 6) Bethesda released its latest opus, the open world science-fiction role-playing game Starfield, as an Xbox console exclusive.

This release appears to have been a hit for Microsoft, with critics generally praising the game and over 6 million players either purchasing it outright or playing through Gamepass. Moreover, during the game’s release window, Amazon reported a sales increase of 1,000 per cent on Xbox’s Series X console.

This turn of events has put into perspective the power of console-exclusive titles, putting the Activision Blizzard deal into sharper focus than ever before.

Enter Player 2

The name of Activision Blizzard may not be as universally recognisable as Microsoft to those less familiar with gaming discourse, but the publisher is responsible for some of the biggest titles in the industry, including Call of Duty, World of Warcraft and Candy Crush. These three titles alone make Activision Blizzard a formidable force within the industry.

Therefore, one can understand Microsoft’s enthusiasm to engulf the venerable brand and have its stable of IPs firmly planted in ‘Team Green’ territory.

Initially founded as a developer 1979 before transitioning into the powerhouse it is today in 2008 as the result of a merger with Vivendi Games, and based in Santa Monica, California, the video game holdings company consists of five business units: Activision Publishing, Blizzard Entertainment, King, Major League Gaming and Activision Blizzard Studios.

Good or bad for the industry?

One of the primary reasons why this proposed deal has been the source of such fervour and dissent from Microsoft’s competitors is the issue of monopolisation. The key worry continuously reiterated by regulatory bodies and Microsoft’s competitors is that the deal would lead to a monopoly within the sector, particularly with regard to cloud gaming.

‘Cloud gaming’ refers to the number of services already available to consumers which allow users to stream and play full games over the internet, eliminating the need for a disc or even a console in some cases.

With Microsoft already having solidified its presence in the cloud gaming market with the aforementioned Game Pass, some have questioned the concept of Xbox having exclusive streaming rights to Acitviion’s substantial library. Hence, the British CMA (Competition and Markets Authority) blocked the deal in the UK pending a number of alterations.

In response, Microsoft has agreed to a deal with prolific French publisher Ubisoft who now holds the rights to Activion’s library when it comes to cloud streaming in the UK.

While this is an arrangement that left many scratching their heads when it comes to brand identity and consumer clarity, it demonstrates Microsoft’s sheer will to acquire Activision Blizzard by any means necessary.

Furthermore, it warrants mentioning that Microsoft has officially stated that it intends to keep the Call of Duty series multi-platform for at least the next 10 years, both as a means to appease Sony and also because the revenue brought in by the series on the PlayStation platform is simply too much to leave on the table.

Exit to menu

Ultimately, it remains to be seen how this deal will affect the video games industry if it goes ahead, but I resolutely believe that it will give Microsoft the edge it has so desperately needed for so many years to finally compete with Sony’s stellar first-party line-up of blockbuster games.

Coupled with a (hopefully) more consistent output from the previously acquired Zenimax, Microsoft now stands a chance at holding the reins on a swathe of market-leading titles and finally finding its footing in a new era for gaming as a hobby and as an industry.

As cloud streaming and the subscription service continue to carve out their place in the gaming landscape, Microsoft can firmly plant its flag with titles like Call of Duty and Starfield in its camp, even if has to share its toys with players on other platforms for the time being. Once those kinds of agreements are over, things really do stand to be shaken up!

—– By Matthew Neville – Senior Correspondent, Bdaily.

Looking to promote your product/service to SME businesses in your region? Find out how Bdaily can help →