Industry-shaking purchase could grow Xbox's sizable slate of exclusive franchises.
Microsoft this morning announced plans to purchase gaming mega-publisher Activision Blizzard for a record-setting $68.7 billion. The move, when finalized, would bring franchises like Call of Duty, Overwatch, Diablo, World of Warcraft, Starcraft, and many more under the umbrella of the Xbox maker.
Today's announcement follows on Microsoft's $7.8 billion acquisition of Bethesda, announced just 15 months ago. After some initial confusion about what that meant for Bethesda's multiplatform titles, it has since become clear that most of Bethesda's biggest franchises, such as Elder Scrolls, will not be appearing on competing consoles such as the PlayStation 5.
The same could definitely happen for Activision Blizzard's big-name games. Microsoft notes in its announcement that Activision Blizzard games would become a part of its Game Pass program, which currently enjoys 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 company said. "Upon close, Microsoft will have 30 internal game development studios, along with additional publishing and esports production capabilities."
In addition to new console exclusives, the acquisition includes Candy Crush maker King, giving Microsoft a new way in to the massive mobile gaming market. "Through great teams and great technology, Microsoft and Activision Blizzard will empower players to enjoy the most-immersive franchises, like Halo and Warcraft, virtually anywhere they want," Microsoft said in a statement.
If that sounds familiar, it's because it's similar to what Take-Two said about its recent $12.7 billion acquisition of mobile gaming powerhouse Zynga. "Take-Two has an extensive catalog of commercially and critically successful console and PC titles with engaged and loyal communities of players, and there is a meaningful opportunity to create mobile games and new cross-platform experiences for many of these properties," the company said.
Buy the dip?
The all-cash transaction values Activsion Blizzard at $95 a share, a significant premium on Friday's closing stock price of $65.39. But that stock price is down significantly from its 2021 peak of $103.81, which it hit in February.
That stock decline reflects a fraught time for Activision Blizzard, which has faced months of controversy after the state of California brought a lawsuit against the company alleging widespread sexual discrimination and harassment. CEO Bobby Kotick has come under particular fire after further reporting suggesting he withheld information about some of the allegations within the company from the board of directors.
While Kotick reportedly told colleagues he would consider stepping down in November, Microsoft said in a statement today that "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."
The publisher is also facing an open-ended strike among a group of workers protesting the treatment of testers at its Raven Software subsidiary.
The allegations surrounding Activision Blizzard have drawn vague statements of concern from all three major console makers. Microsoft's Phil Spencer told employees in November that the company was "evaluating all aspects of our relationship with Activision Blizzard and making ongoing proactive adjustments... This type of behavior has no place in our industry."
And just last week, Spencer was quoted in The New York Times saying the company has "changed how we do certain things with [Activision], and they’re aware of that." At the same time, Spencer said he "would rather help other companies than try to get into punishing" and that "it’s not obviously our position to judge who the CEOs are" at other companies.
"Any of the partners that are out there, if I can learn from them or I can help with the journey that we’ve been on on Xbox by sharing what we’ve done and what we’ve built, I’d much rather do that than get into any kind of finger-wagging at other companies that are out there," he added.
"As a company, Microsoft is committed to our journey for inclusion in every aspect of gaming, among both employees and players," Spencer said in a statement accompanying today's announcement. "We deeply value individual studio cultures. We also believe that creative success and autonomy go hand-in-hand with treating every person with dignity and respect. We hold all teams, and all leaders, to this commitment. We’re looking forward to extending our culture of proactive inclusion to the great teams across Activision Blizzard."
Not a done deal
While the deal has been approved by the boards of both Microsoft and Activision, the deal is still "subject to customary closing conditions and completion of regulatory review," as Microsoft puts it. The sheer size of the merger might also merit review by the Federal Trade Commission, which could raise antitrust concerns over the proposed merger. That said, Microsoft said in an investor call Tuesday morning that the merger would only make it the No. 3 gaming company worldwide by revenue, behind both Tencent and Sony.
The deal isn't expected to close until Microsoft's 2023 fiscal year, which starts on July 1. The two companies will continue to operate separately until then.
This is a breaking story that will be updated as developments warrant.