February 21, 2024

5 min

Video Game Industry

Juan Jimenez

Marketing Manager

What Happens After the Microsoft-Activision Blizzard Acquisition?

After almost one year, several high-profile court hearings and submissions, and raising the eyebrows of the industry and its audience alike on more than one occasion, the dust has finally settled. On October 13, 2023, the UK’s Competition and Markets Authority (CMA) finally authorised Microsoft’s acquisition of Activision Blizzard King, putting an ending line to the video game industry’s most expensive buyout of all time.

Valued at $69 billion, the deal between the hardware/software giant and one of the largest video game development companies by size and IPs brings an incommensurable advantage to Microsoft in the never-ending console war. Judging only by the sheer amount of IPs involved, not even Take-Two Interactive’s purchase of Zynga in January 2022 or Microsoft’s past acquisition of ZeniMax Media – owners of Bethesda Games Studios, id Software, Arkane Studios, and more – come even close to such an achievement.

It’s easy to downplay the importance of this as “Microsoft now owns Call of Duty”, and given how crucial the military first-person shooter series has been to Activision Blizzard’s success, we cannot fault anyone for thinking that. But at some point in 2024, Microsoft will also have direct input in other larger-than-life franchises, such as StarCraft, Warcraft, Overwatch, and Diablo.

And yes, they will even have some leeway in – of all games – Candy Crush Saga.

Does this sound like holding too much power in only one hand?

Probably, yes. But Microsoft still has a long way to go before this groundbreaking philosophical situation comes to fruition. Even after overcoming the regulations and anti-trust issues, there is much work to do before the Redmond-based company enjoys its new toys.

Have you given some thought to this lately? Then you have come to the right place.

It’s all about the logistics.

Microsoft completing its Activision Blizzard deal comes as great news after its latest financial report, which showed promising numbers for their cloud and content services – with a 13% increase in revenue thanks to Xbox Gaming Pass – but a small bump in their gaming hardware sales. With Sony steadily increasing its PlayStation 5 sales and the Nintendo Switch still reigning supreme in the sector, any benefit that boosts Xbox’s leading asset is welcome.

Implementing these benefits, however, is an entirely different matter, both because of the previous actions made by Microsoft to ensure the deal and the future compromises it will have to make to keep it moving forward.

To sweeten the deal for the CMA, Microsoft had to concede cloud and streaming rights for all Activision games outside the European Union to French gaming conglomerate Ubisoft for 15 years. This privilege opens a massive opportunity for the Assassin’s Creed developers to take advantage of Activision’s ever-increasing catalogue of games; nevertheless, it also makes things muddier in all other markets that were not initially apprehensive about Microsoft’s rising supremacy in cloud gaming services and might want to reconsider their position on this regard.

Also, the United States Federal Trade Commission (FTC) could resume its intent on bringing the deal down. Even though Microsoft saw a significant win in July – when a court ruled against the FTC’s restraining order pretensions on the acquisition and allowed regular operations between the two parties – the antitrust sentiment in the United States is quite strong inside the government, even more so with a current Democratic Party-ruled administration and a growing distaste for big tech and its usual proceedings.

And even then, we cannot forget the pink elephant in the room:

This agreement started amidst Activision Blizzard’s high-profile executive scandal last year when accusations of sexual harassment and abuse towards female workers hit mainstream media and caused an influential cultural upheaval in California, the company’s seat of power, that splashed to other video game studios and companies with similar indictments behind them.

ABK’s CEO, Bobby Kotick – whose resignation was demanded several times in the media and industry itself to sate the masses – will instead collaborate with Microsoft over the transition process, which, if finished by the end of the year, will net him approximately $400 million in company shares as a final retirement bonus and a “get out of jail” card. Undoubtedly not the ending which many people were expecting.

If Microsoft finds a successful solution to this riddle, then – and only then – the deal will be closed for good. But even then, the question remains:

What is Xbox going to do with such a golden gun?

With great power comes great responsibility.

It is essential to weigh that, to get the deal approved in several other territories, Microsoft had to make compromises related to the presence of Activision Blizzard’s IPs in other consoles. Not only did Microsoft have to close a deal with Nintendo – of all console developers – to put Call of Duty in the Switch and future consoles for ten years, but it also had to ensure other consoles would not get the axe on such valuable content.

Funnily enough, soon after the court ruling against the FTC’s reservations against the deal, Sony had to sign the same accord that, at least during Jim Ryan’s reign, was considered not good enough and a menace to the status quo. In another relatively frequent instance of the market regulating itself,

This kind of arrangement seemingly opens another window of opportunity where players could say that, by holding so many cherished franchises and games, Microsoft essentially established the basis for a non-exclusive world – by putting themselves in a corner where any attempt to lock down any of these valuable IPs on Xbox and PC would mean a step closer to monopoly territory.

But the big question, particularly as these contracts have a fixed duration, is how long they will stand afterwards.

The recent announcement that Bethesda’s Elder Scrolls VI – also a Microsoft property by now – could potentially miss a release on PlayStation consoles has raised an orange flag into how other franchises will behave further down the line. Likewise, Starfield being an Xbox and PC exclusive so far raises additional concerns about what of these promises Microsoft will hold from now on.

Another meaningful question is how effectively the newly acquired franchises from Activision Blizzard will weigh into Microsoft’s content-based strategy. Xbox has been lagging behind Sony and Nintendo regarding high-value, critically acclaimed first-party games for years. The acquisition of ZeniMax Media – one of its most substantial differentiating factors thus far – has proven to be a two-sided affair, with potential deal-breakers like Arkane’s Redfall and Bethesda’s Starfield not having the expected universal acclaim they would.

Nevertheless, by winning Activision Blizzard as a wholly-owned subsidiary, Microsoft will have an enormous list of advantages to increase its value in all gaming spaces.

By owning both the Microsoft Store and Battle.net, the company’s presence in the digital storefront market would put it in a better position to compete with Valve’s Steam and the Epic Games Store. It would also mean that Blizzard’s powerhouses, like World of Warcraft, StarCraft II, and Diablo IV, would be available in an additional channel, increasing their presence in the digital gaming space for both present and future franchises.

On the console front, Microsoft will likely use Activision’s classic franchises, such as Tony Hawk’s Pro Skater, Crash Bandicoot, King’s Quest, and Spyro, to further develop the all-encompassing Xbox Gaming Pass catalogue of games.

In the mobile gaming space, Microsoft will also hold the keys to King and their comprehensive portfolio of games, which includes Candy Crush Saga, Pet Rescue Saga, Farm Heroes Saga, and more. Considering the company has been wanting to expand to the mobile market since the development of Windows Phone, this is a thrilling fact to see evolve over the following months.

And the best part: Microsoft’s growing, more stable corporate culture might alleviate some of the issues that Activision Blizzard’s employees suffered previously. After all, Microsoft CEO Satya Nadella has personally committed to improving the culture across the board and has enlisted Xbox head Phil Spencer to ensure the transition process goes smoothly for ABK’s significant workforce.

If the acquisition makes Activision Blizzard’s offices a better workplace, it will be a sound, well-deserved victory for the people there.

Let us wish corporate overlords don’t mess things up all over again.

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