Back in the day, video game makers earned their money a quarter at a time, through coin slots at arcades in malls across America. How times have changed.
On Tuesday, Microsoft agreed to pay $70 billion in cash for gaming giant Activision Blizzard, asserting its weight in a highly competitive market that generated $155 billion in revenue in 2020 — more than the music and movie industries combined.
Microsoft is no stranger to gaming: since 2001, its Xbox consoles have gone head-to-head with Sony’s Playstation line in a battle of the hardware titans. But a market that once depended on the purchase of physical cartridges and discs is transitioning to streaming subscription services, just as music and television have. As a result, owning top notch content is becoming as important as producing top notch consoles.
That’s where Activision, which at $68.7 billion would be the biggest acquisition Microsoft has ever made, comes in. The merger would bring a stable of blockbuster games to Microsoft’s Xbox Game Pass streaming service, if it’s approved:
- Activision’s library includes “World of Warcraft,” “Call of Duty,” “Candy Crush,” and “Doom,” four wildly popular franchises to join Microsoft’s “Minecraft” and “Halo” series which have together made more than $10 billion.
- The scrutiny of Washington regulators — no doubt aware the deal would create the third-largest gaming company in the world, behind Tencent and Sony — could result in a long approval process, and Microsoft doesn’t expect the deal to close until 2023.
Bargain Bin: Activision has been dogged in recent months by a California government lawsuit alleging gender pay disparity and sexual harassment, something the SEC is also probing. While that means Microsoft may inherit cleaning up to do, it also may be getting a bargain: Activision shares have fallen 30% since the suit was filed in July.
Pay to Playstation: Activision games will remain on other platforms… for now. Microsoft pledged Tuesday to support all platforms on which Activision games are available. But if past is prologue, new releases from Activism brands could be exclusive to Microsoft’s Xbox and PC platforms.