Microsoft’s Acquisition of Activision Blizzard: It’s not NOT About the Metaverse
Last week, Microsoft announced their plans to acquire Activision Blizzard, a global leader in game development whose most famous titles include Call of Duty and Candy Crush. If the deal goes through, it is set to be the largest all-cash acquisition in the history of gaming at $68.7 billion. Microsoft stated this deal is intended to accelerate their gaming business across all platforms and provide “building blocks” for the metaverse — the speculative, fully immersive future of the internet enabled by augmented and virtual reality.
When the news broke last Tuesday morning, it shocked gamers and industry insiders alike. Social media was soon abuzz with reactions and speculations as to the true motivations behind this deal.
So why is Microsoft really buying Activision Blizzard? Let’s explore three possibilities:
- Banking on the metaverse
- Capitalizing on a good deal
- Buying up talent
1. They’re banking on the metaverse
Microsoft has been forthright about their intention to be a major player in the metaverse. In the acquisition announcement, Microsoft chairman and CEO Satya Nadella stated that gaming “will play a key role in the development of metaverse platforms.” It makes sense that many of those reporting on this deal comment on its proximity to Facebook’s rebranding to Meta and note the amplified efforts of tech giants like Apple and Google in developing AR & VR solutions. Reuters called this deal a “$69 billion metaverse bet,” a reaction to other “global technology giants [staking] their claims to a virtual future.”
I think it’s reasonable to assume Microsoft is hedging their bets that the metaverse will explode in coming years. After all, virtual reality gaming is more popular and accessible than ever. Just take Meta’s Oculus Quest 2 as evidence: with a price point starting at $300 USD and more than 250 games currently available, it is taking virtual reality gaming from niche to normal. Its accessibility is how Meta sold nearly 13 million Oculus VR headsets in 2021. Plus, the global pandemic showed people how much we need engaging ways to socialize with friends and loved ones remotely. This convergence of consumer-friendly VR tech and shifting cultural standards is setting the stage for the metaverse boom.
This deal could certainly give Microsoft a big piece of that pie. Players of Activision Blizzard games account for around 13% of the 3.1 billion video game players worldwide. Gaining control over their IP would make Microsoft’s corner of the metaverse much more appealing to consumers. Plus, it gives them the opportunity to reinvent some of the world’s most beloved titles. Imagine playing a totally immersive, 3D version of Candy Crush with your mom, or jamming on a virtual stage with your college friends in Guitar Hero — even if you live oceans away from them now.
2. They’re capitalizing on a good deal
Even with the giant price tag of almost $70 billion, the purchase of a top studio like Activision Blizzard is still a gosh darn good deal for Microsoft. It would have cost them much more a year ago, but since then, Activision Blizzard’s stock price had fallen almost 30%. For a decades-old creator of some of the world’s most-played content, $70 billion really is a good deal, especially when you consider that’s only about 3% of the size of Microsoft.
What could this acquisition mean for Microsoft’s gaming business? There are the obvious benefits of absorbing a major competitor, such as gaining market position and consuming titles that contributed to more than $2 billion of net revenue in 2021. But is there more to it?
Is it an exclusivity play? For years, Sony has been needling Microsoft with exclusive titles that help them bolster their own console sales and stay ahead in the market. Some gamers are concerned that Microsoft will make Activision Blizzard’s massive titles exclusive to Xbox and PC, which would put a damper on Sony’s sales. It may be a good short-term plan for Microsoft, but it doesn’t fit with the overall direction the industry is heading. More studios and game creators today want to create experiences for everyone, to play on anything, from anywhere — and gamers are clamoring for it.
More likely, this is a play to help increase sales of Game Pass, Microsoft’s game subscription services that gives players access to a library of games for a monthly fee. With the speculation of a Sony Game Pass coming to market later this year, the addition of these large titles being made available immediately on Game Pass could be a way to increase market share now.
3. They’re buying up top talent
Every game studio I talk to, regardless of size, identifies the same pain point: it is a huge headache to hire talent. That includes developers, testers, artists, animators, anyone. Even Bobby Kotick, current CEO at Activision Blizzard, has described difficulties in hiring the talent they would need for their dream projects. If Microsoft wants to continue to ascend in the gaming industry, buying up the top talent, including those in the massive mobile game sector, isn’t a bad way to do it.
In fact, taking on Activision’s workforce is especially smart since their skills can be applied outside of Microsoft’s gaming division. Let’s consider the metaverse again, and the assumption that it won’t be used just for gaming, but for work and socialization, too. Microsoft’s bread and butter has always been solutions that aid communication, collaboration, and productivity. With HoloLens, Microsoft is already using augmented reality to this end, albeit for a narrow market. The non-gaming portions of its metaverse will be created with the same tools, like game engines, that are used to make the games — and they’ll be created by the same people. Plus, with smart cross-team collaboration workflows and the right tools in place, they’ll be able to repurpose tons of digital assets, thereby capitalizing even more on a relatively modest gain in their workforce.
What does it all mean?
If gaming is the gateway to the metaverse, Microsoft is making sure their logo hangs over the archway. But they have big plans for their future in gaming, whether it includes the metaverse or not. This acquisition of Activision Blizzard is a savvy, strategic next move with many potential upsides. If it goes through, it will be exciting to see if Microsoft is able to realize Activision Blizzard’s full potential — and, later on, to see what they serve up in the metaverse.
