What I, a Microsoft employee, feel about the Microsoft acquisition of Activision Blizzard
Exciting is not the word to describe my feeling.
This morning, Microsoft announced the $68.7 billion acquisition for Activision Blizzard, short for AB in the following. It is astonishing news for the gaming industry, especially when AB has recently been under heavy accusations of sexual misconduct.
Does Microsoft pay too much?
The acquisition value is $96/share, with a 45% premium compared to the January 14th Activision Blizzard stock price. People might think Microsoft is paying a very high price.
According to AB’s 2020 annual financial statement, it could generate $2.25Billion operating cash flow. For 2021’s report, we expect it to reach at least $2.5 Billion. Let’s assume the annual cash flow as the rental fee; Microsoft pays about 330 months of rental for the company price. It is much better than the current Seattle east side’s house market, where people spend more than 440 months' worth of the rental for a property.
Suppose you and I know that it’s not good to keep too much cash during the heavy inflation period when we are talking about thousand or the most thousands of dollars. Consider it in tens of billions. Microsoft needs to find its way to spend those cash for its new growth point.
If you could manage it properly, buying another established company is a much better investment target than real estate. A company could grow, be creative, and provide you surprise for further growth acceleration, especially when it is at a strategically important area.
What could be Activision Blizzard’s position in Microsoft’s roadmap?
Even though people keep talking about metaverse for this acquisition, I will only think about the traditional business.
- Extend the XBox Game Pass Offering
With current AB’s gaming catalog, such as Call-of-Duty, Overwatch, World of Warcraft, and Diablo, it will improve the already strong XBox Game pass’s offering. If you know Netflix’s story, you might be aware of what could be possible for a similar story in the Gaming industry. That is what Microsoft is trying to do.
Similarly, to online streaming as Netflix, with XBox online, you could stream your video playing as well. With XBox’s more than 30 individual studios, they would further strengthen their gaming and content creation position. I could feel the ambition and exciting future for XBox Game Pass.
2. Game distribution ambitious
Satya complains that the distribution channel on Apple Store or Android Google Play Store is taking a more significant share than the content creator. He thinks it is unfair. Microsoft has cut their own Microsoft Store’s distribution share from 20% to 12% last year.
Microsoft shakes up PC gaming by reducing Windows store cut to just 12 percent — The Verge
I do not know how Microsoft would solve the conflict in the Mobile market, but I feel they must be thinking creatively to over-turn the tide.
With Microsoft being the 3rd biggest gaming company after Tencent and Sony, it would better negotiate with Apple and Google.
3. XBox Online
As Satya and Phil mentioned in their conference call, people will start to realize the excitement and impact of this deal when they could play Diablo on XBox Online.
I experience the XBox online personally. It is not perfect, but as a casual gamer, it is an excellent choice to test different games quickly. I hate the game installation and the mess left over when I finish playing. So XBox online is a good choice.
If more people start to feel similar, more will join the XBox Game Pass. Eventually, a community would begin to emerge. Developers would come and develop for that platform. Practically, it would be another game distribution channel.
And this channel does not have Apple Store or Android Google Play Store in the middle.
What does this acquisition to gamers?
We have to admit that sexual misconduct is a severe issue for Activision Blizzard. It dramatically impacts its reputation and employees’ morale and creativity. You will find the evidence from the recent Blizzard game development progress.
On the other side, Microsoft has an apparent goal and strong company culture to be inclusive, safe, and growth mindset. As a longtime Microsoft employee, I am confident of claiming that Microsoft respects every employee and provides a safe, inclusive, and diversified environment for all people to work on their passion.
With Microsoft’s culture starting to influence Activision Blizzard and its deep financial pocket, Blizzard could regain its reputation of only producing great games and never compromising.
Summary
I am not only excited about Microsoft’s recent acquisition of Activision Blizzard. I also think this is an excellent investment for Microsoft’s long-term growth. As gamers, we expect more great games coming from Microsoft shortly.
Acclimatation: I am a Microsoft employee but do not work for XBox, or any related gaming business. All of the following descriptions are based on public information.
