Here I was stretching after a hard day at work and my brain suddenly thought of seeing what memes were revolving around. Scrolling through social media, however, the general populous was screaming and losing their minds, and finally, figuring out the root of the excitement I saw Phil Spencer, CEO of Microsoft gaming happily announcing their extension of gaming platform by purchasing Activision blizzard.
To the average consumers very casual into gaming, one might question the excitement around this acquisition, but Activision Blizzard has been around since the advent of gaming and makes some of the most iconic franchises to grace our gaming systems.
You can consider “Call of Duty”, the largest gaming franchise in the world, or overwatch, and Microsoft wanted a piece of the pie. What we didn’t know was that Microsoft needed the entire pie which they bought for a massive 68.7 billion dollars. let’s dig into the fact of Microsoft buying Activision blizzard.
The Cost for Microsoft to Buy Activision Blizzard
To put things into perspective, the annual budget of a developing country such as Bangladesh is only 3.5 to 5 billion dollars. The entire budget of the most technically advanced piece of machinery, the super hydron collider, is 4.75 billion dollars. What Microsoft did change the gaming industry forever.
The Deal between Microsoft and Activision Blizzard
Microsoft just completed the biggest acquisition within the gaming industry. The deal, once fully realized, will sharply increase Microsoft’s already impressive studio lineup. They will have iconic franchises such as call of duty, Diablo alongside DOOM, Wolfenstein, and Minecraft.
Reports suggest that going through with this merger will boost the tech giant’s gaming revenue in third place, just behind Sony and Tencent. As of now, at the tail end of 2021, the earnings call stated that Tencent leads with 29 billion dollars, Sony with around 22 billion, and Microsoft at around 13 billion. After this acquisition, Microsoft is set to gain a huge boost to 21.9 billion dollars, overtaking Nintendo is positioned at third.
This Acquisition is also a Change within Microsoft’s Infrastructure
An acquisition like this is a direct sign of how Microsoft is being molded under Satya Nadella’s leadership who built Microsoft into the second-largest company a powerhouse in business computing and a rising giant in video games.
That is not to say that this deal is all sunshine and roses, lawyers suggest that this deal entails significant complications. Shares have been down by 30% ever since California regulators filed a lawsuit against the company in July over sexual harassment and gender-pay disparity amongst Activision blizzard’s 10,000 employees.
The Dark side of Microsoft’s Decision to buy Blizzard
This is a bit of sad news as the story is a case of “the villain gets away without deserved punishment”. A trend is all too common in this industry. Despite the massive fall in stock prices, the acquisition jumped Activision shares in premarket trading. Wall Street Journal reports that the prices ended at 82.31 USD, gaining 26% and effectively erasing all the backlash Activision blizzard deserved.
A plus point to the lawsuit is that Activision CEO, Bobby Kotick is said to leave after the company completes full integration and after the deal closes, the company will directly report to Phil Spencer, the CEO of Microsoft gaming.
However, when asked, Mr. Kotick danced around the question and stated that he will be there as long as he is needed for the thorough merger.
Mr. Kotick and its board of directors were under scrutiny from all sides due to workplace issues, namely sexual misconduct. Wall Street Journal reported that about a fifth of all the employees signed petitions to force Kotick out of the office and Mr. Spencer said that Microsoft was re-evaluating their connections with Activision blizzard.
Microsoft has approached Activision in November, and one can speculate this acquisition made Activision make several changes in recent months that Mr. Kotick has said are intended to make it a welcoming and inclusive workplace, including a zero-tolerance harassment policy and an end to mandatory arbitration for harassment and discrimination claims.
On Monday, they stated they have either fired or disciplined more than 80 employees since July to drive their efforts on restructuring the company.
Microsoft’s history of Buying Other Companies
This is not the first time Microsoft flexed in a “historical” acquisition. They bought LinkedIn for 26 billion in 2016, Nuance for 16 billion, Zenimax Media for 8.1 billion, and more often than not, their acquisitions pan out with Microsoft reporting that Linkedin has finally churned out over 10 billion dollars annually in profit.
This deal can be seen as the tech giant capitalizing on the recent boom in gaming thanks to the pandemic as well as their push into cloud gaming and the rise of a virtual world known as the metaverse where people can play, work and shop across different platforms using digital avatars.
Microsoft has been largely successful with their acquisitions as they prefer a “hands-off approach” to allow their talent to foster. Of course, not all work according to plan as they stumbled in their acquisition of TikTok from Chinese parent company ByteDance Ltd. Due to the former US President Donald Trump threatening to ban the social media platform over security reasons.
Microsoft doesn’t seem to end this spree anytime soon and Mr. Spencer has consistently stated that they are always on the lookout to add new talent to their Xbox ecosystem. It is no surprise that Microsoft’s gaming subscription service is a big reason behind these acquisitions. Considered the “Netflix” of gaming, Microsoft calls this the Xbox Game Pass and it now houses over 25 million subscriptions since its launch 5 years ago.
Finally, going back to the Activision blizzard, their stocks continued to increase consistently during the pandemic until the lawsuit in July. Since then, Activision had agreed to settle a two-year-long probe of sexual harassment claims by the Equal Employment Opportunity Commission for $18 million which is pending a judge’s approval.
On top of this, Mr. Kotick was apparently in the loop about all the misconducts circling the workplaces but failed to report to the board. It also detailed misconduct allegations against Mr. Kotick, including when an assistant complained in 2006 that he had threatened in a voice mail to have her killed.
Putting out tinfoil hats on
With all this information still digesting, we can speculate that the world is slowly transitioning into a subscription model and the green giant wants to be at the forefront of this era. We can also consider their rivalry with Sony about the dominance over the gaming market. For years, the Japanese tech company has enjoyed its lead in this industry and Microsoft is looking to change that.