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Microsoft is Activision Blizzard for $69 billion. For those of you who play or follow video games – many of you – we really don’t need to say why this is a really big deal.
The rest of you may need some background information. Remember when Disney bought a majority of Rupert Murdoch’s Fox empire and officially kicked off a wave of consolidation in Hollywood? That’s it.
Maybe bigger: the deal size is about the same. The Microsoft deal valued Activision at about $69 billion, and Disney paid more than $70 billion for Fox’s movie studio and other assets. But the deal – if successful – is both horizontal and vertical, pairing Microsoft’s Xbox console business with one of the world’s most valuable gaming companies, which already owns Minecraft and Halo and other huge game franchises, which have big games like Call of. Mission, World of Warcraft and Candy Crush Saga.
While streaming TV shows and movies grab a lot of media attention, video games grab a lot of the attention of ordinary people: Microsoft says there are 3 billion gamers worldwide today, and says that number will reach 4.5 billion by 2030.
And if you want to get really fancy: If any version of the metaverse or virtual reality future we’ve heard of over the past few years becomes a reality, it’ll almost certainly be game-based. Maybe in the future you don’t want to wear goggles all day. But putting on a device and shooting at virtual strangers isn’t an easy task.
this is something Microsoft, not coincidentally, has been developing its own goggles, is tending to justify its transactions. “When we consider our vision for Metaverse, we believe there will not be a single, centralized Metaverse,” Microsoft CEO Satya Nadella said after announcing the deal on Tuesday.
You can also read the statement as a message Lina Khan, the chairman of the Federal Trade Commission, and other antitrust enforcers in the Biden administration: I know we seem to be gobbling up a lot of the gaming business, but don’t think of it as a consolidation of an important industry – think of it as Competing with Facebook in new industries. Competition is good, right?
The deal is sure to get a lot of attention in Washington, which has been focused on the big and small deals most of the tech industry does — but so far Microsoft has been largely isolated. (The irony, of course, is that Microsoft spent a long time battling federal antitrust charges over its web browser dominance two decades ago; the company avoided being forced to break up, but lost in the process. took most of the charm).
The deal has a $3 billion breakup fee — meaning Microsoft will have to pay Activision cash if the merger is blocked by regulators — which may seem like a lot of money to you and me, but for this It’s quite a small bean for this kind of transaction. Still, it should show that the two companies are confident in getting the job done. In filing a lawsuit with Washington regulators, you can expect Microsoft to argue that 1) its Xbox business is much smaller than Sony’s Playstation business, and 2) the future of gaming is about mobile, meaning Microsoft isn’t just competing with Sony, but also with Apple and Google.
These are good arguments, but we’ll see. Microsoft has also been moving away from its game console business — low-margin boxes that consumers buy for $300 or more, but tend not to be replaced often — to its Netflix-style subscription model called GamePass, where you pay monthly The company pays $15 and can then play its games on any kind of device.
Microsoft already has 25 million subscribers to the service. I don’t expect Microsoft to make most of Activision’s big games exclusively for GamePass — like movies and TV shows, games are the most valuable if they’re available to as many people as possible — but you certainly can See why Khan and her colleagues would want to poke this.
Also of concern: what happened to Activision’s leadership, which has been embroiled in a sexual misconduct scandal for the past year or so.Last fall, the Wall Street Journal reported that CEO Bobby Kotick didn’t tell his own board About an employee who said she was raped by a supervisor, and an out-of-court settlement that followed. Recently, Activision said it has “quit” after dozens of employees were investigated for harassment and other misconduct.
There is widespread speculation in the gaming industry that the scandals could cost Kotick his job and could lead to a sale of Activision. Now, Microsoft says Kotick will continue to run his company after the deal, but will report to Phil Spencer, who runs Microsoft’s gaming business.
It’s possible that Kotick will stick around indefinitely. But you don’t see people who run really big companies with very high salaries — Kotick made $154 million in 2020, making him the second-highest paid CEO in America that year — when they tell CEOs reporting person.
Again, all of this will only work if Microsoft has regulatory approval. A few years ago, this seemed simple enough—Washington allowed big tech companies to buy almost anything they wanted, but few paid attention. But a lot of people will care about this.Both because a lot of people play the game — hence the $69 billion price tag — and a smaller number of people very influential person Yes new doubt About making big tech bigger.
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