Since last year, Activision Blizzard has been mired in scandal, its share price plummeting and its CEO’s job on the line. Now, all of a sudden, the game developer and publisher is subject to the biggest takeover in the industry’s history.
What has happened? Microsoft has agreed to buy Activision Blizzard for $68.7 billion in cash. It will leave Microsoft as the third-largest company in gaming, after China’s Tencent and Sony (in terms of revenue).
Can you put that price tag in perspective? This is a mega-deal: it will be the largest acquisition in Microsoft’s history. The company is paying $95 a share, around 45% above Activision Blizzard’s stock price before the announcement.
Financially, the deal is on a par with Disney’s acquisition of 21st Century Fox for $71.3B in 2019. For comparison, Disney paid just over $15B for Pixar, Marvel, and Lucasfilm combined, unadjusted for inflation.
What’s in it for Microsoft? The company already has a big presence in gaming, thanks to the Xbox. Through Activision Blizzard, it will get a library of major franchises, including Call of Duty, Diablo, Overwatch, and Warcraft. This will make it even more competitive against Sony’s Playstation and others, across console gaming but also mobile, PC, cloud, and the metaverse. It will also get Activision’s subsidiary King, which produces mobile games like the Candy Crush franchise.
That old buzzword … Microsoft has already entered the metaverse arena, and it sees the Activision Blizzard deal as another big step in this direction. As chairman and CEO Satya Nadella put it, “Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms.”
Isn’t Activision Blizzard in the middle of a scandal? Yes: it has faced lawsuits, employee fury, and condemnations from other companies over widespread allegations of sexism and harassment. Its stock has dropped, making the buyout cheaper for Microsoft. Controversially, embattled CEO Bobby Kotick will remain in his role after the acquisition.
Has Microsoft addressed these problems? Not directly, although Microsoft Gaming CEO Phil Spencer — who previously criticized Activision Blizzard — wrote in a blog post announcing the acquisition, “We deeply value individual studio cultures. We also believe that creative success and autonomy go hand-in-hand with treating every person with dignity and respect. We hold all teams, and all leaders, to this commitment.”
When will the deal be finalized? It is expected to close in Microsoft’s fiscal year 2023, which ends in June 2023. But it has to be approved by regulators and Activision Blizzard shareholders first. Regulatory scrutiny will likely be intense, as politicians have been speaking out increasingly loudly against the power of tech giants.