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It was a big week. Time to get caught up.
Last week was a big one for the videogame industry. In a deal that dwarfed all others before it (in the game business, anyway), Microsoft surprised the world with the announcement that it will acquire Activision Blizzard for a whopping $68.7 billion. The news came exactly two months after Microsoft Gaming CEO Phil Spencer described the sexual harassment and discrimination scandal at Activision Blizzard as «horrific,» and said Microsoft was «evaluating all aspects» of its relationship with the company.
The scale of the buyout is staggering: When completed, it will give Microsoft control of some of the biggest game series in the world, including Call of Duty, Warcraft, and Overwatch, and a massive backlog of older games. In conjunction with Microsoft’s purchase of Bethesda Softworks just over a year ago—a blockbuster deal in its own right, even though it was only for a small fraction of the Activision Blizzard price tag—it will make Microsoft the third-largest game company in the world by revenue.
It’s not a done deal, and Activision Blizzard comes with a lot of baggage that could complicate the regulatory approval process. But if it does go through—and the general consensus is that it will—then it could shake up the videogame industry in ways unlike we’ve ever seen before.
It was a heavy flurry of news stories over just a few days, so here’s a look at what we know about the deal so far, its implications, and how the industry is reacting:
A filing with the US Securities and Exchange Commission answered some basic questions about the impact of the buyout: That it «remains business as usual» with both companies operating independently until the deal is done, and that immediately layoffs aren’t anticipated. As for Kotick’s status, however, it said only that will be remain as CEO while things are wrapped up: «Once the deal closes, the Activision Blizzard business will report to Phil Spencer, CEO, Microsoft Gaming.»
Reaction from the industry was fast and furious. Microsoft executives were naturally upbeat—Xbox general manager Aaron Greenberg said he was «proud of the team we have here at Xbox/Microsoft—while the ABK Workers Alliance was more cautious:
We remain committed to fighting for workplace improvements and the rights of our employees regardless of who is financially in control of the company. (2/6)January 18, 2022
Game dev consultant Rami Ismail said that the deal solidifies Game Pass, already tremendously popular, as «the best deal in games for consumers,» while industry analyst Daniel Ahmad took note of Microsoft’s broader gaming strategy. Jon Erlichman of Bloomberg did some comparison work to give the acquisition scale:
Microsoft’s biggest acquisitions:Activision Blizzard: $68.7 billionLinkedin: $26.2 billionNuance: $19.7 billionSkype: $8.5 billionZeniMax: $7.5 billionGitHub: $7.5 bilionNokia phone unit: $7.2 billionaQuantive: $6.3 billionMojang (Minecraft): $2.5 billionJanuary 18, 2022
While Kotick’s post-acquisition status still hasn’t been confirmed, sources told the Wall Street Journal and Bloomberg that he’s expected to step down once the deal is closed. Kotick has expressed interest in stay on in some capacity, telling VentureBeat that having Phil Spencer as a new boss would an «an easy thing to do,» but he’s weighed down by a long history at the top of Activision Blizzard, during which ongoing workplace abuses were consistently ignored. Employees, investors, and even a political activist group have called for his removal.
The scope of the deal means it will be scrutinized carefully by regulatory bodies, and approval is not a done deal. That said, the general feeling is that it will be given the green light.
«Antitrust issues typically arise with horizontal mergers, where a company acquires a competitor, as these mergers limit competition in that particular market. For example, Microsoft buying Sony,» attorney Kellen Voyer, founder of Voyer Law, told PC Gamer. «Vertical mergers, where a company purchases a downstream company that provides a different function, such as one of its suppliers, may also attract antitrust review but the anticompetitive nature of the transaction is not as clear and there’s a better chance of passing review on this basis.»
Loup founder Gene Munster predicted something similar on CNBC’s Squawk Box program, saying that there will likely be «some drama» but that ultimately, the deal will get done.
One big worry among the PlayStation crew is that the deal could see the Call of Duty series become a console exclusive, especially since it’s already done that with Starfield and The Elder Scrolls 6. A few days after the deal was announced, however, Spencer soothed nerves—a little bit, anyway—by saying Microsoft has no immediate plans to take Call of Duty away from PlayStation.
«Had good calls this week with leaders at Sony,» he tweeted. «I confirmed our intent to honor all existing agreements upon acquisition of Activision Blizzard and our desire to keep Call of Duty on PlayStation. Sony is an important part of our industry, and we value our relationship.»
Had good calls this week with leaders at Sony. I confirmed our intent to honor all existing agreements upon acquisition of Activision Blizzard and our desire to keep Call of Duty on PlayStation. Sony is an important part of our industry, and we value our relationship.January 20, 2022
The carefully-worded statement was far from a rock-solid commitment and notably excluded any mention of other big Activision Blizzard franchises.
For some gaming old-timers, a more pressing question than Microsoft’s plans for Activision Blizzard’s biggest games is what it has in mind for the classics. On that front, the news is potentially better. «We’re hoping that we’ll be able to work with [Activision Blizzard studios] when the deal closes to make sure we have resources to work on franchises that I love from my childhood and that the teams really want to get,» Spencer told the Washington Post.
So, Tim Schafer heading up a Space Quest reboot? It’s not likely, but it’s possible, and that’s a tantalizing prospect.
Striking Raven Software QA workers voted to form a landmark union last week, supported by the ABK Workers Alliance and the Communications Workers of America. Dubbed the Game Workers Alliance, the union asked for immediate, voluntary recognition from Activision Blizzard, although it also noted that it could be formalized through the National Labor Relations Board even without management recognition.
We are proud to join CWA! https://t.co/ZoJH2qBHNq pic.twitter.com/hKGFhyhLusJanuary 21, 2022
The union formation wasn’t directly related to the acquisition, but it does introduce a variable that wasn’t present when Microsoft made the decision to buy, and Microsoft will have to work with it after the deal closes. On the upside, the Raven QA workers ended their strike today, as a show of good faith.
The World Bank, an international financial organization that provides loans and grants to poor countries, is not involved in the regulatory process, but even so World Bank president David Malpass does not approve of the deal.
«I was struck this morning by the Microsoft investment, $75 billion [actually $68.7 billion], in a videogaming company at a time when, to put it in perspective, the entire IDA20 commitment that we were just able to achieve in December was $24 billion spread over three years,» Malpass said during a Peterson Institute for International Economics virtual event [via Reuters]. «That’s $8 billion per year to 75 of the poorest countries. $8 billion, compared to a $75-billion, single-shot investment in a gaming company. And you have to wonder—wait a minute, is this the best allocation of capital?»
We can’t really comment on the deal from a global finance perspective, but we did put our heads together to come up with 28 exciting, intriguing possibilities that could emerge from Microsoft’s acquisition of Activision Blizzard once the deal closes. Clippy in Overwatch? Hey, you never know.
Andy has been gaming on PCs from the very beginning, starting as a youngster with text adventures and primitive action games on a cassette-based TRS80. From there he graduated to the glory days of Sierra Online adventures and Microprose sims, ran a local BBS, learned how to build PCs, and developed a longstanding love of RPGs, immersive sims, and shooters. He began writing videogame news in 2007 for The Escapist and somehow managed to avoid getting fired until 2014, when he joined the storied ranks of PC Gamer. He covers all aspects of the industry, from new game announcements and patch notes to legal disputes, Twitch beefs, esports, and Henry Cavill. Lots of Henry Cavill.
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