Last week, Take-Two’s acquisition of Zynga was the largest announced acquisition in the video games industry. This week, Microsoft has eclipsed this with a near-$70 billion all-cash acquisition of Activision Blizzard. The ramifications are extensive: Microsoft has plentiful reasons to celebrate bringing in some of the most popular global IP and new mobile expertise through King. It also faces an extensive PR battle against Activision Blizzard’s culture of sexual abuse and harassment.
PocketGamer.biz asked leading industry voices in the mobile and games industry for their views on the acquisition, and what will follow.
Nambiar is speaking from a personal capacity, and his comments do not necessarily reflect those of EA.
After Take-Two bought Zynga, many predicted more consolidation early in 2022 - and here it is! The deal size is mind-blowing and easily will be the biggest splash of this year. These represent my own personal thoughts on the deal, but this basically combines Microsoft’s cloud infrastructure and platform position in gaming with a true competitive moat of some of the world’s most treasured gaming franchises.
This could take care of both present and future for Microsoft, giving them enough amazing content to build a metaverse that has a chance to become THE metaverse. Though Microsoft probably still need to make more gains on the social front to build the requisite long-term engagement and stickiness profile to truly come out on top.
It’s a bit of a shocker for the industry to see this happen, but the more you consider it the more it makes sense. My expectation is that this is something Microsoft have been chasing for sometime but it is Kotick’s weakened position from the sexual abuse allegations which has meant Microsoft could get it over the line with shareholders. It seemed a management change was inevitable.
Obviously a big boon for Game Pass on PC and console. But there’s also the mobile cloud streaming app on Android and iOS browser. Not unthinkable that Microsoft are considering adding in native games now too. Or at least more mobile first offerings. At the very least, using King’s portfolio to push mobile users to Xbox Game Pass is surface level smart. But I'm unsure of the audience crossover.
Where Candy Crush Saga is much more suitable is on Windows. Already pre-installed on Windows 10 back in 2015, I could see this avenue expanding for Microsoft and them offering a range of free-to-play mobile adaptations from King. Crash Bandicoot: On the Run! has shown that King can dip in to the ActiBlizz back catalog and make casual hits, so no longer constrained by Candy Crush.
John is co-founder of PR and marketing company Big Ideas Machine. Also an all-round nice guy...
It's a huge deal, and not just financially. Activision Blizzard is a huge business encompassing 30 studios and 10,000 staff. Incorporating that into Microsoft means we will see a much bigger restructuring of Microsoft around services and entertainment, and its Xbox business continues to transition into a subscription business and away from hardware.
I do wonder how the two cultures at the companies will fit together. And what does this mean for the ongoing lawsuit into allegations of sexual harrassment? As much as we can get excited by how this deal will affect the wider industry, this is a company that still has questions to answer about working practises under a CEO who is going to become a billionaire. I am sure that there are many Blizzard employees that are worried this deal will take attention away from their efforts to hold people in leadership roles to account.
As the owner of Minecraft, Microsoft was already a big player in the metaverse. The acquisition of Activision Blizzard might just make it the de facto leader. It fuses Microsoft's expertise in technology such as cloud computing with Activision's development capabilities across all platforms, not to mention player base of 400 million and Call of Duty and Overwatch esports leagues. It's an ideal platform from which Microsoft can launch its vision of the metaverse.
Activision Blizzard will have been evaluating how to continue to grow its business as the market shifts to an on-demand model, which is commonly underpinned by subscription monetisation alongside other models. The company probably doesn’t have the output to build its own direct-to-consumer subscription product and would also need to partner with third-party cloud service providers to support on-demand streaming. It has already signed a strategic deal with Google Cloud but building a commercially viable service remains a challenge. Microsoft and its Azure business solves this issue but also offers a more viable commercial structure to distribute Activision Blizzard content to a broader audience. There are obvious benefits to aligning itself to a platform company that is seeking to make it easier to reach more gamers.
Activision Blizzard’s content portfolio can be increasingly aligned to Microsoft’s B2B games services, tools, and technologies so there are substantial broader synergies here. For example, Activision Blizzard recently announced a strategic deal with Google Cloud and Ampere assumes this will be revisited in due course.
The acquisition also brings with it a troubled company culture, a large amount of misconduct allegations and an ongoing lawsuit faced by Activision. Microsoft has a hands-off approach to managing its games acquisitions, but this may be a case where closer oversight will be needed to make sure the cultural challenges are being effectively dealt with. Ampere expects Microsoft to be proactive in this regard
This deal gives Microsoft a gargantuan mobile audience straight out of the box. Historically, the beast from Redmond has found great success on console and PC via its Xbox brand. Now with King in its portfolio, it has the tremendous market opportunity to create native smartphone experiences, and perhaps deploy killer IP such as Halo on mobile screens.
Take-Two acquires Zynga in the biggest games industry deal of all time... Microsoft: hold my Green Tea Frappuccino.
The purchase of Activision Blizzard makes sense for a lot of reasons, with two in particular standing out. Firstly, Microsoft gets an enormous foothold in mobile gaming, which continues to be a key growth area, via titles such as Candy Crush and Call of Duty Mobile. Secondly, the dozens of titles, hundreds of developers and hundreds of millions of players it has acquired mean Microsoft is ideally placed to drive the emerging metaverse through Web2 and Web3 gaming content.
If this deal goes through Microsoft will substantially increase its share of the entertainment market, including mobile gaming and the metaverse. This is another example of a well-established tech giant expanding into the fastest-growing market segment.
Take-Two’s acquisition of Zynga for $12 billion was a jaw-dropper, but this is something else altogether. I don’t really have the words to describe just how big a $68.7 billion acquisition is, so I’ll stick with the points that do come to mind!
Firstly, Xbox could get exclusive access to franchises like Warcraft, Diablo, Overwatch, Call of Duty, and more. It’s pretty straightforward to assume that this alters the balance of power in Xbox’s rivalry with PlayStation, especially once these titles are made available for free on Game Pass.
Where it gets interesting is that Microsoft will also own mobile publisher King. If you look at the earnings numbers from Q2 2021, the King team (33 per cent) generated more revenue than Blizzard (23 per cent). Microsoft will be able to use King’s team to further build out their rich franchise portfolio, mirroring how King developed a mobile game for Crash Bandicoot that reached 27 million downloads just in two weeks. Just imagine Fallout’s Pip-boy or Doomguy in a similar runner!
This is an industry-changing deal with potentially seismic implications across PC and console, mobile gaming, cloud gaming and esports. It's an awesome moment for the gaming industry as a whole, cementing a massively strong start to the year after Take-Two's purchase of Zynga.
As well as being able to add iconic franchises to Game Pass, Microsoft now owns leading mobile publisher King Digital and esports org Major League Gaming. It's a frightening proposition for competitors if Microsoft can continue repairing Activision's company culture.