As a veteran tech and gaming industry analyst, I unpack the momentous implications of Microsoft‘s $68.7 billion bid to purchase Activision Blizzard. Providing you an expert guide through the forces propelling this deal forward despite intense backlash.
The Stakes and Scrutiny Around This Power Play
Microsoft sent shockwaves in January 2022 announcing plans to acquire Activision Blizzard – the scandal-plagued yet formidable gaming juggernaut behind Call of Duty, World of Craft and more blockbuster franchises.
This deal carries tremendous stakes for industry dominance and the future of interactive entertainment. With regulators and competitors like Sony fiercely opposing the merger, many expect Microsoft‘s historic bid to fall through.
Yet recent signals suggest approval may now be more likely than initially predicted. We analyze why.
Why Microsoft Coveted Activision‘s Gaming Crown Jewels
Activision Blizzard earned over $8.8 billion in 2021, making it one of the largest video game holding companies globally. But the publisher has faced recent talent exoduses, PR crises around discrimination and harassment allegations, and pressure from shareholders.
Meanwhile, Microsoft has craved more exclusive, must-have gaming franchises to drive adoption of Xbox consoles and its popular Game Pass video game subscription service.
Acquiring Activision plugs major IP gaps for Microsoft – chief among those gains being full ownership of Call of Duty, one of gaming‘s most lucrative series.
With Call of Duty annually generating over $3 billion for Activision, Microsoft covets integrating these releases into its Xbox and subscription ecosystem. Game Pass now boasts over 25 million subscribers – leverage likely to expand greatly with these megapopular titles added to its libraries.
"When we think about strategy going forward, it‘s really about delivering great exclusive games for our Xbox customers…as well as driving subscriber growth on services like Game Pass." – Phil Spencer, CEO of Microsoft Gaming
The Regulatory Maze Threatening Approval
Given the deal hands Microsoft control of many top-earning titles alongside its Windows and Azure cloud ecosystems, global regulators are investigating whether it will unfairly suppress competition.
The UK competition agency worries acquisition of the "Call of Duty" franchise specifically could damage rival console and subscription services by restricting access.
The FTC opened an in-depth probe centered on whether Microsoft could influence pricing, release scheduling and distribution to sabotage competitors like Sony‘s PlayStation.
| Regions Reviewing Deal | Main Risks Under Scrutiny |
|---|---|
| United States | Reduced market competition |
| United Kingdom | Limited title availability |
| European Union | Price inflation from bundled services |
| China | Data privacy and security |
However, Microsoft contends the deal encourages industry innovation by making more games accessible through cloud streaming and its subscription model.
Clearing the Approval Hurdle – With Guardrails
The FTC was initially predicted to sue blocking the merger. But its bipartisan committee now appears split 2-2, likely permitting the acquisition to squeeze through by July 2023 if Microsoft formalizes concessions.
To date, Microsoft has already publicly committed to:
- Releasing new Call of Duty titles on PlayStation for several more years
- Expanding Game Pass and future titles to Nintendo‘s console
- Continuing to distribute Call of Duty games on Steam
I expect amplified pressure on Microsoft for additional contractual guarantees around pricing, release timing, alternative distribution options and even potential divestiture of less critical Activision businesses.
These good faith provisions may finally appease regulators – albeit with tight restrictions curtailing Microsoft‘s ability to take full, exclusive advantage of acquired IP like Call of Duty.
"Our acquisition will bring Call of Duty to more gamers and more platforms than ever before...We‘ve committed to Sony that we will also make Call of Duty available on PlayStation beyond the existing agreement."
*Satya Nadella
CEO, Microsoft*Without further concessions, US and EU antitrust decisions hang in the balance as regulators debate limitations that would still enable this industry-reshaping consolidation.
Bracing For Aftershocks Across Gaming
If approved under select constraints, Microsoft would still emerge enormously strengthened by adding Activision‘s equip of development talent and rich intellectual property lode to its entertainment empire.
Call of Duty integration with Xbox networks and services promises tremendous upside expanding the platform‘s appeal – yet likely at costs to player choice and innovation long-term judging from past video game mergers aftermaths.
I anticipate lingering efforts from both Sony and Activision workers to derail proceedings even at this late stage. However, with global social and political winds shifting to favor big tech regulation, Microsoft successors may one day rue this dramatic expansion play.
For now, both video game fans and industry peers remain rapt observers of forces determining whether Activision Blizzard‘s reign passes into Microsoft‘s impatient hands – and at what final cost compromising full ownership.
