Microsoft Buys Activision Blizzard for Almost $70 Billion (Updated)

One of the biggest publishers in gaming is now part of one of tech’s biggest conglomerates. After being mired deep in scandal for the last seven months, Activision Blizzard has been acquired by Microsoft for $68.7 billion in an all-cash deal.

With the acquisition, Microsoft adds the Activision Blizzard group of developers and games to its vast and ever expanding portfolio of games and game studios. Included in this would be the legendary Blizzard Entertainment, the Call of Duty triumvirate of Infinity Ward, Sledgehammer Games and Treyarch, mobile heavyweight King and the venerable Toys for Bob, among many others.

This is the latest in a long line of recent acquisitions in the gaming space, especially by Microsoft. The green brand acquired ZeniMax media in 2020 which brought Bethesda and its subsidiaries into the Microsoft fold. There were also previous major purchases of larger independent studios such as Double Fine, inExile, Mojang, Obsidian and Rare. Outside of Microsoft, we’ve seen EA recently acquire Codemasters while Sony acquired a half-dozen independent developers in the last year along with EVO.

As noted in the announcement press release, Microsoft intends to add the Activision Blizzard library to the Microsoft Xbox Game Pass service. Xbox’s signature subscription service has, anecdotally, become the biggest value and most popular feature that Microsoft has. While other companies have tried to emulate Game Pass, such as EA’s EA Play subscription service, Microsoft’s is considered the hallmark of gaming subscription services and head and shoulders above the competition. Adding the Activision Blizzard library to the Xbox Game Pass catalogue will be a major boon for an already incredibly well-regarded service.

There is also the interesting question of what will happen to the upcoming library of Activision Blizzard games on other platforms. Currently, Activision has an ongoing relationship with PlayStation with timed and exclusive content for Call of Duty on PlayStation platforms as well as exclusivity windows for the latest Spyro the Dragon and Crash Bandicoot games. Presumably, when those deals expire, Activision games won’t give the content advantage to Sony’s platform.

We already know that Bethesda’s Starfield will be exclusive to Microsoft’s two platforms, the Xbox Series consoles and Windows PC. Xbox boss Phil Spencer strongly implied that The Elder Scrolls VI would be exclusive to Microsoft platforms. It is possible that upcoming games from Activision Blizzard could also be made exclusive to Microsoft’s gaming platforms. After all, Microsoft can use those games to drive sales of its products and services such as the Xbox consoles, Game Pass, Xbox Live and the Microsoft Store.

Conversely, exclusivity creates the risk of cutting out a large portion of the market. According to IGN, the PlayStation 5 is outselling the Xbox Series consoles by over 5 million units while the Nintendo Switch is has sold almost 80 million units more than the PS5. That cuts out a significant portion of the market, especially if the owners of those consoles don’t have gaming-capable Windows PCs or the latest Xbox consoles. While Microsoft would be able to keep a larger share of the revenue by not releasing gaming on Sony or Nintendo platforms and losing licensing costs to them to publish on their consoles, they limit the customer base that could be purchasing their games and spending on DLC or microtransactions. Of course, this assumes that one of Microsoft’s goals from the acquisition is game sales rather than increasing Game Pass subscriptions which still need one of Microsoft’s platforms to use.

But as Qui-Gon Jinn wisely said, there’s always a bigger fish. While Activision Blizzard is a massive company in the gaming space and this is an incredibly large purchase, the Wall Street Journal reports that even with the revenue from Activision Blizzard, Microsoft will still be only the third largest gaming company by revenue behind Tencent and Sony.

From the Activision Blizzard side, this sale to Microsoft provides much needed good news after an ongoing scandal. The California Department of Fair Employment and Housing launched a lawsuit against Activision Blizzard in July 2021 alleging sexual misconduct and discriminatory hiring and employment practices against women. This scandal had caused internal upheaval at the company and resulted in strained relationships with external partners such as content creators and even PlayStation. While the reasoning behind the acquisition has yet to be reported from Activision’s side, it’s entirely possible that the scandal played a part in Activision Blizzard shareholders wanting to sell so they could wash their hands of the controversy.

And what about the man who is the soon to be former CEO of Activision Blizzard? According to Investopedia, Bobby Kotick is the largest shareholder of Activision Blizzard owning 0.56% of the outstanding shares of the company. It doesn’t sound like much until you start doing the math. That only 0.56% of the $68.7 billion acquisition price is worth about $384,720,000. This is before any additional payouts that Kotick could be owed through his employment contract resulting from negotiating an acquisition and any retirement or pension bonuses as a result of leaving his position as CEO. While the acquisition price per share wasn’t announced in official channels, suffice to say, Mr. Kotick, who has been with Activision as CEO since 1991, is definitely getting some return on investment. For now, he remains CEO of Activision Blizzard until the deal closes and the company becomes part of Microsoft rather than operating independently.

It should be noted that the deal has not been closed and still requires regulatory approval. As such, while it is likely going to be completed, nothing is done until it’s actually done.

Update: After first posting, Mr. Kotick’s severance payments were reported. Termination due to a change in control of Activision Blizzard’s ownership would result in payments of just under $293 million. This would be in addition to the purchase of his shares by Microsoft and his compensation from serving as Activision Blizzard CEO until the deal closes.

It has also been reported that the deal will close during Microsoft’s 2023 fiscal year which runs between July 1, 2022, and June 30, 2023.

Sources: Bloomberg, IGN, Investopedia, PC Gamer, WSJ, Xbox


About Steve Murray

Steve is the founder and editor of The Lowdown Blog and et geekera. On The Lowdown Blog, he often writes about motorsports, hockey, politics and pop culture. Over on et geekera, Steve writes about geek interests and lifestyle. Steve is on Twitter at @TheSteveMurray.

Posted on January 18, 2022, in Games and tagged , , , . Bookmark the permalink. Leave a comment.

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