When tech giant becomes gaming giant: Microsoft buys Call of Duty maker Activision Blizzard for a record £51bn
Microsoft snapped up Call of Duty maker Activision Blizzard this afternoon for a record $68.7bn (£50.6bn) in the biggest takeover for the gaming industry.
The deal is the latest – and the biggest – game designer to be bought by the tech giant as it looks to expand its games and consoles offering.
Assuming the deal is a success, it will also make Microsoft the third-largest gaming company by revenue, just behind Tencent and Sony.
The move towers above its acquisition of LinkedIn back in 2016 for $26bn (£19bn), as well as tech mega deals, like Salesforce snapping up Slack in 2020 for $27.7bn (£20.4bn) and the previous record deal of Dell buying EMC in 2015 for $67bn (£49bn).
The Activision deal includes iconic franchises, including Warcraft and Candy Crush, as well as its global eSports activities through Major League Gaming.
For gamers, it crucially means that titles will now come under Microsoft’s Game Pass, allowing subscribers free access and opening the games up to a new audience.
With Activision Blizzard’s near 400 million monthly active players across 190 countries, Microsoft chairman Satya Nadella said that gaming would play “a key role in the development of metaverse platforms” for the firm.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, praised the move yesterday afternoon and said: “Microsoft is already the go-to provider of must-have software, so tacking on a gaming arm is a stroke of genius from a cross-selling potential standpoint.”
“The likes of Netflix have already said they’d like to foray into gaming themselves, but Microsoft has come out swinging with today’s rather generous offer, which would make Microsoft the third largest gaming company in the world”, she added.
Michael Gartenberg, tech analyst, and ex Apple director, echoed this point and told City PM: “It [the deal] gives Microsoft access to a huge catalogue of exclusive titles for Xbox and allows them to move further into mobile gaming which moves them beyond the PC and console.”
Both Gartenberg and Lund-Yates suggested that execution risk is still a factor to consider and the deal marks a whole new territory for Microsoft’s business model.
However, Mike Proulx, research director at Forrester, highlighted that whilst this is a whole new space for the tech giant, he said: “Microsoft is now holding a number of important cards in the developing metaverse: back-end infrastructure, devices, and now an experience platform.”
In turn, this may stand it in good stead when competing with the likes of Facebook’s Meta when building its metaverse world for customers.
Despite the huge opportunity for both companies, the massive elephant in the room remains the sexual harassment cases brought against Activision Blizzard over the past year.
Last summer, the videogame publisher was sued for promoting a culture of “constant sexual harassment” in the US, climaxing in a $18m (£13m) settlement.
Nonetheless, Wall Street seemed unphased by this backdrop yesterday afternoon and shares rocketed up to 30 per cent to around $82.7 following the announcement.
The offer means Activision shareholders would receive $95 per share, a 45.3 per cent premium to the share price before the deal was announced.
Victoria Scholar, Head of Investment at interactive investor pointed out the fact that the stock has not rallied the offer price yet shows how antitrust concerns lurk behind the mega deal.