Microsoft is buying powerhouse video game company Activision Blizzard in a deal valued at $68.7 billion. This is Microsoft biggest acquisition yet and far in excess of the $26 billion the company paid to acquire LinkedIn back in 2016.
The acquisition, announced on Tuesday, would catapult the company into a leading spot in the $175 billion gaming industry. Games on virtually every kind of device, from bulky consoles to smartphones, have gained even greater popularity during the pandemic. Technology companies are swarming around the industry, looking for a bigger share of attention and money from the world’s three billion gamers.
In an industry driven by big franchises, Activision makes some of the most popular titles like “Warcraft,” “Diablo,” “Overwatch,” “Call of Duty” and “Candy Crush,” in addition to global eSports activities through Major League Gaming.
Bobby Kotick will continue to serve as CEO of Activision Blizzard, and once the deal closes, the Activision Blizzard business will report to Phil Spencer, CEO, Microsoft Gaming.
“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” said Satya Nadella, chairman and CEO, Microsoft. “We’re investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all.”
“Players everywhere love Activision Blizzard games, and we believe the creative teams have their best work in front of them,” said Phil Spencer, CEO, Microsoft Gaming. “Together we will build a future where people can play the games they want, virtually anywhere they want.”
Microsoft is valued at more than $2.3 trillion, second only to Apple. The takeover of Activision would make Microsoft the world’s third-largest gaming company by revenue, behind Tencent and Sony, the company said. Microsoft now makes Xbox consoles and owns studios that produce hits like Minecraft.
The acquisition also bolsters Microsoft’s Game Pass portfolio with plans to launch Activision Blizzard games into Xbox Game Pass, which has over 25 million subscribers. When asked whether Activision games like Call of Duty would become exclusive to Xbox, Mr. Spencer would say only that “our goal is to allow the content to reach as many players as possible.”
Microsoft has been looking for ways to spend its immense cash reserve — more than $130 billion — to expand its consumer business. It has looked at acquiring the booming social network TikTok and the popular chat app Discord.
Activision Blizzard´s mobile business represents a significant presence and opportunity for Microsoft as the company will be looking to solidify it efforts in mobile gaming. Mobile is the largest segment in gaming, with nearly 95% of all players globally enjoying games on mobile. The biggest video games are largely found on smartphones and major publishers have been spending a lot of money over the last few years to get into that space. This month, Take Two – the company behind NBA 2K and Grand Theft Auto – acquired Zynga for almost $13 billion. Activision spent $5.9 billion on Candy Crush creator King in 2016, creating opportunities for audiences to experience their games on mobile devices, consoles and personal computers. During their most recent quarterly earnings statement, Activision revealed that King was it’s highest grossing division, earning $652 million in net revenue for Q3 of 2021. The deal is expected to close in fiscal year 2023.