Microsoft has officially closed its landmark $68.7 billion deal to acquire Activision Blizzard on January 13th, 2023. This acquisition, Microsoft’s largest to date, marks a monumental shift in the gaming industry and cements Microsoft’s ambition to become a gaming powerhouse.
The deal has been closely watched by industry insiders and regulators worldwide. Microsoft faced scrutiny from competition watchdogs like the US’s Federal Trade Commission (FTC) and the UK’s Competition and Markets Authority (CMA). However, after making concessions related to Call of Duty’s availability on PlayStation and addressing antitrust concerns around cloud gaming rights, Microsoft eventually secured all necessary approvals.
For gamers, this deal unlocks tremendous potential. Activision Blizzard’s legendary franchises like Call of Duty, World of Warcraft, Overwatch, and Diablo will now fall under Xbox Game Studios. Many of these fan-favorite titles will likely be added to Microsoft’s Netflix-style Game Pass service.
Phil Spencer, CEO of Microsoft Gaming, expressed his excitement about the acquisition in an announcement post:
“As one team, we’ll learn, innovate, and continue to deliver on our promise to bring the joy and community of gaming to more people. We’ll do this in a culture that strives to empower everyone to do their best work, where all people are welcome, and is centered on our ongoing commitment of Gaming for Everyone.”
The Road to Approval Wasn’t Smooth
Microsoft announced its intent to buy Activision Blizzard on January 18th, 2022. The tech giant was betting big on gaming by offering to pay $95 per share in an all-cash deal then valued at $68.7 billion.
This price represented a 45% premium over Activision Blizzard’s share price at the time. Bobby Kotick would remain CEO during a transitional period.
The deal instantly made waves by potentially making Microsoft the third-largest gaming company by revenue behind Tencent and Sony. However, securing approvals would prove challenging.
The FTC Steps In
In the US, the FTC moved to block the transaction over concerns that it would suppress competition. The agency filed a lawsuit in December 2022 and sought a preliminary injunction from the court.
The FTC argued that owning blockbuster franchises like Call of Duty would give Microsoft an unfair advantage over rivals. Call of Duty games generate billions in annual revenues.
Microsoft contended that the deal was pro-competitive and would benefit players by making more games accessible through Game Pass. The tech company also claimed the FTC’s stance contradicted its own past positions on acquisitions.
Judge Approves Microsoft’s Appeal
The acquisition cleared its biggest hurdle in August 2023 when Judge Dabney L. Friedrich denied the FTC’s request for a preliminary injunction. This allowed Microsoft to proceed with the merger while the FTC’s antitrust case continued.
In her ruling, Judge Friedrich determined that the FTC had failed to substantiate its claims about how Microsoft could influence competition through Call of Duty. She concluded that the potential harm to Microsoft outweighed the risks to competition.
The FTC is still appealing this decision even after the deal’s completion. However, the denial of the preliminary injunction was a huge win for Microsoft’s legal team.
Activision Games Coming to Game Pass
With the Activision Blizzard deal now closed, Microsoft is working quickly to fulfill its promise of bringing these games into its subscription ecosystems.
CEO Phil Spencer confirmed that beloved Activision, Blizzard, and King franchises will start landing on Game Pass across platforms in the coming months. Titles like Overwatch, Diablo, and Call of Duty are likely to appear soon.
This will significantly boost the value proposition of Game Pass and provide access to AAA blockbusters on day one for subscribers. Game Pass now has over 25 million members across Xbox consoles, PCs, and the cloud.
Microsoft Adds Major Firepower to Its Studios
The sheer volume of intellectual property Microsoft just acquired is staggering. Activision Blizzard boasts a library of iconic, multi-billion dollar franchises.
Adding these powerhouse studios gives Microsoft serious ammunition in the arms race for gaming content. All in all, the deal nets Microsoft an additional:
- 10 game development studios
- Nearly 9,000 more employees
- Culture-defining series like Guitar Hero, Skylanders, and more
With studios like Infinity Ward, Blizzard, and King under its wing, Microsoft morphs into a true publishing juggernaut. This lays the foundation for Xbox Game Studios to unleash a bold lineup of exclusive content.
Analysts see Microsoft’s first-party portfolio as a key advantage over rivals in the next console generation. Expanding its creative resources through acquisitions helps fuel its content engine.
The Future of Call of Duty on PlayStation
Call of Duty availability on PlayStation systems was a major contention point raised by Sony and regulators. The shooter franchise drives billions in revenues annually across platforms.
To address concerns over pulling Call of Duty from PlayStation, Microsoft made a landmark 10-year commitment to Sony. The deal ensures new Call of Duty titles will continue launching on PlayStation consoles through October 2033.
Microsoft Gaming CEO Phil Spencer emphasized that Call of Duty will remain on PlayStation so gamers can play together across console ecosystems. This 10-year covenant helped appease competition bodies scrutinizing the merger.
Cloud Gaming Concessions Secure UK Approval
The CMA emerged as the primary regulatory rival outside of the US, with the FTC serving as Microsoft’s major hurdle domestically. Because of concerns that Microsoft would utilize Activision Blizzard games to stifle competitors in the emerging cloud gaming sector, the UK authority finally decided to prohibit the transaction.
Microsoft consented to a complicated package of behavioral remedies relating to cloud streaming rights in order to appease the CMA and European Commission. Included in this is a ten-year license agreement that enables Ubisoft to sell Activision Blizzard games as part of its Ubisoft+ subscription service.
The concessions were successful since soon after unveiling the Ubisoft deal, Microsoft announced that the CMA had given the transaction the go-ahead. Microsoft was able to cross the finish line internationally with the hurdles to cloud gaming removed.
Mobile Gaming Upside
Although the Activision Blizzard purchase mostly focused on the effects on console gaming, it also strategically strengthens Microsoft’s position in mobile.
Microsoft will now have control over the wildly popular Candy Crush brand after adding Activision’s collection. Leading mobile publisher King is a division of Activision. Over 240 million people are active each month on Candy Crush.
King’s library is owned by Microsoft, which provides it with important intellectual property and experience to increase the Xbox mobile capabilities. Activision Blizzard boosts Microsoft’s position in this quickly expanding sector, where mobile gaming offers a $90 billion+ market opportunity.
Effectively Doubling Down on Gaming
Microsoft’s 2021 acquisition of ZeniMax Media, the parent company of Bethesda, for $7.5 billion has already changed how people view gaming. This agreement expanded Xbox’s first-party library to include beloved brands like Doom, Fallout, Elder Scrolls, Wolfenstein, and others.
Now, the significant acquisition of Activision Blizzard essentially doubles down on Microsoft’s gaming goals. It solidifies Microsoft’s position as a leading publisher and the value of Game Pass for gamers.
With the gaming arms race still going strong, this agreement prepares the ground for a content battle with Sony. additional significantly, the addition of the creative teams and assets from Activision Blizzard provides Microsoft additional material with which to continue to excite players for years to come.
