Microsoft is buying Activision-Blizzard
This is probably all over your news feed today. It is certainly all over mine. Microsoft (stock ticker: $MSFT) is buying Activision-Blizzard (stock ticker: $ATVI) for approximately $68.7 billion. You probably have some questions. Let’s try to tackle some of them, shall we?
Why would MSFT want to buy ATVI?
ATVI has a lot of assets and is currently “on sale” - the stock price had dropped from a high of $104 per share last year to $65 per share as of yesterday before the announcement. MSFT is paying $95/share to acquire ATVI, which is still something of a bargain considering that buyouts usually come at a hefty premium. ATVI holds some of the most valuable gaming IP in the world (Call of Duty, Warcraft, Starcraft, Diablo, Candy Crush, etc.) which is already valuable, but ATVI also holds a huge amount of institutional knowledge in several important fields like running massive live game services, running a massive network infrastructure that supports multiple games, and running and maintaining massive mobile games. Blizzard and King basically wrote the book on many of these topics - that kind of institutional knowledge is incredibly valuable.
What will this mean for the devs?
For those in the trenches, it won’t mean a huge change. Some of their practices and administration bits will change but the people who work at the project level will still continue to create game content, write game system code, create game assets, and so on. The majority of changes will likely happen at the level above those projects - the overall direction of the games division, project budgets, target platforms, approval process of new projects, etc. will be affected significantly by this change in ownership.
Currently, these kind of decisions are made with the goal gaining value for the shareholders directly. Because ATVI will become a part of a much larger organization like MSFT, such considerations will change. MSFT, for example, would be willing to take a hit in terms of sales and revenues for its ATVI subdivision by making the next round of Call of Duty games Xbox exclusive in order to serve the greater longer-term goal of strengthening its Xbox brand. This wouldn’t necessarily be as doable under the current org structure without MSFT giving ATVI a huge and hefty exclusivity contract, but would be very possible if MSFT owns ATVI. MSFT may want more games for its Gamepass. MSFT may want more mobile games. We can expect these kinds of large directional changes from an acquisition like this.
What will this mean for the non-devs?
Things get much more murky for the other initiatives that aren’t centered on game development. I don’t know how MSFT’s upper management feels about spending a lot of money on esports like Overwatch League. I don’t know how they feel about hosting a convention like Blizzcon. I do know that the previous decision-makers will now have people higher than them that they must answer to, and that may mean a significant change in direction.
Further, there’s now a lot of redundant systems and divisions between ATVI and MSFT. A lot of the internal infrastructure will need to be evaluated and possibly changed. For example, MSFT already has Azure, its own cloud computing services. If ATVI is not using Azure already, there will probably be a long-term initiative to migrate all of ATVI’s back end over to Azure in order to save money and align business goals. There will probably be merging/realigning of redundant business stuff like licensing, HR, legal, etc.
What will this mean for the ongoing discrimination and harassment lawsuits?
MSFT knows what they are buying. One of the reasons they are able to buy ATVI at the price they are is because of the past year of stock price drop. They must believe that these endemic issues are fixable. It also seems likely that those currently in the executive suite will probably exit the company with some kind of big payout. It may not feel good to know that Bobby Kotick and the rest of the current board will not get much punishment for their behavior in fostering a terrible environment, but he and those in the C-suite will likely no longer be making the big decisions on their own. They will be answering to Phil Spencer when the acquisition goes through, but it is much more likely that there is some kind of deal where they get some big stock payout that vests over time. They will probably step back from decision-making, collect their paychecks and stock options, and then quietly exit stage left.
What will this mean for the players?
I don’t think this will mean a huge change for players in terms of the games themselves. I think that the various esports initiatives and such may be affected, especially if MSFT leadership isn’t into esports. I think that this will likely mean a long term heavier emphasis on Gamepass and PC/Xbox gaming. I think PC gamers should feel good about the future. I think Playstation die-hards will feel a little bit sadder.
When will these changes start happening?
In the mid to longer term future, it seems likely that there will be more games exclusive to PC/Xbox/Game Pass, but that likely won’t happen until whatever is in development when the handover occurs finishes development. Most sources seem to expect this deal to complete around June of 2023, so what is likely to happen is that whatever projects are still in development in June of 2023 will be allowed to finish out, and whatever is green lit after then will be the first wave of MSFT-approved projects.
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