By Dina Bass and Cecilia D’Anastasio | Bloomberg
Microsoft Corp. completed its $69 billion purchase of Santa Monica-based Activision Blizzard after a nearly two-year fight with global regulators threatened to scuttle the deal.
The biggest-ever acquisition in the video game industry gives the maker of Xbox consoles a more formidable position against rivals, vaulting it from fifth to third place globally, behind Tencent Holdings Ltd. and Sony Group Corp. The acquisition is a stunning turnaround after Microsoft executives underestimated the magnitude and longevity of antitrust objections, forcing the software giant to seek a three-month extension of the deal’s expiration period from Activision.
The US Federal Trade Commission, which lost an attempt to block the transaction in court, continues to pursue legal action in its own administrative hearing. That could still force the two companies to unwind the deal if the commission is successful.
The UK’s Competition and Markets Authority announced on Friday that it had approved the deal after accepting a restructuring plan involving selling some gaming rights to French publisher Ubisoft Entertainment SA. The regulator was concerned about preserving competition in the nascent market for games streamed via the cloud.
Microsoft’s gaming chief Phil Spencer’s work from here may prove even more challenging. The deal provides Spencer the cornerstone for a plan to boost the company’s lagging mobile games business. Among Activision’s titles is the universally popular Candy Crush and its spinoffs. Yet the delay means Microsoft has fallen even further behind in that space amid a contraction in the over-saturated sector.
The company remains in a standoff with Apple Inc. over access to its app store. In 2020, Microsoft President Brad Smith criticized Apple’s terms, which include a 30% cut of developers’ revenue and restrictions on cloud gaming. After Fortnite maker Epic Games Inc. sued Apple alleging anti-competitive practices, it seemed that company’s walled garden might finally open. Epic has struggled to gain wins in court, however. And Apple’s App Store is still inhospitable to Microsoft’s cloud gaming service, which iOS users have to access through a mobile browser.
Other parts of the gaming landscape have shifted since the Activision deal was first announced in January 2022. The metaverse, a persistent online world where consumers would play games and shop, hasn’t turned out to be as big a commercial opportunity as many in the industry believed. That business was identified as a key driver for the acquisition when it was announced.
The delays also meant Microsoft can only now begin the process of reforming Activision’s culture in the ways the company wants to see. While Microsoft has traditionally taken a hands-off approach to the gaming studios it acquires, it may be more involved this time. Fans have often complained about some of Activision’s business decisions, such as crowding the market with Tony Hawk’s Pro Skater and Guitar Hero releases that ended up cheapening the franchises. Fans have also said the company’s beloved StarCraft series has lacked resources because it’s less of a money-earner than other games.
Microsoft said in its announcement that it planned to make the games library available on Game Pass, its cloud-streaming service.
Activision CEO Bobby Kotick has drawn criticism for his handling of harassment complaints at the company. In 2021, California’s Civil Rights Department sued Activision for fostering a “frat boy” culture. Since then, the company has appointed an officer to oversee diversity, equity and inclusion, named a head of inclusive game design and released a report on the company’s progress on workplace issues.
Microsoft has also pledged to remain neutral on employee unionization after Activision had challenged efforts to organize. In January, workers at Microsoft’s ZeniMax video game unit joined the Communications Workers of America. Microsoft recognized the union immediately.
“We are intentional about inclusion in everything we do at Xbox,” Spencer said in a blog post on Friday, Oct. 13, “from our team to the products we make and the stories we tell, to the way our players interact and engage as a wider gaming community.”
In an email to staff, Spencer said Kotick would stay on as chief executive of Activision Blizzard through the end of the year, reporting to him.
The deal had faced vocal opposition from PlayStation console maker Sony. That company’s video games chief, Jim Ryan, suggested that Microsoft could disadvantage competitors by selling them a less-than-adequate version its popular Call of Duty shooting game. In July, Microsoft and Sony penned a 10-year deal that would keep future Call of Duty entries on PlayStation consoles. Ryan told staff in late September he would retire from Sony in March.
The UK regulators had previously vetoed the deal, saying it could result in higher prices, fewer choices and less innovation for gamers. The new agreement means Microsoft can’t limit access to Activision’s key content to its own cloud gaming service or withhold those games from rivals, the regulator said.
Founded in 1979, Activision is home to some of the most popular game franchises in the world, including Overwatch, World of Warcraft and Crash Bandicoot. Call of Duty alone has sold more than 425 million units and brought in more than $30 billion in revenue before the most recent installment last year.