Microsoft is paying roughly $70 billion for Activision Blizzard, the maker of Candy Crush and Call of Duty, in a transaction that will instantly make it a larger video-game company than Nintendo, while also raising concerns about possible anti-competitive implications.
Microsoft, the maker of the Xbox gaming system, will become one of the world’s top video game firms as a result of the all-cash $68.7 billion transactions. It will also help it compete with tech rivals like Meta, formerly Facebook, in developing immersive virtual worlds for business and play.
If the deal passes regulatory approval in the United States and Europe in the coming months, it could be one of the largest tech mergers ever. Dell paid $60 billion for EMC, a data storage company, in 2016.
Accusations of wrongdoing and unfair pay have dogged Activision for months. In a conference call with investors on Tuesday, Microsoft CEO Satya Nadella addressed the problem.
“Our organization’s culture is my top focus,” Nadella said, adding that “it’s vital for Activision Blizzard to press forward” on its workplace culture promises.
Last year, Activision reported that the company was under investigation by the Securities and Exchange Commission (SEC) for workplace discrimination accusations, and in September, it settled claims brought by US labor regulators. In July, the state of California filed a lawsuit against the Santa Monica-based Corporation, citing a “frat boy” culture that had created a “breeding ground for harassment and discrimination against women.”
Last year, Microsoft paid $7.5 billion for ZeniMax Media, the parent company of Bethesda Softworks, the video game publisher behind popular titles such as The Elder Scrolls, Doom, and Fallout. After purchasing Swedish gaming firm Mojang for $2.5 billion in 2014, Microsoft acquired the hit game Minecraft.
The recent acquisitions, according to the Redmond, Washington-based tech giant, would help bolster its Xbox Gaming Pass game subscription service while also speeding up its plans for the metaverse, a collection of virtual worlds envisioned as the internet’s next generation. The prospect of Microsoft controlling so much game content raised questions about whether the company could restrict Activision games from competing consoles, despite Nadella’s assurance that the deal would allow people to play games “wherever, whenever, and however they want.” While Xbox already has its own game-making studio, the prospect of Microsoft controlling so much game content raised questions about whether the company could restrict Activision games from competing consoles.
According to Wedbush Securities analyst Daniel Ives, the acquisition would propel Microsoft beyond Nintendo as the world’s third-largest video game firm by revenue, after Sony and Chinese computer behemoth Tencent.
“Given their streaming ambitions and metaverse approach,” Ives said, “Microsoft needs to undertake an aggressive deal.” “They’re the only game in town that can pull off a deal of this magnitude with the other tech heavyweights who are under intense scrutiny.”
Antitrust regulators in the United States and Europe have been paying close attention to Meta, Google, Amazon, and Apple, but the Activision purchase is so large that it will almost certainly bring Microsoft under scrutiny, according to Ives. Because of a British antitrust inquiry, Microsoft’s proposed $16 billion acquisition of Massachusetts voice recognition company Nuance has already been delayed.
Because of its success as a cloud computing provider, Microsoft was able to make such a large all-cash acquisition of Activision. After years of focusing on business clients and products like the Office email suite and other work tools, Ives believes Microsoft’s unsuccessful 2020 bid to acquire social media startup TikTok “really whetted the hunger for Nadella to execute a huge consumer acquisition.”
Consumer advocacy groups were quick to criticize the agreement.
“The Federal Trade Commission and the Department of Justice should not allow this combination to go forward,” said Alex Harman, a competition policy advocate for Public citizens. “Rather than swallowing a competition, Microsoft should invest in new technology if it wants to gamble on the metaverse.'”
During her press briefing on Tuesday, White House press secretary Jen Psaki said nothing about Microsoft’s announcement, but she stressed the Biden administration’s recent actions to tighten enforcement against illegal and anticompetitive acquisitions.
Activision was founded in 1979 by former employees of Atari Inc. and has since created or purchased several of the most successful video games, including Pitfall in the 1980s, Guitar Hero, and the World of Warcraft franchise. Since 1991, Bobby Kotick, 59, has served as CEO.
The transaction is expected to finalize in Microsoft’s fiscal year 2023, which begins in July. Kotick will continue to lead the company as CEO, according to the statement. Following the completion of the transaction, the Activision business unit will report to Phil Spencer, who previously managed Microsoft’s Xbox division and will now lead Microsoft Gaming.
Following a series of incidents coming from charges of a poisonous workplace atmosphere, Kotick survived a number of senior shakeups at Activision last year. According to a shareholder lawsuit filed in August, the firm failed to inform investors that it was under investigation in California and that it had workplace culture issues that could lead to legal troubles.
In September, Activision and the Equal Employment Opportunity Commission reached an agreement to settle claims that had been the subject of a nearly three-year inquiry. Activision, according to the agency, failed to take meaningful action after employees complained about sexual harassment, discriminated against pregnant employees, and retaliated against whistleblowers, including by dismissing them.
Microsoft has also been looking into its own policies on sexual harassment and gender discrimination, launching an investigation last week in response to investor requests made at the company’s annual shareholders’ meeting in November. The business has pledged to produce a report later this year on how it handles harassment claims, including earlier complaints involving senior executives such as Bill Gates, the company’s co-founder.
Activision Blizzard Inc.’s shares rose 25% in a trade Tuesday, making up for losses in the six months since California’s discrimination complaint was filed, according to Wall Street. Microsoft’s stock has dropped by around 2%.
