Microsoft to Purchase Activision Blizzard in Blockbuster Deal

Source: Microsoft/Activision Blizzard

By Nikolai Perebeinos

On January 18th, 2022, Microsoft announced that it would be acquiring video game company Activision Blizzard for 68.7 billion dollars. It is the most expensive video game company acquisition in history. This purchase gives Microsoft ownership of several top-grossing video game franchises, including Call Of Duty, Warcraft, Diablo, Overwatch, and Candy Crush. Activision Blizzard’s revenue in 2020 was 8.09 billion dollars. This purchase will help Microsoft in its competition with Sony’s PlayStation, as well as other competitors in the video game market. Microsoft is also planning to enter the mobile game market, which is actively growing due to lockdowns and the rapidly increasing performance of smartphones. This purchase will also benefit Activision Blizzard in its competition in the videogame market, says Activision Blizzard CEO Bobby Kotick.  “And I would say one of the motivations that we had for a partnership with Microsoft is the recognition of it’s a, it’s a big market, but there’s enormous amount of competition, whether it’s Tencent to AGS resources that are extraordinary or global footprint or Sony, or Facebook or Amazon or Apple or Google or Netflix or Disney,” he said in an exclusive interview to CNBC. 

The troubled video game maker’s stock has decreased 13% in value over the last year and is $79.14 as of market closure on January 28th. Microsoft will acquire Activision at $95.00 per share, in an all-cash transaction with a total value of $68.7 billion.

This deal may also help Activision Blizzard in resolving its internal issues. The Activision Blizzard troubles are not limited to the oversaturated video game market. The dissatisfaction of players grows with Activision Blizzard’s attempts to increase profit. Many gamers are not happy with the active implementation of a pay-to-win financial strategy used by Activision that encourages players to spend additional money on the game they already purchased, bugs and issues with released games, failure to handle cheaters, adding unnecessary changes, and ignoring needs of players of their existing games such as Warcraft. The player base of Blizzard, which developed World of Warcraft and is a division of Activision Blizzard, decreased from 38 million monthly active players in the first quarter of 2018 to 26 million in the third quarter of 2021, according to Activision Blizzard’s financial results.

Another problem Activision Blizzard encountered was the toxic workplace and sexual harassment lawsuits. The company received over 700 misconduct reports, according to The Wall Street Journal. In July 2021, the company was sued by the California Department of Fair Employment after failing to respond to sexual harassment and discrimination towards female workers. Accusations include discrimination, sexual harassment, and women being denied promotions, raises, and equal pay. The company has already fired 37 employees related to sexual harassment incidents. Bobby Kotick told CNBC that “any issue of harassment or discrimination is something that I would take seriously and do. And like many companies today, we had some challenges, but we have worked through them.” Meanwhile, The Wall Street Journal claimed that Bobby Kotick knew about sexual harassment in his company but did not do anything about it before the scandal. 

It is not the first video game company acquisition for Microsoft. Previously, Microsoft purchased ZeniMax Media, the owner of multiple video game studios like Bethesda, for 8 billion dollars. With this purchase, Microsoft acquired ownership of many iconic video games, including The Elder Scrolls, Fallout, Starfield, Doom, Quake, Rage, Prey, and Wolfenstein. Microsoft has also previously acquired several companies including LinkedIn, Skype Technologies Telecommunication, GitHub, and Nokia’s mobile phones division. Microsoft’s rival on the video game market is the world’s largest video game company, Tencent Holdings. Tencent owns multiple video game companies, including Riot Games – creator of League of Legends – and owns shares of many video game companies, such as 40% share of Epic Games – creator Fortnite Battle Royal, Rocket League – 5% of Ubisoft, and 5% of already mentioned Activision Blizzard.