Microsoft To Buy Activision Blizzard For About $70 Billion

SEATTLE — Microsoft said Tuesday it plans to buy powerhouse but troubled video game company Activision Blizzard for around $70 billion, betting video games will become an increasingly central part of people’s digital lives.

The biggest blockbuster acquisition ever for Microsoft and the gaming world would have catapulted the company into a leading spot in a $175 billion industry that has been successful on just about every type of device, from major game consoles to mobile phones. reached even higher heights during the pandemic. Tech companies are swarming around the industry to get a bigger share of attention and money from the world’s three billion players.

In an industry driven by the blockbuster franchise, Activision makes some of the most popular titles, including Call of Duty and Candy Crush. Still, the company has been rocked by employee riots over sexual harassment and discrimination accusations in recent months.

The deal could also strengthen the company’s hand in the so-called deal. metadata store, the developing world of virtual and augmented reality. Metaverse is more of a buzzword than a thriving business right now, but it has attracted a huge amount of investment and talent. Facebook renamed its parent company to Meta late last year to underscore his commitment.

Whatever the metaverse, “the game will be at the forefront of making it mainstream,” said Phil Spencer, CEO of Microsoft’s gaming business. For now, he said, the acquisition is about acquiring a stronghold in mobile games and a studio that produces blockbuster games, where Microsoft is barely competing. He called Call of Duty “one of the greatest entertainment franchises on the planet.”

Federal regulators may raise concerns about the buyout as Democrats and Republicans seek to limit the power of tech giants. Microsoft is worth more than $2.3 trillion and is second only to Apple.

The industry is rapidly consolidating as it spends heavily on technology. The company said the acquisition of Activision would make Microsoft the world’s third-largest gaming company in terms of revenue, behind Tencent and Sony. Microsoft now makes Xbox consoles and has studios that produce hits like Minecraft.

One of the main drivers of deals, and one that may grab the attention of regulators, is the arms race for exclusive content. After locking down well-known franchises like Call of Duty, Microsoft may decide whether to make these games exclusive to their platform, meaning fans of these games will have to switch from Sony’s PlayStation console to Microsoft’s rival Xbox system.

When asked if Activision games will be Xbox exclusive, Mr Spencer simply said “our aim is to make sure the content reaches as many players as possible”.

After looking into acquiring fast-growing social network TikTok and popular chat app Discord, Microsoft is looking for ways to spend its massive cash reserves in excess of $130 billion to expand its consumer business.

At Activision, facing accusations that senior executives ignored sexual harassment and discrimination, Microsoft found a target under stress. The allegations weighed heavily on Activision, with its shares falling 27 percent since then. California sued the company on the subject in July.

Shares of the game maker rose nearly 30 percent in trading on Tuesday. Microsoft shares fell 2%.

The transaction could be seen as a victory for Activision’s long-time CEO Bobby Kotick, which some critics are trying to push for debate. Mr. Kotick negotiated a huge premium for investors – Microsoft pays $95 per share, which is only slightly more than the trading price before the scandal broke out, but roughly 45 percent above his company’s stock price before the announcement.

Mr Kotick declined to provide information on whether he would remain as CEO when the studio reported to Mr Spencer after the deal closed.

“Post close I will be available when needed to make sure we have the best integration,” Mr. Kotick said.

The controversy at Activision began last summer when a California employment agency sued the company over accusations of promoting a toxic workplace culture in which women are routinely sexually harassed and discriminated against. In the months that followed, employees staged protests, launched social media campaigns and called on executives to resign.

Several senior leaders at Activision have left, including J. Allen Brack, chairman of the Blizzard Entertainment subsidiary, and the company has committed $250 million to increase employee diversity and said it will strengthen its anti-harassment policies. But when Wall Street Journal He reported in November that Mr. Kotick had known about employee harassment allegations for years and in some cases failed to act. Calls for resignation increased.

Making a deal with Activision is a face-to-face thing for Microsoft, which in November questioned the company’s culture. In an email to Xbox employees reported by Bloomberg and confirmed by the company, Mr Spencer wrote in November that he was “disturbed and deeply disturbed by the appalling events and actions” at Activision. On Tuesday, he appeared with Mr Kotick to commend the deal, and Mr Kotick said he felt the two companies “have similar values ​​and think alike about our cultures”.

Mr Spencer said Microsoft had “sat down with Bobby and the team and looked at the plan they’ve implemented,” adding that the company culture has always been a work in progress. “We are very supportive of the progress he and the team are making.”

Current and former Activision employees who are leading efforts to reform the company’s culture did not consider the acquisition to lead to change in the short term, especially as the sale could face lengthy scrutiny by regulators.

Mr Spencer said it could take 12 to 18 months for the deal to close.

Jessica Gonzalez, a former Activision employee and one of the organizers of the ABetterABK activist movement, said: “We will continue to fight for improvement and emphasize the right representation of employees,” she said. “This doesn’t change anything.”

Gaming companies turning to cash are rapidly consolidating since the pandemic boosted the industry’s profits. The previous record for the largest merger in the games industry was broken last week when Take-Two Interactive, the creator of games like Grand Theft Auto, announced plans to acquire mobile game publisher Zynga for more than $11 billion.

Last year, Electronic Arts and Take-Two entered a bidding war for a racing game company, Codemasters – which eventually sold it to EA for $1.2 billion – and another one when Microsoft bought Zenimax Media and its game studios in 2020. made a splash. 7.5 billion dollars.

Activision itself was the product of Mr. Kotick’s serial deals that brought together smaller game studios for decades. Known for producing games for traditional game consoles at that time, Activision took shape in its current form. Combine with France’s Vivendi gaming unit To expand into multiplayer online games like World of Warcraft.

action later bought KingThe European gaming company behind Candy Crush to expand into mobile games.

Mr. Kotick described the deal as a calculation that Activision doesn’t have the tools to keep up with big tech companies like Google, Apple, Amazon and Tencent in the rapidly evolving gaming landscape.

“We realized it would be an increasingly competitive world with resources we didn’t have,” he said.

Although Microsoft owns the Xbox game console and the studios behind it Minecraft and Halo continued to focus heavily on enterprise users for software like Office 365, and specifically cloud computing business Azure, which competes with the likes of Amazon and Google.

Activision’s gaming efforts are facing delays between the latest Call of Duty release panned by gamers, and games like Diablo and Overwatch, which have seen key directors leave in recent months after the company’s scandals. Still, Activision remains highly profitable, reporting net income of $639 million in its most recent quarterly earnings report.

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