Everything about Microsoft's merger with Activision Blizzard – the process, details, and implications for the industry

Contents:

• How the acquisition took place
• What we learned about the industry
• What studios and franchises does Microsoft now own?
• How the deal will impact the industry

On October 13, Microsoft completed the acquisition of Activision Blizzard, marking the largest deal in the history of the gaming industry. The approval process lasted nearly two years, during which the corporation clashed with antitrust regulators and was forced to make certain concessions to secure approval for the deal. This acquisition will open new horizons for Microsoft in the video game industry and will expand their collection of popular franchises.

In this article, we will discuss the acquisition process, consider what information the public has received about the behind-the-scenes side of the gaming business, and analyze how the merger of the companies can affect the development of the gaming industry.

How the acquisition took place

On January 18, 2022, Microsoft announced the acquisition of Activision Blizzard for $68.7 billion. The corporation intends to complete the deal by June 30 of next year and has already announced its intention to integrate as many of this publisher's games as possible into its Game Pass subscription service. This strategic acquisition is aimed at expanding the platform's content and strengthening Microsoft's position in the video game market.

On April 1, 2022, four US senators asked the Federal Trade Commission (FTC) to review the merger deal. They expressed concerns that the merger could worsen employee rights issues at Activision Blizzard. The senators also considered the possibility of CEO Bobby Kotick leaving with a "golden parachute" amid scandals to be unacceptable. The FTC will become one of the main opponents of this deal.

On April 28, 2022, 98% of Activision Blizzard shareholders supported the sale of the company to Microsoft. However, a number of analysts have expressed doubts about the possibility of antitrust regulators approving this deal. Questions about competitiveness and the impact on the video game market remain in the spotlight, which could influence the further steps of both companies.

On July 6, 2022, the UK Competition and Markets Authority (CMA) initiated an investigation into the merger. The main goal of this investigation is to determine whether the combination of the companies will harm competition in the market and the interests of consumers. The CMA seeks to ensure fair conditions for all market participants and prevent potential negative consequences for the economic environment.

In August 2022, Saudi Arabia's antitrust authority was the first to approve the deal, followed by similar decisions by representatives of dozens of other countries. This comes amid growing disputes between Microsoft and Sony over the Call of Duty series. The Japanese company expresses concerns that this series of shooters could become exclusive to Xbox, and the merger itself will have a negative impact on the gaming industry.

On September 15, 2022, the British regulator CMA announced an extension of its investigation into the deal between Microsoft and Activision Blizzard. The main reason for this decision was concerns that this merger could negatively affect the competitiveness of the video game market. In this context, Sony actively expresses its support for the CMA's actions, emphasizing the importance of protecting competition in the industry.

In October 2022, discussions around the Call of Duty series reach their climax. At the end of the month, Phil Spencer, head of Xbox, publicly confirms Microsoft's intention to continue publishing Call of Duty games on PlayStation as long as the platform exists. In November, the company offers competitors 10-year contracts to release the series on their devices, but Sony rejects this offer.

On November 8, 2022, the European Commission initiated an in-depth investigation into the deal in the gaming industry. The move was prompted by concerns that the deal could negatively impact competition in the video game market. This investigation is aimed at protecting player interests and maintaining a healthy market environment by preventing potential monopolization of the sector.

On December 8, 2022, the US Federal Trade Commission filed a lawsuit seeking to stop the merger. The main argument was the concern that Microsoft could make Activision Blizzard games exclusive, which in turn would limit the competitiveness of other gaming consoles.

On March 9, 2023, Activision Blizzard representatives published a statement online from PlayStation CEO Jim Ryan, made during a meeting with European Union regulators. In this statement, Ryan refused to sign the Call of Duty agreement, stating his intention to block the entire deal. The announcement highlights tensions between major gaming companies and regulators, and raises questions about the future of the Call of Duty franchise and its availability across multiple platforms.

On April 26, 2023, the CMA decided to block the merger between Microsoft and Activision Blizzard. The antitrust authority expressed concern not so much about the possible exclusivity of the Call of Duty game, but rather about the risks associated with Microsoft's monopolization of the cloud gaming market. Microsoft representatives criticized the CMA's actions and announced their intention to appeal.

On May 15, 2023, the European Union approved the deal after Microsoft presented 10-year agreements with other companies, including cloud services related to Activision Blizzard games. The EU concluded that it would be economically unfeasible for the corporation to stop publishing Call of Duty on the PlayStation platform. This decision underscores the importance of maintaining competitive conditions in the video game market and promotes the further development of partnerships in the industry.

On July 11, 2023, a judge ruled in favor of Microsoft in its lawsuit against the Federal Trade Commission (FTC). A hearing held in late June found that the FTC failed to convincingly prove that the deal would negatively impact competition in the gaming industry. The judge noted that while the merger could negatively impact PlayStation, overall, Call of Duty fans and other gamers would benefit from Microsoft's acquisition of Activision Blizzard. This decision highlights the positive aspects of the merger for consumers and opens new opportunities for the gaming market.

On July 16, 2023, Microsoft and Sony signed a 10-year distribution deal for Call of Duty. This agreement is an important step for both companies in the gaming industry and underscores their commitment to ensuring access to the popular franchise across multiple platforms. Such partnerships can significantly impact the competitiveness and development of games, as well as the satisfaction of players around the world.

On August 22, 2023, Microsoft took a step towards the CMA by announcing the sale of Activision Blizzard game streaming rights to Ubisoft. This move is aimed at persuading British antitrust authorities to reconsider their findings on Microsoft's potential monopoly in cloud gaming. The sale of streaming rights could allay regulators' concerns and facilitate the more active development of cloud gaming services.

On October 13, 2023, the CMA decided to approve the merger, and on the same day, Microsoft completed the deal. A process that lasted almost two years has come to an end.

Following the completion of the deal, the US Federal Trade Commission (FTC) announced its intention to continue the fight against the merger. The commission representatives argue that the acquisition of Activision Blizzard threatens competitiveness in the gaming industry. However, analysts warn that the appeals process could drag on for years, making it increasingly difficult for the FTC to achieve its goals with each passing month. Given current enforcement trends and the economic climate, the prospects for a successful conclusion to the litigation remain uncertain.

What We Learned About the Industry

The merger was an unexpected event that revealed many details about the behind-the-scenes workings of the gaming industry to the public. In particular, it provided an opportunity to learn about the current state of giants such as Sony and Microsoft, as well as their strategic plans for the future. Information about the internal policies and business strategies of these companies can significantly impact the video game market and player expectations.

The revelations began in the summer of 2022, when Microsoft accused Sony of using "blocking rights" to prevent its games from being added to Game Pass and other competing subscription platforms. Several months later, Microsoft also claimed that Sony blocked Xbox releases of highly anticipated games like the Final Fantasy 7 and Silent Hill 2 remakes, as well as Final Fantasy 16. These allegations highlight important aspects of the competitive struggle between the largest gaming companies and are of interest to gamers and analysts monitoring the market. Microsoft noted that Xbox significantly lags behind PlayStation in the gaming market, both in terms of console sales and exclusive games. Furthermore, the company stated that Xbox ranks last among all gaming devices. This highlights Xbox's current difficulties in competing with PlayStation, which continues to dominate the video game market.

In June 2023, Phil Spencer, the head of Xbox, said that the company "lost the console war", since its share of the gaming device market was only 16%. During communication with regulators, Microsoft representatives emphasized that the gaming division was significantly lagging behind competitors such as PlayStation and Nintendo. They also noted that a merger with Activision Blizzard would improve competitiveness in the gaming market, which could lead to more diverse offerings for players and a stronger position for Xbox.

Information about other companies that Microsoft was considering acquiring has appeared online. These include Sega, Bungie, Supergiant Games and IO Interactive. In one of the 2020 emails, Phil Spencer openly discussed with colleagues the possibility of buying companies such as Nintendo or Valve. He emphasized that acquiring the Japanese company would be "one of the key events of his career." However, these discussions did not translate into actual deals.

An interesting aspect is the confidence of Xbox executives that their Series console is superior to the PlayStation 5. Phil Spencer, head of Xbox, claimed that Microsoft is ahead of Sony not only in the technical specifications of the new console but also in the services it offers. However, by mid-2022, he described the lack of major releases from Microsoft's internal studios as catastrophic. This highlights the importance of regular game releases to remain competitive in the industry.

In one of its documents, Microsoft indicated that the release of new The Xbox and PlayStation consoles could be released in 2028. This year is also mentioned in later court filings, supporting speculation about the possible timing of the next generation of gaming hardware.

On September 19, 2023, a significant leak of internal documents occurred as a result of a lawsuit. On this day, a release schedule for expected Bethesda games, dated July 2020, was published online. This leak attracted the attention of players and video game experts, as it revealed the company's future plans.

The document discusses remasters of Fallout 3 and The Elder Scrolls 4: Oblivion, as well as a new Doom game, Dishonored 3, a sequel to Ghostwire: Tokyo, and a number of unannounced projects under third-party licenses. It should be noted that since 2020, Microsoft may have made changes to its plans and canceled some of these games. This highlights the dynamic nature of the gaming industry and the need to keep an eye on new announcements and updates from developers.

A new leak mentions updated versions of the Xbox Series X and S consoles, as well as a new gamepad with haptic feedback. The document suggests minor hardware changes to the consoles, but this won't affect their performance. The updates could offer improved gaming experiences without sacrificing performance.

The new Xbox Series X will look like a smart speaker and will not feature a disc drive. The Xbox Series S will retain its original design. The new consoles are expected to be announced in the summer of 2024, with a planned release in the fall of that year. These changes may attract the attention of users focused on digital versions of games and compact solutions.

According to leaked documents, estimates have appeared The cost of adding new games to Microsoft's Game Pass service immediately after their release. For example, for LEGO Star Wars: The Skywalker Saga, the publisher could request a sum of $35 million. Meanwhile, the cost of adding Dying Light 2 was estimated at $50 million. These data highlight the importance of a strategic approach to choosing games for the subscription service and reveal the financial aspects of the interaction between publishers and platforms.

In the case of Star Wars Jedi: Survivor and Mortal Kombat 1, Microsoft believed that their publishers would not agree to a deal, since these were key releases for them. At the same time, Baldur's Gate 3, one of the most significant games of 2023, was valued at only 5 million, which came as a surprise to Larian CEO Swen Vincke. This situation highlights the importance of a strategic approach to valuation and deals in the gaming industry.

Microsoft does not publish information about the cost of adding games to Game Pass, so leaked documents are becoming the main source of data on this issue. These documents could provide valuable information for developers and players interested in the features and terms of the Game Pass partnership.

Phil Spencer commented on the leaked information later that day, noting that some of the data in the documents was already outdated. The Xbox team will announce its future plans when it is ready to provide up-to-date information.

What studios and franchises does Microsoft now own?

Before acquiring Activision Blizzard, Microsoft had a significant portfolio of gaming studios and franchises. Popular series under its ownership included Halo, Gears of War, and Forza, as well as iconic games such as The Elder Scrolls, Fallout, Minecraft, Fable, and Doom. With the recent acquisition of Activision Blizzard, this list has expanded significantly, strengthening Microsoft's position in the video game market and opening up new opportunities for content development and integration.

Microsoft gained control not only over legendary game series that attract hardcore players, but also over King's mobile franchises, including the popular and profitable Candy Crush. It's worth noting that the primary reason for this acquisition was the desire to strengthen its position in the mobile market, as King accounts for 31% of Activision Blizzard's quarterly revenue.

Microsoft has acquired several major game series, significantly expanding its portfolio. These series include well-known franchises such as Halo, Gears of War, and Forza. These games are not only popular among players but also have a significant impact on the gaming market. Thus, the acquisition of these series strengthens Microsoft's position in the video game industry and allows the company to offer a more diverse content offering to its users. Further development of these franchises is expected to contribute to the growth of popularity of Microsoft gaming platforms and attract new players.

• Call of Duty;
• Candy Crush;
• Crash Bandicoot;
• Diablo;
• Diamond Diaries Saga;
• Farm Heroes Saga;
• Guitar Hero;
• Hearthstone;
• Heroes of the Storm;
• Overwatch;
• Skylanders;
• Spyro the Dragon;
• StarCraft;
• Rebel Riders;
• Tony Hawk;
• Warcraft.

Some studios became part of Microsoft.

• Beenox (Spider-Man: Shattered Dimensions and other old games about Spider-Man);
• Blizzard and its divisions in different countries;
• Digital Legends (The Respawnables);
• High Moon Studios (Transformers series, Deadpool);
• Infinity Ward (Call of Duty: Modern Warfare sub-series);
• Radical Entertainment (Prototype duology, The Simpsons Hit and Run);
• Raven (Singularity, Wolfenstein 2009, X-Men Origins: Wolverine);
• Sledgehammer Games (Call of Duty: Vanguard, WWII, Advanced Warfare);
• Toys for Bob (Crash Bandicoot N. Sane Trilogy, Spyro Reignated Trilogy);
• Treyarch (Call of Duty: Black Ops sub-series);
• Activision Support Studios;
• King and its divisions (Candy Crush Saga).

Such a portfolio provides Microsoft with significant opportunities not only to support well-known game series, but also to revive forgotten franchises. This could lead to increased interest from players and a wider audience, which in turn will have a positive impact on the company's image and its position in the video game market.

Activision Blizzard CEO Bobby Kotick previously claimed that cooperation with Microsoft will allow the company to create more remakes of classic games. He also hinted that a new version of Guitar Hero is in development. However, representatives of Microsoft and Xbox have not yet revealed their plans in this regard.

How the deal will affect the industry

The merger of Microsoft and Activision Blizzard will lead to significant changes in the gaming industry, the consequences of which will be felt in both the short and long term. This is an unprecedented deal, and even analytics professionals have difficulty predicting its impact. However, some key aspects are already worth paying attention to. The merger is likely to change the way games are developed and distributed, and will also affect the competitive landscape in the industry. It's important to keep an eye on any new initiatives and changes that may arise from this merger, as they could impact the future of gaming.

Activision Blizzard games will be available on Game Pass on consoles and PC. New titles like Diablo 4 and Call of Duty: Modern Warfare 3 are expected to arrive in 2024, although specific dates have not yet been confirmed. Some journalists speculate that a number of older games could be added to the service's library as early as 2023.

Call of Duty will remain available on PlayStation for at least the next 10 years. This issue became a key point of discussion during the regulators' investigation. Microsoft confirmed that it does not plan to make the series exclusive to its platform, having reached an agreement not only with Sony but also with Nintendo. The Call of Duty series has been absent from Nintendo consoles for many years, and the games' return to this platform could attract new players.

Future Call of Duty games will likely be added to Game Pass on the day of their release. This will allow Microsoft to attract franchise fans to a subscription on Xbox or PC instead of purchasing games for $70 on competitors' consoles. This approach could significantly increase the popularity of Game Pass and create additional opportunities for players, providing access to new releases without the need for a large financial investment. Microsoft continues to develop Game Pass, focusing on attracting users from various platforms to its ecosystem. The company's gaming division strives not simply to sell Xbox consoles, but to build a sustainable business based on the subscription service. Activision Blizzard's game library will undoubtedly be a key element in increasing the popularity of Game Pass, which has significant potential for growth. Currently, the service is second in subscribers to Sony's PlayStation Plus, with 41.7 million versus 50.1 million. These statistics include subscribers to both the budget and premium plans of both services. The development of Game Pass and the expansion of its content will help Microsoft strengthen its position in the gaming subscription market.

Microsoft may stop releasing Activision Blizzard games on PlayStation in future, as the current agreement only covers the Call of Duty series. This situation is similar to what happened with Bethesda games after the acquisition of the company by Microsoft. For example, titles like Starfield and Redfall were not released on the PS5 console. This may mean that PlayStation players will not be able to enjoy new projects from Activision Blizzard in the future unless the agreement is renegotiated.

Games from Microsoft's internal studios will be available on third-party cloud services. The corporation signed a ten-year agreement with NVIDIA to integrate its games into the GeForce Now platform, which has already entered into force. In addition, Microsoft has entered into partnerships with cloud providers Ubitus and Boosteroid. Ubisoft will also receive the right to stream Microsoft games, and they will be available through the Ubisoft+ Multi Access subscription. These steps strengthen Microsoft's position in the gaming market and expand the availability of content for players.

Bobby Kotick will step down as CEO of Activision Blizzard on January 1, 2024. Since his appointment in 1991, the company has significantly increased its market capitalization, which has grown from a few million dollars to 70 billion. Despite his achievements, Kotick's reputation has suffered due to scandals in recent years related to employee rights violations at Activision Blizzard. However, it cannot be ignored that he has remained a key figure in the gaming industry for over 30 years.

In 2024, Microsoft plans to launch its own app store for iOS and Android platforms. This move is aimed at increasing competition in the mobile segment, which will allow the company to more actively develop its mobile games, such as Candy Crush Saga and Call of Duty Mobile, which are already in its portfolio. Phil Spencer emphasizes the importance of the mobile market and its potential for growth, making this initiative key to Microsoft's future in the mobile space.

Analysts are confident that the trend of acquisitions in the gaming industry will continue. For example, they do not rule out the possibility of further acquisitions by Sony, despite the recent purchase of Bungie, the studio known for the Destiny series. However, experts warn against expecting Sony to pursue acquisitions of major publishers like Take-Two, the owner of the popular GTA series.

The merger of Microsoft and Activision Blizzard raises many questions. Will the new structure and management be able to integrate the studios and establish the production of successful blockbusters beyond Call of Duty? Will the Game Pass service justify its cost by covering the development costs of games of varying sizes? Will Sony consider creating its own Call of Duty competitor to prepare for the potential departure of the series from the PlayStation platform in 2033? These questions remain relevant for the video game industry and require careful analysis.

Experts unanimously agree that the acquisition of Activision Blizzard significantly strengthens Microsoft's position in the gaming market. This acquisition opens up new opportunities for the company to influence the development of the gaming industry and allows it to set its own terms.