Microsoft To Acquire Gaming Firm Activision Blizzard For $US 68.7 billion. What Is Tech Titan's Real Ambition Behind The Acquisition?

In the biggest ever deal by the tech behemoth, Microsoft on Tuesday (Jan 18) announced that it is acquiring Activision Blizzard, a leader in game development and interactive entertainment content publisher, for $75 billion.

Microsoft will acquire Activision Blizzard for $95.00 per share, in an all-cash transaction valued at $68.7 billion, inclusive of gaming company’s $6.37 billion net cash. Bobby Kotick will continue to serve as CEO of Activision Blizzard and will report to Phil Spencer, CEO, Microsoft Gaming.

The deal, the biggest acquisition ever made in the video-game industry, will catapult Microsoft as world’s third-largest gaming company by revenue, behind Tencent and Sony. The acquisition will be biggest ever made by Microsoft, more than twice the size of a deal in 2016 to acquire LinkedIn, a social network, for $26 billion.

Activision Blizzard is the maker of hugely popular video games like “Warcraft,” “Diablo,” “Overwatch,” “Call of Duty” and “Candy Crush". It also runs global eSports activities through Major League Gaming. The company has studios around the world with nearly 10,000 employees and makes around $8 billion a year.

Ambition Behind Acquisition

The $200+ billion gaming industry is the largest and fastest-growing form of entertainment. In 2021 alone, the total number of video game releases was up 64% compared to 2020 and 51% of players in the U.S. reported spending more than 7 hours per week playing across console, PC and mobile. An estimated 3 billion people globally play games today, which is expected to grow to 4.5 billion by 2030.

While the tech titan has a formidable enterprise software and cloud computing businesses, it is still a relatively minor player in gaming industry and that too mostly through its Xbox unit. The deal will give Microsoft considerable foothold in the smartphone-gaming market, in which it has little footprint.

The deal will also help Microsoft bolster its cloud subscription portal Game Pass” that offers console and PC gamers access to a library of video games, which usually cost $40-60 each, for $10 a month. The gaming portal currently has 25 million subscribers.

"With Activision Blizzard’s nearly 400 million monthly active players in 190 countries and three billion-dollar franchises, this acquisition will make Game Pass one of the most compelling and diverse lineups of gaming content in the industry." Microsoft said in a statement.

“Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms,” said Satya Nadella, chairman and CEO, Microsoft on the acquisition.

“We’re investing deeply in world-class content, community and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive and accessible to all.” he added.

Activision Blizzard CEO Bobby Kotick said that his decision to partner with Microsoft was driven by increasing competition that needs investments in cloud computing, AI and machine learning, data analytics, and user interface and experience capabilities

"Facebook, Google, Tencent, NetEase, Amazon, Apple, Sony, Disney – and many more – have ambitions for their own gaming and metaverse initiatives. Established and emerging competitors see opportunity for virtual worlds filled with professionally produced content, user generated content and rich social connections."

Activision Blizzard's Recent Troubles

Activision Blizzard has been embroiled in to series of scandals including allegations of toxic culture, sexual harassment and horrific workplace conditions. The State Of California has filed a lawsuit against the gaming company over charges of \ sexual harassment and employment discrimination.