The Microsoft-Activision deal, explained

By Sammy Bovitz

The name “Activision Blizzard” may be new to you. But you’ve definitely heard of a few of the things they own: Call of Duty, Candy Crush, Diablo, Guitar Hero, World of Warcraft, Overwatch, Tony Hawk’s, and Crash Bandicoot. These are some of the most popular video game franchises in the world– Call of Duty alone has sold over 400 million copies– and are all owned by Activision Blizzard. 

In the other corner of the ring stands Microsoft, who for years has made a name for themselves in the gaming space with the Xbox. While Microsoft has never been number one in video games, they’ve remained a consistent and successful presence in the industry for two decades. However, their biggest shortcoming seemed to be their reliance on third-party developers to produce some of their most popular games, which led to a lack of compelling exclusive games on Xbox. But recently, that notion has been challenged, with Microsoft suddenly purchasing a bunch of studios. That all seemed to culminate with their acquisition of Bethesda–creators of the popular Fallout and Elder Scrolls series– for around $8 billion back in 2020. 

The third ingredient in this industry-shaking stew comes with the firestorm surrounding everything Activision-related. It’s no secret that Activision isn’t exactly employee-friendly, with titles like Call of Duty pumped out yearly at the expense of employees’ time, money, and health. But even worse is the lawsuit resulting from a two-year investigation into Activision Blizzard that was filed last summer. Among the horrifying accusations were several counts of sexual harassment and discrimination, as well as a second lawsuit that accused executives of hiding these problems in reports to shareholders. In response, Activision attempted to dismiss and downplay the allegations, leading to employee protests and further controversy.  Yet 2021’s Call of Duty Vanguard was still a massive success for the studio, as millions around the world voted with their wallets to ignore the company’s abuses. Vanguard was 2021’s best-selling game, edging out the number two spot, which belonged to… 2020’s Call of Duty Black Ops Cold War.

This firestorm of massive controversy clashing with high sales led to an industry-rollicking purchase. On January 18th, it was announced that Microsoft had purchased Activision Blizzard, and everything they own, for $68 billion. For comparison, Disney bought Lucasfilm and thus the Star Wars franchise back in 2013 for “just” $4 billion, or 17 times less than this massive purchase. Let’s take a look at what this means for the future of technology and the video game industry, assuming the deal closes as planned in 2023.

The two most popular shooting franchises ever– Call of Duty and Halo– are now owned by the same company.

First, let’s look again at those properties. Microsoft and the Xbox often fell short in the realm of compelling exclusive games and have relied largely on third-party games to move consoles. Sony’s PlayStation has God of War, Horizon, and Spider-Man, and Nintendo has Mario, Zelda, and Pokemon. For decades, Xbox didn’t have much more than Halo. It’s primarily because of this lack of exclusive games  that allowed PlayStation 4 to dominate the last generation of consoles. 

However, there are millions of players who would buy a console to exclusively play Call of Duty. Making one of the most successful franchises of all time an Xbox exclusive is monumental and will send earthquakes throughout the industry. That’s not to say the other franchises aren’t too shabby either. Diablo and Overwatch are massive properties that core console players can’t get enough of. Crash Bandicoot and Spyro are family-friendly platform games that will give a much-needed injection of variety to Xbox’s primarily mature and shooter-heavy game library. World of Warcraft and Candy Crush are properties for PC and mobile players respectively, but both will still gain massive returns on investment and make Microsoft an even bigger name in video games.

Then there’s Xbox Game Pass, Microsoft’s attempt to create the first true “Netflix of games”  by allowing players on Xbox and PCs to play their selection of games over the Internet for a monthly fee without being able to own them. Game Pass is easily the most robust of the game streaming services out there so far, and is easily one of the Xbox’s biggest selling points. Having Halo, Gears of War, Forza, Fallout, Doom, and The Elder Scrolls plus new Xbox exclusives on launch day already makes the service appealing enough. On top of all that, Game Pass adding all of Call of Duty, among other Activision game series, makes the service even more appealing to the average consumer.

Microsoft’s official announcement of the purchase showed off many of Activision’s biggest properties.

It should be understood that all of this is a direct hit at Sony and the PlayStation. These companies thrive off a lineup of exclusives while still raking in money from games like Call of Duty. However, Nintendo isn’t as much of a direct competitor, as their focus on family-friendly games and portable play with the Switch puts them in a completely different market than the Xbox. Nevertheless, the PlayStation and Xbox are full-fledged rivals, and because of their similar levels of hardware power, as well as game quantity and quality, a move like this is huge. While Sony is building a perfectly solid team of studios– especially with the purchase of Spider-Man studio Insomniac Games– they’ve never come close to making a purchase on a scale as large as Activision Blizzard. 

Finally, it is important to note that Bobby Kotick, the disgraced Activision CEO, will no longer be in charge of the company, and while he will get a significant amount of money from the transaction, he will no longer be leading that company. It’s unclear whether Microsoft will truly listen to the demands of Activision Blizzard employees when the deal closes, but this purchase is the only way that anything would change. 

This is uncharted territory for the gaming industry. In the span of 15 months, Xbox acquired two of the biggest game studios in the world; it would take a Sony purchase of a company like Take-Two Interactive, Square Enix, or Ubisoft to even come close to topping this move. Not long ago, the idea of any of those companies being acquired would be ludicrous. But this purchase proved that nothing is impossible. Before the purchase, Activision Blizzard was the number five video game company in the world in terms of revenue, behind only Chinese investment firm Tencent, and of course Nintendo, Sony, and Microsoft. For decades, Microsoft sat in 2nd or even 3rd place in the gaming industry. As far back as three years ago, you’d be all but laughed out of the room for even suggesting they could become the Disney or Netflix of video games. But with this purchase, Xbox could be both, and could dominate the video game space on a scale no one has ever seen.