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The biggest questions and answers about the Activision Blizzard takeover

20.1.2022

Translation: Megan Cornish

Microsoft buys Activision Blizzard for 68.7 billion dollars. The announcement sparked a raft of questions. What does it mean for the games, where does it leave Sony, and what’s going on with the misconduct scandal?

A few days ago, Take Two announced its 11 billion-dollar purchase of mobile game developer Zynga. At the time, it was the biggest ever takeover in the gaming industry. Chump change compared to the 68.7 billion that tech giant Microsoft is paying for Activision Blizzard.

How did it come about?
Industry portal Bloomberg reported that Microsoft was alarmed by the ongoing court case against Activision Blizzard (in German) due to serious misconduct allegations. As a result, Microsoft management member and head of Xbox Phil Spencer encouraged talks with Activision Blizzard CEO Bobby Kotick. According to the article, the goal of this was to support an important partner but also to address concerns about the treatment of its employees. Spencer is also reported to have hinted at Microsoft’s interest in a takeover.

The deal is set to give Microsoft a huge new portfolio.
Source: Microsoft

According to Bloomberg, Activision and Kotick weren’t initially convinced. This was around the time that the share price plummeted 15 per cent after more scandal coverage in the Wall Street Journal, placing it at 30 per cent below the value before it was named up in the Californian lawsuit. But the search for other interested parties, including Facebook, proved unsuccessful. Activision eventually gave in and the deal was finalised over Christmas.

For Microsoft, it’s the biggest purchase in the gaming industry after it acquired «Minecraft» developer Mojang for 2.5 billion dollars and Bethesda for 7.5 billion dollars. Spencer has previously said multiple times that the company was planning further takeovers, particularly in the casual and social games sector. Mission accomplished. Since 2016, Activision has also owned King Digital, maker of «Candy Crush», having bought it for 5.9 billion US dollars.

How secure is the deal?

Even if the parties are shaking hands, the deal is far from done. Both the American Federal Trade Commission and the EU have to give their approval. It’s likely to take until at least June 2023 for Microsoft to take ownership of Activision Blizzard,

but most experts expect Microsoft to get the go-ahead from the authorities. Although the company is one of the largest in the world with a turnover of over two trillion US dollars, things look different in the gaming world. Sales-wise, Sony is at the top, followed by Tencent. Nintendo is currently in third place. The Activision Blizzard takeover will mean that Microsoft, currently in fourth place, overtakes the Japanese gaming company, while Activision Blizzard is in fifth spot. So it’s arguable that the balance of power will stay the same.

Nevertheless, Microsoft stresses that the deal is also a strategic investment. The other players such as Facebook and potentially Google are much bigger than Sony, which could also lead to allegations of a monopoly in the gaming industry.

What’s the situation with Bobby Kotick?

It will take some time, but the CEO of Activision Blizzard Bobby Kotick won’t be in his position for long. The official line is that Kotick will continue as CEO of Activision Blizzard and take the company forward, but the company can’t say anything else until the deal is sealed. However, the Wall Street Journal reports that Kotick will step down as soon as the takeover is complete.

Bobby Kotick is «still» CEO of Activision Blizzard.

Image: Flickr//Thomas Hawk

Kotick is eager to avoid the acquisition and his departure being associated with the abuse scandal. In an interview with Venturebeat, he justified the drop in share price with the postponement of «Diablo IV» and «Overwatch 2», along with the financial disappointment of «Call of Duty Vanguard». The postponements at least are a clear result of the scandal and the related dismissals and interruptions.

However Kotick is remembered, one thing is clear: he’ll be leaving with a golden parachute.

What’s happening with the misconduct scandal?

The abuse scandal around Activision Blizzard, which has thrown up new shocking revelations on a weekly basis, hasn’t been resolved with the takeover. Activision Blizzard employees have made a series of sexual harassment claims. The victims have allegedly been ignored by management, working in a male-dominated culture where perpetrators are protected. Microsoft will strive to ease the situation as quickly as possible if the company is to be an attractive employer for women going forward. Microsoft itself isn’t immune from these kind of claims. In November 2021, against the company’s wishes, Microsoft shareholders approved a non-binding resolution for a review of sexual harassment policies, as reported by Bloomberg.

What does this mean for the employees?

Activision Blizzard employees who have made a defiant stand against its management since the start of the abuse scandal can now breathe a sigh of relief. The recent promotion of Phil Spencer to Head of Xbox has given the company a positive reputation in terms of studio takeovers. But, to the delight of employees, the abuse scandal should mean that Microsoft takes a more hands-on approach than it has done with previous purchases.

Phil Spencer is the recently-appointed CEO of Microsoft Gaming. Image: Microsoft

Microsoft hasn’t always demonstrated the right sensitivity when dealing with its own game studios. The company admits this in its «Power On: The Story of Xbox» documentary series. But now most of the studios it has acquired, such as Double Fine, are full of praise for their new owner. Microsoft is solely to thank for «Psychonauts 2» being released with all of its planned features, according to studio director Tim Schaefer in an interview with Game Rant. Before the takeover, Double Fine was intending to cut its iconic boss fights due to time and cost constraints.

«Psychonauts 2» definitely benefitted from the Microsoft takeover.

The new employees shouldn’t expect a pay rise, however. Blizzard is known for paying comparatively poor salaries. Its argument is that it’s a privilege to work for the company. As so many studios are now under the Microsoft umbrella, there’s hardly any competition between them in terms of salaries.

It will take years for positive changes to be made one way or the other. If you consider how long it took for Activision to examine its own company culture, Microsoft isn’t going to unravel the threads much faster.

What does this mean for «Call of Duty» and co.?

With the purchase of Activision Blizzard, Microsoft will secure the rights to blockbusters such as «Call of Duty», «Diablo» and «Overwatch». As was the case after the Bethesda takeover, there’s uncertainty whether the games will be available for competitors’ platforms such as PlayStation. Games such as «Starfield» have already demonstrated that Microsoft is willing to provide console exclusivity via a wider player base. This is also due to happen with Activision games, as reported by Bloomberg, although not with all of them.

It remains to be seen whether the next «Call of Duty» or the one after that will be available for PlayStation.

I’d wager that the annual «Call of Duty» release will still be available on PlayStation. The financial loss would be too great. Although it wouldn’t surprise me if the pattern of releases is scaled back to improve quality. Microsoft will share its newly acquired portfolio nice and neatly throughout the year to avoid big titles being cannibalised via Game Pass.

In contrast, «Diablo IV» is very likely to be exclusive to PC and Xbox gamers. For a while, at least. It’s still unclear whether «Starfield» etc. will be available on PlayStation with a time delay. Perhaps Game Pass will launch on PlayStation in a few years’ time. The chances of that have risen considerably since Tuesday.

The despised Activision title is expected to benefit. The more the company targets «Call of Duty», the more classics such as «King's Quest», «Pitfall», «Prototype» and «Blur» will fade into obscurity. As Microsoft always needs newcomers for Game Pass, this collection is sure to get a lot of love.

What does this mean for Sony?

Sony is still the undisputed top dog in the gaming industry. But, with its latest acquisition, the balance of exclusive blockbuster games has recently tipped in favour of Microsoft. Sony’s share price dropped by 13 per cent right after the announcement. That’s a loss of around 20 billion US dollars. Sony’s management will now be looking even more keenly for its own studio takeovers. The next-biggest fish in the pond is EA, followed by Take Two, Nexon and Bandai Namco. Ubisoft is definitely another big hitter with gamers. No deal is unthinkable anymore. «Assassin’s Creed» only on PlayStation? Who knows?

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Philipp Rüegg

Senior Editor

Philipp.Rueegg@digitecgalaxus.ch

As a child, I wasn't allowed to have any consoles. It was only with the arrival of the family's 486 PC that the magical world of gaming opened up to me. Today, I'm overcompensating accordingly. Only a lack of time and money prevents me from trying out every game there is and decorating my shelf with rare retro consoles.

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