Is Xbox or PlayStation superior? This question has been heavily debated for some time; however, the lack of affinity between major third party game publishers and console providers has given little weight to either argument. Could the acquisition of Activision Blizzard by Microsoft change all of this? Could we see some of the largest gaming franchises in the world move away from console cross compatibility?
On the 18th January 2022, Microsoft announced their intent to acquire Activision Blizzard for $95.00 per share, in an all cash deal valued at $68.7 billion.
Who is Activision Blizzard?
Founded in 1979, Activision was the first independent, third party console video game developer. They aimed to create an ‘active’ ‘television’ experience for consumers – hence their name.
Activision Blizzard was created in 2008, following the merger of Activision with Vivendi Games. Today, Activision Blizzard is the market leading third party game developer and publisher; owning famous gaming franchises such as Call of Duty, World of Warcraft and Diablo.
Historically, the company’s franchises have been made available across all console platforms. However, there has been widespread speculation whether this will continue, should Microsoft complete this acquisition.
Microsoft’s acquisition incentives
Should the transaction complete, Microsoft will become the world’s third largest gaming company by revenue, behind Sony and Tencent.
More significantly, this acquisition will give Microsoft control of some of the most popular titles in gaming, and the potential to claim significant market share in the console space by making these franchises Xbox exclusive or providing other consoles access but on significantly worse terms.
Regulation and competition scrutiny
It may not come as a surprise that the announcement of this deal has concerned both regulators and competitors.
Following phase 1 of the investigation, The Competition and Markets Authority (CMA) voiced their concerns that this deal could “substantially lessen competition in gaming consoles, multi-game subscription services and cloud gaming services.” The CMA decided to refer the proposed acquisition for a phase 2 investigation; this will require an independent panel of experts to look into the risks in more depth.
Despite these ongoing investigations, Microsoft’s CEO Satya Nadella stated recently that the “company is very, very confident that its merger with Activision Blizzard will go ahead.”
It would appear that he remains the only person confident about this deal, given the substantial competition implications that could result.
Although the result of this investigation seems somewhat inevitable, it will be interesting to see how this one plays out
Analyst: Spencer Hughes
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