On Friday, Microsoft finalized the $69 billion acquisition of video game developer Activision Blizzard, concluding one of the most costly technology transactions ever and potentially affecting the entire video game industry.
The notification of the transaction’s completion was issued seven hours after Microsoft received ultimate approval from the competition watchdog in Britain. The watchdog had previously reversed its opposition to the merger, thereby eliminating the final barrier to the transaction.
Acquisition of the development studios responsible for critically acclaimed games such as Call of Duty, Diablo, and Overwatch will benefit Microsoft’s Xbox, currently positioned third in sales, trailing only Sony’s PlayStation and Nintendo. Additionally, the software behemoth has ambitious plans to incorporate Activision titles into its multi-game subscription service, which functions similarly to the video game Netflix.
The transaction took nearly 22 months to finalize amid rivalry and government oversight, reflecting apprehensions that Microsoft might exploit its expanding game library to stifle competition. An element of more extensive industry consolidation has caused concern among independent game developers who fear being marginalized as the sector redistributes resources to established blockbuster franchises.
The U.S. Federal Trade Commission opposes it, arguing that Microsoft could create “walled gardens” around its Xbox Game Pass subscription service and the emerging business of streaming games on demand by consolidating a major game publisher. However, after losing a court battle to halt the merger, FTC antitrust enforcers must now wage a difficult battle to undo it.
“The FTC continues to believe that this transaction poses a threat to competition,” Victoria Graham, a spokesperson for the FTC, stated on Friday.
Microsoft has consistently advocated for the agreement, asserting that it intended to expand the accessibility of Activision games across multiple platforms rather than prevent rival console manufacturers from obtaining those games.
Microsoft Closes Deal To Buy Call Of Duty Maker Activision Blizzard After Antitrust Fights.
Phil Spencer, CEO of Microsoft’s Xbox division, said in a statement on Friday, “Whether you play on Xbox, PlayStation, Nintendo, PC, or mobile, you are welcome here – and will remain welcome, even if Xbox isn’t where you play your favourite franchise.”
In a video commemorating the merger, he uploaded clips from video games accompanied by the Broadway musical “Oklahoma!”‘”Oh, What A Beautiful Morning!”
The U.K.’s Competition and Markets Authority granted initial approval for a revised Microsoft proposal last month, with the intention of assuaging concerns that the transaction would negatively impact competition and negatively impact gamers, particularly in the burgeoning cloud gaming sector where players can stream games to their smartphones or tablets instead of purchasing expensive consoles.
“The new agreement will prevent Microsoft from stifling competition in the burgeoning cloud gaming market, ensuring that U.K. cloud gaming customers continue to receive competitive pricing and services,” the watchdog stated.
However, it also considerably shifts the “balance of power” in favor of Microsoft, whose Xbox console has lagged behind PlayStation and Nintendo, according to tech research and advisory firm Omdia senior principal analyst George Jijiashvili.
He stated that Microsoft “now has a tremendous opportunity to shape the future of the gaming industry.”
Since the transaction was officially declared in January 2022, Microsoft has obtained authorizations from antitrust authorities in over 40 countries. Significantly, it received approval from the 27-member European Union after its concession to permit cloud gaming platforms and consumers to stream its titles without remitting royalties for ten years.
U.S. and British regulators presented the most formidable opposition to the transaction. Sony was also concerned it would restrict access to Call of Duty, Activision’s long-running military shooter series, for PlayStation players.
A court bid by the FTC to halt the transaction so that its in-house judge could assess it was unsuccessful this summer. The FTC has not surrendered, appealing the decision and filing notice of its intention to recommence the trial last month.
Microsoft will sell European cloud streaming rights for all new and current Activision games released within the next 15 years to French game studio Ubisoft Entertainment to obtain U.K. approval.
Although the regulator criticized how the agreement was reached, he cautioned other businesses against adopting Microsoft’s strategy of “insisting on a package of measures that we told them simply wouldn’t work.”
In contrast to the feeble commitments acknowledged by the European Commission, the structural remedy imposed by the U.K. regulator on Microsoft “deserves credit,” according to Max von Thun, director of the Europe office of the Open Markets Institute and an advocate for stricter antitrust enforcement.
He stated, however, that the British regulator appears “weak and indecisive” due to the back-and-forth.
Until now, the title for the most expensive technology acquisition belonged to computer manufacturer Dell, which acquired data-storage company EMC for approximately $60 billion in 2016. Concurrently, Microsoft completed its largest transaction to date, the $26 billion acquisition of professional networking service LinkedIn.
“Inclusive of Activision Blizzard’s net cash,” Microsoft initially valued the Activision deal at $68.7 billion; however, Microsoft consented to pay $95 in cash per share of the game-maker, bringing the total value closer to $75 billion.
Activision, founded in 1979 by former employees of Atari Inc., has developed or acquired a significant number of the most popular video games, including Guitar Hero, World of Warcraft, and Pitfall in the 1980s. A significant asset of Activision that Microsoft acquired was its King studio, which developed well-known mobile games, including Candy Crush Saga.
Bobby Kotick assumed the role of CEO in 1991, after he collaborated with a business associate in rescuing the company from bankruptcy.
Kotick announced his impending departure on Friday, stating that he remains CEO of the organization that is now a Microsoft subsidiary until 2023, during which time he is “completely committed to assisting with the transition.”
“Our extraordinary teams around the world will gain access to new opportunities and resources as a result of our partnership with Microsoft,” Kotick wrote in a letter to employees.
He is under the supervision of Spencer, who has held the position of CEO of Microsoft’s Xbox division since 2014.
While Sony’s PlayStation continues to dominate the industry, Microsoft has been acquiring game studios in recent years to attract more enthusiasts to Xbox. It acquired ZeniMax Media, the parent company of video game publisher Bethesda Softworks, the developer of Elder Scrolls, Fallout, and the recently released Starfield, for $7.5 billion last year. Microsoft acquired Minecraft, one of the most popular games in the world, in 2014 for $2.5 billion from Swedish developer Mojang.
Rivals have also acquired larger game libraries through acquisitions; Sony acquired Bellevue, Washington-based independent game publisher Bungie Inc. for $3.6 billion last year, venturing near Microsoft’s headquarters.
SOURCE – (AP)
