OK, now what?
I wasn’t sure we’d ever get here, but 21 months later, Microsoft has successfully fended off the FTC, pacified the CMA, and completed its $69 billion acquisition of Activision Blizzard. One industry leader has merged with another, which means Microsoft, on top of everything else it does, is now one of the highest-revenue video game companies in the world.
It’s not a question of whether Microsoft will earn back that $69 billion, but when.
Activision Blizzard, along with its mobile subsidiary King, controls several of the highest-grossing franchises in the games industry, one of which is the perennial best-seller Call of Duty. In theory, Microsoft could simply allow Activision Blizzard to continue business as usual and throw a few games from A-B’s back catalog on its Game Pass service to entice subscribers.
That has traditionally been Microsoft’s approach to games-industry M&A. Like the Roman empire, the subtle genius of Microsoft leveraging its pocketbook is that it reportedly doesn’t force big changes on its newly acquired studios. It simply changes all the stationery and takes a hands-off approach.
That approach has actually backfired once in recent memory, however, with the notoriously dead-on-arrival vampire shooter Redfall. Initially announced as the next big, stylish Xbox exclusive, Redfall turned out to be a failed attempt to combine developer Arkane’s knack for immersive sims with the more readily monetized mechanics of a Fortnite or Destiny.
At least in theory, Microsoft could’ve stepped in to reverse course on Redfall but didn’t, which gave it a black eye in May. That experience could affect how it handles its integration approach to Activision Blizzard, particularly since A-B could use a lot more work.
The Microsoft acquisition process has served to turn a spotlight on the flaws in Activision Blizzard, many of which are thrown at the feet of departing CEO Bobby Kotick. Activision Blizzard’s games are still licenses to print money, but many of them are also naked exercises in revenue-boosting, primarily through the use of microtransactions.
This year alone, Diablo IV has been accused of making itself actively worse to play through repeated “nerfs,” so an invested player has to spend more time in-game, and is thus more tempted to spend real money on character improvements. Overwatch 2 is also seen as an unnecessary brand refresh that harmed the overall experience.
Essentially, Activision Blizzard under Kotick has been coasting off its own momentum for years, and even before the acquisition, was bleeding both player counts and experienced developers.
While this obviously can’t all be Kotick’s fault, Kotick is seen as the guy who decided to focus on profits above everything else by turning all of Activision Blizzard’s games into Skinner boxes: log in every day, get random rewards, hope for better luck tomorrow.
This has been the status quo at Activision Blizzard for long enough that it’s hard to know what the company will look like at all under Microsoft. We’re headed into uncharted territory for both Microsoft and Activision Blizzard, because neither company’s now-standard rules can usefully be applied.