The Implications of Tech Giant Microsoft’s Acquisition of Blizzard
Earlier this year, Microsoft announced its acquisition of Activision Blizzard, a leading company in “game development and interactive entertainment content publisher,” for $68.7 billion – which is the biggest gaming industry deal to date. Microsoft’s motives in this deal lie in the gaming industry being “the most dynamic and exciting category in entertainment across all platforms today,” and its participation in developing metaverse platforms. After Facebook transformed into Meta Platforms to increase its efforts in virtual reality, other tech companies have now followed suit in placing bets on the metaverse. Microsoft acquiring Activision plays a key role in its involvement in the “metaverse arms race.” It will also bolster Microsoft’s venture to grow its gaming business across different platforms such as mobile, PC, console and cloud.
Phil Spencer, the CEO of Microsoft Gaming, states that together with Activision, they will be able to “build a future where people can play the games they want virtually anywhere they want.” Activision has released some of the most successful and well known games on the market, including Candy Crush, Call of Duty, and World of Warcraft. Bobby Kotick, CEO of Activision Blizzard, notes that Activision’s “world class talent and extraordinary franchises,” married with “Microsoft’s technology, distribution, access to talent, ambitious vision, and shared commitment to gaming and inclusion will help ensure [their] continued success in an increasingly competitive industry.”
Although the prospect of furthering the metaverse and making games more accessible to individuals on more platforms are positive in the advancement of the tech sector, there are antitrust and competition hurdles that Microsoft must jump in order for this acquisition to succeed. The Competition and Markets Authority (CMA), Britain’s antitrust regulator, acknowledges that Microsoft is disposed to be successful in cloud gaming given its leading cloud platform in Azure, PC operating system in Windows OS, and Xbox. However, these strengths combined with ownership of Activision’s games “could damage competition in the nascent market for cloud gaming services.” If Microsoft refuses competitors’ access to Activision’s games, the gaming industry could be struck with serious damage – which is why the deal requires approval in several major jurisdictions including the United States, China and the EU.
The antitrust concerns lie greatly in how the deal would impair game console creators such as Sony and entrants to the new market of gaming subscription services and cloud gaming. Open competition would be severely harmed if Microsoft gains the ability to refuse rivals access to Activision games or provide them on worse terms. The Phase 1 investigation conducted by the CMA requires Microsoft to address its concern over the control the company would gain over popular games post-acquisition. If Microsoft fails to offer remedy solutions, the CMA would initiate its Phase 2 wherein an independent panel would carry out an in depth analysis and examination of competition implications.
In response, Microsoft released a statement in an attempt to appease regulators by saying that Call of Duty would not become an exclusive Microsoft Xbox game and would continue to be available on other companies’ game consoles. The company wants to remain committed in its mission to provide people with “more access to games, not less.” Analysts believe that Microsoft should provide specifications around these exclusivities in writing to demonstrate more credibility and legitimacy in its pledges.
Microsoft has painted a very exciting picture of its desire to “embrace choice,” for games to “reach the billions of players where they are and no matter what device they play on,” through this expansion. Their Game Pass subscription option and cloud game streaming technology to bring more games to mobile platforms would allow the company to “open up mobile gaming, create new distribution opportunities for game developers outside of mobile app stores and deliver compelling and immersive experiences for players using the power of cloud.” However, the stricter antitrust regulations, especially on tech giants, stretches out the period of time between the announcement of a deal and its completion – thus increasing the threat of the transaction disintegrating. Microsoft’s response to the antitrust concerns over its acquisition will set an important example and no doubt offer guidance to future mergers and acquisitions, especially in the tech industry where monopolies are scrutinised to prevent giants from gaining and abusing unfettered power.