Microsoft’s deal to buy Call of Duty maker Activision Blizzard brings opportunities and questions

Microsoft’s multi-billion dollar deal to buy Activision Blizzard is far more than a massive gaming company purchase.

Still image from the video game Call of Duty Black Ops III by Activision

Microsoft’s $US69bn ($96bn) deal to buy video giant Activision Blizzard is far more than a massive gaming company purchase.

Sure, the deal, if consummated, will see Microsoft as the third biggest player in a gaming industry predicted to be worth $US256bn in three years. Its revenue will only be exceeded by Tencent and Sony.

On that score, the position of Xbox against Sony PlayStation will strengthen with Microsoft controlling a slew of titles such as Call of Duty that Sony presumably won’t anymore have access to, or be paying huge amounts for access under a licence.

Microsoft says the acquisition will accelerate the growth in its gaming business across mobile, PC, console, and cloud. It will gain substantial control of that industry. It had already been moving in this direction with the acquisition of Bethesda and Minecraft maker Mojang. This proposed deal takes things to a new level.

The deal will also bolster Microsoft Xbox Game Pass which has 25 million subscribers. Microsoft says it plans to launch Activision Blizzard games into Game Pass.

However video games are just the start. The acquisition also gives Microsoft software building blocks for its foray into the metaverse. That it, it will have the ability to use the advanced software tools and 3D graphics that Activision Blizzard has developed for its own end.

While the metaverse remains a rather abstract concept around the use of virtualised spaces for the next phases of the world wide web, Facebook, Microsoft and others are in a battle royal to gain some kind of supremacy in it, and this will be a big factor in this deal. Billions are being poured into the metaverse.

Rupantar Guha, principal analyst at GlobalData’s Thematic Team, has picked up on this point.

“Taking part in what is the biggest tech merger and acquisition ever reflects Microsoft’s desire to dominate the metaverse,“ he says. ”The company is focused on acquiring both Activision’s communities and content — two essential parameters for success in the metaverse. Activision’s popular games franchises Call of Duty and Overwatch, and the communities it commands, will position Microsoft as a leader in the metaverse.”

He says Microsoft is formidable competition for Meta, Epic Games, Tencent, and Roblox, all of which are scrambling for dominance in this emerging theme.

“While the metaverse is still largely conceptual, Microsoft’s strength in underlying themes such as artificial intelligence, augmented reality, virtual reality, and cloud computing give it a leadership position in this theme. Activision’s games will help Microsoft create metaverse experiences and provide an established global consumer base to test and market them.”

How well Microsoft uses the software tools made available through Activision Blizzard remains to be seen. We have previously seen companies swallowed up by Microsoft without the appearance of much gain in the process. Take AltSpace VR, a 3D graphics firm that was ahead of the game by about half a decade in offering 3D virtualised spaces around 2016. What arose out of that?

The announcement comes at a time that Activision Blizzard is reeling from allegations of sexual harassment and other misconduct. According to The Wall Street Journal, the company has received about 700 reports of employee concerns over sexual assault, harassment and more in seven months. It says it has fired nearly 40 employees and disciplined more than 40 others since July.

The proposed acquisition also will be a test for US antitrust regulators with a view already in the US that Microsoft is big enough as it is, and shouldn’t become larger. Will antitrust regulators swoop or is preventing tech giants acquiring any company they want just hot air? If there is regulatory scrutiny, will it delay the merger further?

Expect this proposed deal to be picked apart in the months ahead.

Originally published as Microsoft’s deal to buy Call of Duty maker Activision Blizzard brings opportunities and questions