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Starting off 2022 saw Take-Two Interactive acquire Zynga, known for Facebook and mobile games. It doesn’t matter whether those who read this play those types of games or not, but these were big business and brought in a lot of money. Enough to make Zynga valued at $12.7 billion, which at the time was a shocking amount of money for a videogame related deal. It made sense for Take-Two Interactive, the publisher has long been a successful one, yet despite the massive continued success of GTAV (especially its online mode) [developed by subsidiary Rockstar Games] Take-Two would often be an afterthought when it came to discussions around the big publishers; Activision, EA, and Ubisoft. What’s more, Take-Two didn’t have a presence in the mobile space. Whilst I don’t consider mobile as the singular future for videogames, to dismiss it as “lesser” compared to console and PC is to miss the point. It is this point that Activision realised when it purchased Candy Crush creator King back in 2015 for $5.9 billion.
Now Microsoft has made its play to widen its portfolio to cover its gaps in the broader videogames market. With many mobile game developers being swallowed up by the other publishers, Microsoft’s answer was to instead cut out the middle man and buy out the publisher.
This is an oversimplification though, especially as there is more to the big Microsoft news of acquiring Activision for an amount that makes you spit your drink out; a shocking $68.7 billion, cash! We know Microsoft has a lot of money, but to be able to drop this amount that it essentially has lying around reminds us of the size of this company. Microsoft might have been the “smaller” player in the videogame space for the past decade, but this is further evidence that Microsoft wants to be the influential player in this space.
For the past couple of years, Game Pass has been the key to turning around Microsoft’s fortunes in the videogame space. A way to increase accessibility to a variety of videogames at a more affordable price whilst also differentiating itself from the more traditional approach from Sony and Nintendo; even though Sony was the first to offer both a videogame subscription and a videogame streaming service long before Microsoft in the form of PlayStation Now, the difference was it seemed like an afterthought to Sony. Microsoft meanwhile expanded on this approach and made it core to their videogame strategy, just in time for the release of its new Xbox consoles, the Series S and Series X. The former is considered by many as a “Game Pass machine”.
The Metaverse also can’t be ignored. It is still early days and I understand the scepticism towards it. There could be some positives that come out of it, but I can’t get over the fact that the concept is already quite a dated one, not only is the term originally coined from the novel Snow Crash during the early 90s, but also in many ways Second Life provided a flat-screen version of it almost two decades ago. The difference to Second Life is that the Metaverse is potentially being set up as a means to exploit past Intellectual Property [IP]. If this reminds you of Ready Player One then don’t be surprised. Meta [formerly Facebook] might want to be the big player in the Metaverse, but it lacks the IP needed to profit as other companies can. Microsoft already had a growing collection of IP, but with the purchase of Activision Blizzard has a sizable collection to utilise, now including iconic characters Crash Bandicoot and Spyro the Dragon, **among others.
Meanwhile, attention on Sony has increased as a result of Microsoft effectively removing one of the “Big Three” from the equation. There have been those who have called for Sony to increase its acquisitions, calls which grew louder after Microsoft purchased publisher ZeniMax (who owned Bethesda among other subsidiaries). Concerned that Sony would “fall behind”, now these calls have transformed into actual worry among investors, with Sony’s stock value losing $20 billion following the Activision announcement. Almost enough to buy a combined Zynga and ZeniMax.
The thing is though, Sony isn’t Microsoft’s main competitor (or even newly elevated Microsoft Gaming), rather it is the likes of Meta, Apple (maybe Google), and Tencent (who are currently the largest videogame company in the world despite not being a household name in the West). Remember, Sony is an electronics conglomerate that also makes a lot of money from selling insurance. It also happens to have a videogames division. It would be disingenuous to call its videogame division a side venture, especially given how successful it is for the company, but as a whole Sony is not a videogame company. Nor is Microsoft, but it is a software company, which is key, as that distinction can encapsulate videogames.
There is concern/hope that regulators in the US and EU will have something to say about this acquisition, potentially putting a stop to it all together to perhaps calling for parts to be sold off. However, this is where the shrewdness of the acquisition hits home, much of what Microsoft is buying is bolsters its operation in areas where it is either weak or has minimal presence. As mentioned at the start of this post, mobile is crucial and it is an area where Microsoft has only put out a few almost token attempts at mobile games (and of course, there was the disaster that was Windows Mobile). Then there are PC games (the Blizzard side of the acquisition) which ironically Microsoft (the company that brought the world Windows!) is not the strongest in (although it has made strides in this area recently). Tencent was mentioned as a competitor and this certainly gives Microsoft a better chance to compete alongside, an argument that will likely help them when questioned by regulators.
I have not mentioned current (but ultimately outgoing) Activision CEO, Bobby Kotick. There is not much for me to add that hasn’t been said elsewhere. Activision might have been good at making money from videogames, but hadn’t been good at making videogames for a long time. New ideas had dried up long ago, and those making them treated poorly, and it is pretty easy to look at those two points to begin to understand why.
Microsoft of course is no bastion, but Microsoft and Xbox have been making a concerted effort to change how it operates which is evident in the revised image of both. Does that mean this acquisition is a positive thing? Not entirely, some positives could be felt broadly. But it is another example of market consolidation that can cause some real negatives for the videogames industry and therefore the medium. Unfortunately though, if it wasn’t Microsoft, ultimately another company would have made the purchase.